by Jodi L. Miller
Home ownership is the pinnacle of the American dream. Owning a home provides a basis to accrue wealth and a home is an investment that can be passed down through generations.
While the American dream is attainable for some, it is not a reality for everyone. That disparity has led to a racial wealth gap. As Dr. Andre M. Perry, a senior fellow with the Brookings Institution, a Washington, D.C. think tank, explains, the racial wealth gap began during slavery when enslaved people were denied wages for their labor. The gap continued throughout the Jim Crow era (1877-1964), which enforced legal segregation. During this time, Black Americans were denied government benefits and subsidies that their white counterparts enjoyed.
“There was a long-standing history of anti-Black policies that prohibited or thwarted wealth creation among Black people, and so it was government policy ultimately that created a wealth gap through slavery,” says Dr. Perry, who is an economics professor and an expert on race and structural inequality.
“After emancipation, proposals to provide former slaves with land so they could survive economically were largely defeated,” Lisa Camner McKay writes in How the Racial Wealth Gap Has Evolved—and Why It Persists, an article published by the Federal Reserve Bank of Minneapolis. “Thus in 1870, the wealth gap between Black and white Americans was a staggering 23 to 1. That’s equivalent to just $4 of wealth for Black Americans for every $100 for white Americans.”
During Reconstruction—the period after the Civil War from 1865 to 1877—African Americans made some progress toward equality with the passage of what are known as the Reconstruction Amendments. These amendments—the 13th, 14th and 15th amendments to the U.S. Constitution—abolished slavery, provided citizenship to the formerly enslaved and gave Black American men the right to vote.
Reconstruction was supposed to begin to make up for the hundreds of years of slavery and the injustice that formerly enslaved people were forced to endure. White Southerners, however, forced the end of Reconstruction with what is known as the Compromise of 1877. Rutherford B. Hayes needed the support of Florida, South Carolina and Louisiana to win the presidency in 1876. In exchange for that support, he agreed to withdraw all federal troops from the South. The troops had been installed in the South during Reconstruction to keep the peace and protect the rights of the formerly enslaved.
President Hayes made good on his promise and Reconstruction ended in 1877. Dr. Perry contends that had Reconstruction lasted “and followed through in terms of providing Black citizens the economic footing to thrive” the racial wealth gap would not be so wide today.
“There might be a wealth gap,” Dr. Perry says, “but nowhere near what it is now.”
Building wealth
Wealth is defined as the difference between assets and liabilities. An asset is something of value that is owned such as a home or land. A liability is something that is owed such as an unpaid bill or outstanding loan. According to the U.S. Federal Reserve, in 2022, the typical white family had six times as much wealth as the typical Black family. In 2022, the median wealth among white families was $285,000, compared to $44,900 for Black families.
When the opportunity to own a home is denied, the opportunity to build wealth is also denied. Dr. Perry explains that Jim Crow, racism, and disparities in how government programs were distributed, including the New Deal in 1933, compounded upon each other to exclude Black Americans from the opportunities that the rest of the country benefitted from. He points out that when a family has less wealth, there are less discretionary resources to invest in things like higher education or a business, or other assets that could grow wealth.
“To put it plainly, if your grandfather was denied the opportunity to own a home, the grandchildren will more than likely have to take out student loans, have less resources to start a business, and have less resources to put a down payment on a home,” Dr. Perry says. “People don’t get those intergenerational wealth transfers. So federal, state, and local policies created the wealth gap. Discrimination furthered it, and because wealth begets wealth, those systems perpetuate themselves as a result.”
According to McKay’s Federal Reserve Bank article, white Americans hold 84% of total U.S. wealth while making up 60% of the population. Black Americans hold 4% of U.S. wealth and make up 13% of the population. “Put another way,” McKay writes, “the wealth of the richest 400 Americans is approximately equal to that of 43 million Black Americans.”
Writing it in red
Owning a home has been historically harder for Black families through many discriminatory practices including redlining. From 1935 to 1940, the federal Home Owners’ Loan Corporation created color-coded maps that assessed what U.S. neighborhoods were to be deemed credit-worthy, or in other words, worth the investment of granting a mortgage. According to the coding system, neighborhoods coded in green were labeled “best,” while those coded in blue were “still desirable” and yellow “still declining.” The majority of Black neighborhoods were coded in red and labeled “hazardous.”
“The federally backed Home Owners’ Loan Corporation drew red lines around predominantly Black neighborhoods, deeming them generally unfit for various federal investments and insurance,” Dr. Perry says. “That prohibited many Black people from purchasing homes and gaining the wealth that the green-lined areas would receive.”
According to a 2022 report published by the National Community Reinvestment Coalition, more than eight million people still live in formerly redlined communities. “The inequities of residential segregation, cemented in place by redlining, persist in lower home values, higher rates of poverty, and greater vacancy and abandonment,” the report states.
Another form of discrimination that prevented Black Americans from owning a home was racial covenants, also called restrictive covenants. A restrictive covenant was language included in the deed to a home that specifically excluded certain people from purchasing that property. The practice began in the early 1920s, and it primarily focused on Black Americans.
In his 2017 book The Color of Law: A Forgotten History of How Our Government Segregated America, author Richard Rothstein, a researcher with the Economic Policy Institute, wrote, “As early as the nineteenth century, deeds in Brookline, Massachusetts, forbade resale of property to “any negro or native of Ireland.” A 1925 covenant on a Northern New Jersey property stated: “…no part of said premises shall be used for…any structure other than a dwelling for people of the Caucasian Race.”
These covenants prevented Black Americans from purchasing, leasing or even occupying these properties. In 1948, the U.S. Supreme Court ruled that restrictive covenants were unenforceable; however, they were not banned until the Fair Housing Act of 1968. There are no exact numbers for how many restrictive covenants existed nationwide; however, a 2019 report published by the Federal Reserve Bank of Philadelphia identified 4,000 instances in Philadelphia alone where a racial covenant was included in a deed. The language of these covenants still exists in the fine print of many deeds to this day.
Different form of redlining
Today, according to Dr. Perry, instead of redlining, Black Americans are being discriminated against via appraisal bias, which is when Black homes are undervalued. Before a house is sold, the sellers have their home appraised to determine its value. A 2020 Brookings Institution study found that because of biased appraisals, homes in Black neighborhoods are devalued by approximately $48,000. The overall cost of these devaluations, according to Brookings, is approximately $162 billion. The devaluation of a property can mean the delay or cancellation of a transaction, meaning that the contract on the sale of a house doesn’t go through.
In 2022, the Federal Housing Finance Agency released 47 million appraisal reports. Two sociologists who study racial inequality in American cities analyzed the data and found a “widespread practice in the home appraisal industry to give higher values to homes where the occupants are white, and devalue them if the owners are people of color,” according to their report.
“The appraisal system is supposed to be our checks and balances, because it’s supposed to show us how much a home is worth. But we’ve created a system that starts with racism, based on who lives in an area,” Dr. Junia Howell, a sociology professor at the University of Chicago and one of the researchers told The New York Times. “And who lives in what area is always connected to our racial hierarchy. So where white people live, those homes are always valued for more.”
A 2022 New York Times article relayed the story of a Black couple in Baltimore—Nathan Connolly and his wife Shani Mott, both professors at Johns Hopkins University. After a white appraiser gave their house a value of $472,000 in 2021, the couple conducted an experiment. They removed family photos, posters and books from their home and asked a white friend to stand in for them when the appraiser came. That appraiser, unaware a Black family lived in the home, gave the property a value of $750,000.
So, can the wealth gap be closed? Dr. Perry says that for the gap to close some type of restorative policy would need to be put in place.
“There’s no way to close a gap without direct investment towards the people who’ve been harmed by discrimination,” Dr. Perry says. “Oftentimes we talk about reparations for slavery. But you can make claims for reparations for housing discrimination, for education discrimination, and in other areas.”
Discussion Questions
- According to Dr. Perry, federal state, and local policies, in other words, our government created the racial wealth gap. He suggests that a restorative policy could help close it. If you were in charge of deciding how to close the racial wealth gap, what would you propose? Explain your answer.
- What do you think of redlining and restrictive covenants? Explain how these practices contributed to the racial wealth gap.
- Read the sidebar “When Getting Ahead Brought Violence.” The article mentions that the members of the mob that destroyed the Greenwood district were never held accountable by the courts. What do you think should have been done at the time to heal the harm and rebuild “Black Wall Street?” Knowing nothing was done, what could or should still be done today? Explain your answer.
BONUS CONTENT: When Getting Ahead Brought Violence
In 1921, the Black community of Greenwood, a district of Tulsa, Oklahoma founded in 1906, was thriving. Known as Black Wall Street because of its prosperity, the district contained approximately 10,000 residents. According to the Oklahoma Historical Society, the community “had it all,” with every business imaginable, including nightclubs, hotels, cafes, newspapers, clothing stores, movie theaters, doctors’ and lawyers’ offices, grocery stores, beauty salons, shoeshine shops, and much more.
That prosperity ended when a white mob, numbering nearly 1,000 men, including police officers, set upon the Greenwood district, and carried out one of the worst attacks of racial violence in U.S. history, commonly known as the Tulsa Massacre. The mob was angry over the alleged assault of Sarah Page, a white woman aged 17, by a Black man, Dick Rowland, aged 19.
In a riot that began on May 31, 1921, and would last for 18 hours into the next day, the mob killed Greenwood residents, looted businesses and then set them on fire, eventually burning all 35 blocks of the district to the ground, including 23 churches. Historians estimate that when all was said and done 300 people were killed, 1,200 homes were destroyed and 8,000 people were left homeless. A report released in 2001 by the 1921 Race Riot Commission, now known as the 1921 Race Massacre Commission, estimated that the damage to property in Greenwood was approximately $1.8 million, which would be around $27 million today.
After the riot, a grand jury blamed the Black men that had gone to the jail to protect Rowland from being lynched for “instigating” the destruction that followed. Rowland was eventually exonerated of the charges against him but the damage to Black Wall Street had been done. None of the members of the white mob were ever charged with a crime and the survivors received no compensation for the loss of their loved ones or the economic losses they suffered.
Survivors’ quest for justice
In 2020, the three last known survivors of the Tulsa Massacre testified before a House of Representatives subcommittee that was considering reparations to survivors and descendants of the massacre.
During the hearing, Lessie Benningfield Randle testified remotely. Randle was six at the time of the massacre and 106 when she testified. She recounted running outside her house past dead bodies, noting that she still sees the images in her mind 100 years later.
“My community was beautiful and was filled with happy and successful Black people. Then everything changed. It was like a war,” Randle testified. “White men with guns came and destroyed my community. We couldn’t understand why. What did we do to them? We didn’t understand. We were just living. But they came, and they destroyed everything.”
Another survivor, Viola Fletcher, who was seven years old at the time of the massacre, also testified at the hearing. She relayed how bombs were dropped on the community, saying, “I still hear the airplanes flying overhead. I hear the screams. I have lived through the massacre every day. Our country may forget this history, but I cannot.”
Fletcher went on to say in her testimony, “The neighborhood I fell asleep in that night was rich—not just in terms of wealth, but in culture, community, heritage, and my family had a beautiful home. Within a few hours, all that was gone.”
In an op-ed for The New York Times, Victor Luckerson, a journalist and the author of Built from the Fire: The Epic Story of Tulsa’s Greenwood District, America’s Black Wall Street, wrote that Tulsa’s city leaders acknowledge “the horror of the race massacre while punting responsibility for the moral and economic debt it has wrought. But what these leaders fail to acknowledge is that the institutions they helm played an active role in halting Greenwood’s progress after the massacre. The mob burned Greenwood, and the courts fanned the flames when they refused to punish the attackers or offer redress to hundreds of newly destitute Tulsans who believed the law should be on their side.”
In July 2023, a Tulsa County district judge dismissed the 2020 lawsuit brought by Fletcher, Randle and the estate of Hughes Van Ellis, another survivor who died at the age of 102. In August 2023, the Oklahoma Supreme Court agreed to hear the survivors’ challenge to the dismissal of their case and oral arguments were heard in April 2024. In June 2024, the Oklahoma Supreme Court affirmed the lower court’s dismissal of the survivor’s lawsuit.
The court’s ruling stated, “The continuing blight alleged within the Greenwood community born out of the Massacre implicates generational-societal inequities that can only be resolved by policymakers—not the courts.”
“People in positions of power, many just like you, have told us to wait. Others have told us it’s too late,” Randle testified at the 2021 congressional hearing. “It seems that justice in America is always so slow, or not possible for Black people. And we are made to feel crazy just for asking for things to be made right.”—Jodi L. Miller
Glossary Words|
covenant— a formal agreement or promise, usually included in a contract or deed, to do or not do a particular act.
emancipation — the release from slavery.
reparations — financial compensation.
segregation — the policy of separating people from society by race or social class.
This article originally appeared in Respect’s Special Issue: Challenging Racism from Past to Present.