Modern Vectors of Economic Oppression Housing
White Economic Advantage + Black Economic Suppression = Modern Vectors of Economic Racism
"The core argument of this book is that African Americans were unconstitutionally denied the means and the right to integration in middle-class neighborhoods, and because this denial was state-sponsored, the nation is obligated to remedy it"
Richard Rothstein, The Color of Law
Learn about how housing policy affects the racial wealth gap
Overview
Discriminatory housing policies have long fueled the racial wealth gap in the United States, systematically excluding Black Americans from the wealth-building opportunities that homeownership provides. From redlining and racially restrictive covenants to unequal access to credit and federal subsidies, these policies created and reinforced deep structural barriers that persist today. While white families were often able to purchase homes in appreciating neighborhoods and pass that wealth down through generations, Black families were frequently denied mortgages, pushed into segregated communities, or forced into predatory lending arrangements. As a result, the Black-white homeownership gap remains stark—with a 30-point difference as of 2022—driving much of the disparity in intergenerational wealth.* Understanding this history is essential to any serious effort to close the racial wealth gap and build a more equitable future.
Summary
Discriminatory housing policy in the United States took institutional form during the 1930s with the establishment of federal programs intended to stabilize the housing market during the Great Depression. The Home Owners’ Loan Corporation (HOLC), created in 1933, developed residential security maps that graded neighborhoods for investment risk, often rating Black or racially mixed areas as "hazardous" and outlining them in red—a practice now known as redlining. These maps codified racial bias into federal housing policy and became a tool for denying mortgages and credit to Black families, regardless of income or creditworthiness. The HOLC’s assessments set the foundation for decades of disinvestment in Black communities, ensuring that wealth-building through homeownership would remain largely out of reach for African Americans.
The Federal Housing Administration (FHA), created in 1934, institutionalized these practices by refusing to insure mortgages in redlined areas and promoting whites-only developments as sound investments. FHA underwriting manuals explicitly recommended racially homogenous neighborhoods and warned against “inharmonious racial groups,” effectively excluding Black families from federally backed home loans. At the same time, the FHA subsidized the mass development of white suburban neighborhoods—on the condition that developers institute racially restrictive covenants to ensure segregation. These policies ensured that federal dollars built white wealth while structurally denying Black families access to the same opportunities. The FHA helped shape a racially divided housing market where the ability to accumulate and transfer wealth through homeownership became heavily skewed in favor of white Americans.
The Federal National Mortgage Association (FNMA or Fannie Mae), established in 1938, further entrenched these disparities by creating a secondary mortgage market that prioritized FHA-insured loans. Since the FHA’s policies had already excluded Black borrowers, Fannie Mae's participation reinforced segregation by fueling investment in white-only neighborhoods while continuing to bypass Black communities. Over time, these institutions helped construct a racially bifurcated housing system in which white families could purchase homes with federally backed loans in appreciating suburbs, while Black families were relegated to disinvested urban areas with little access to credit or equity. This federally sanctioned discrimination not only segregated America’s cities and suburbs but also created the foundation for the modern racial wealth gap, with homeownership—America’s primary engine of wealth-building—largely reserved for white households.
In 1954, Andrew Wade – an African American electrical contractor and Korean War veteran – wanted to purchase a house. A friend…suggested he look at a middle-class white neighborhood. The Wades found a property in Shively, an all-white suburb.
When the Wades and their child were moving in, a crowd gathered in front and a cross was burned on an empty lot next door. On the first evening…a rock crashed through the front window with a message tied to it: “Nigger Get Out,” and later that night ten rifle shots were fired through the glass of the kitchen door.
Under the watch of a police guard, demonstrations continued for a month until the house was dynamited.
"Remembering the Wades, the Bradens and the Struggle for Racial Integration in Louisville," (R. Howlett)
**********************
“In predominantly African American neighborhoods, where prospective homeowners struggled to obtain financing, Blair sold homes he had acquired via tax deeds on contract. This, in turn, allowed Blair to defraud another class of victims, extracting a substantial down payment from a buyer and then moving to have them evicted, and pocketing the contract buyer’s investment. This is what happened to Rufus Thomas, who purchased a house from Blair on contract in 1965. Shortly thereafter, Thomas received several citations for building code violations, which, as stipulated in the contract, he was required to correct. Contract sellers often sold homes that were in violation of numerous building codes, which the buyer was legally obligated to repair. This, as the historian Beryl Satter notes, often led contract buyers to miss payments and allowed sellers to repossess their homes) An unskilled laborer, Thomas drained his savings in an attempt to complete the repairs. When he failed to do so, he was hauled back into court and fined $2000. Prior to the hearing, Blair— acting as Thomas’s counsel—duped him into signing an affidavit stating that he was the sole owner of the property, which absolved Blair’s corporation of any liability. Unable to pay the fine, Thomas was sentenced to six months in jail.110 Upon sentencing, Blair served Thomas with a notice of forfeiture on his contract and moved to repossess the home.111 “In my dream, I’m caught in quicksand,” Thomas told a reporter. “I have my hands raised for help, but no help ever comes.”
"Unconscionable: Tax Delinquency Sales as a Form of Dignity-Taking" (A.W. Kahrl)
Full timeline of racial disparities in housing
1934
Federal Housing Administration (FHA) is created to boost home ownership during The Great Depression. The FHA insures home mortgages, but only for houses in white neighborhoods. This leads to the industry standard practice of redlining, which systematically withholds credit from homebuyers in black neighborhoods.
1938
Congress creates the Federal National Mortgage Association (Fannie Mae) to boost homeownership levels by making low-cost loans widely available. Only two percent of the $120 billion in new housing subsidized by the federal government between 1934 and 1962 goes to nonwhites.
1945
Though the GI Bill guaranteed low-interest mortgages and other loans, they were not administered by the VA itself. Thus, the VA could cosign, but not actually guarantee the loans. This gave white-run financial institutions free reign to refuse mortgages and loans to Black military members.
1968
Senators Walter Mondale (MN) and Edward Brooke (MA), then the only African-American member of the Senate, submit the Fair Housing Act of 1968 (S. 1358) for inclusion as an amendment within the Civil Rights Act of 1968 (H.R. 2516) a larger civil rights bill to protect civil rights workers.
2007
The subprime crisis reaches a peak. An epidemic of irresponsible mortgage lending driven by the high demand for mortgage-backed securities by institutional investors leads to a severe nationwide recession and nearly 10 million Americans losing their homes. Latinos and blacks experience nearly three times more foreclosure than whites, and decades of progress in their rate of homeownership is wiped out.
The persistent disparity in homeownership rates between Black and white Americans remains a significant barrier to achieving racial equity in the United States. Despite legislative efforts like the Fair Housing Act of 1968, the gap has not only endured but, in some cases, widened. As of 2017, the homeownership rate stood at 71.9% for white households compared to 41.8% for Black households—a gap of 30.1 percentage points, marking the largest disparity in over 50 years .Urban Institute
In their analysis, the Urban Institute identifies several key factors contributing to this divide. Among them, income disparities, differences in marital rates, and variations in credit scores emerge as the most significant contributors to the homeownership gap across metropolitan statistical areas (MSAs). However, 17% of the gap is unexplained; discriminatory housing policy may be the missing element.
Breaking Down the Black-White Homeownership Gap | Urban Institute
- Income differences: 31% of the gap
- Differences in marital status: 27% of the gap
- Credit score differences: 22% of the gap
- Differences in educational attainment do not contribute to the gap
- 17% of the gap remains unexplained
Methods of Housing Discrimination
Appraisal fraud against Black homeowners occurs when appraisers systematically undervalue homes in majority-Black neighborhoods or homes owned by Black families, often based on racial bias rather than property condition or market data. Studies have shown that even when homes are comparable in size, location, and amenities, those associated with Black ownership frequently receive lower valuations. This devaluation limits the ability of Black families to build equity, refinance at fair rates, or sell at competitive prices, directly suppressing their wealth accumulation. In some cases, Black homeowners have received significantly higher appraisals only after removing signs of their racial identity or having a white friend pose as the owner. These patterns of appraisal discrimination not only reflect entrenched racism in the real estate industry but also perpetuate the racial wealth gap by stripping Black families of the full financial benefits of homeownership.
Racial Disparities in Home Appreciation (M. Zonta)
Home Appraisals More Likely To Be Lower in Black, Latino Areas Than White Ones : NPR
Blockbusting
In the mid-20th century, real estate agents and speculators used scare tactics—such as falsely warning white residents that Black families were moving into the neighborhood—to prompt rapid, under-market sales of homes. These homes were then resold to Black buyers at significantly marked-up prices, often through exploitative contract sales rather than traditional mortgages. While white homeowners lost equity through rushed sales, Black buyers gained access only to overpriced, poorly maintained properties with no legal protections or ability to build equity. This manipulation entrenched racial segregation, destabilized communities, and extracted wealth from both groups, with the burden falling hardest on Black families, deepening the racial wealth gap across generations.
Credit Bias
Credit bias in Black communities has contributed to the racial wealth gap by systematically undervaluing Black borrowers’ financial reliability and denying them equal access to affordable credit. Credit scoring models often fail to account for the full financial behavior of Black households—such as timely rent, utility, and phone payments—which are more common in communities historically excluded from mainstream banking. Additionally, lenders have long relied on racially biased criteria and neighborhood-based risk assessments, penalizing applicants based on ZIP codes associated with Black populations rather than individual creditworthiness. As a result, Black borrowers face higher interest rates, more loan denials, and limited access to wealth-building tools like homeownership, business loans, and higher education financing. This structural discrimination in credit markets restricts upward mobility and compounds generational poverty, deepening the racial wealth gap across time.
Contract installment home loans, widely used in the mid-20th century, exploited Black families shut out of traditional mortgage markets by offering deceptive, high-risk terms that stripped them of wealth rather than helping them build it. Because banks and the Federal Housing Administration refused to insure loans in Black neighborhoods, many Black homebuyers were forced to purchase homes "on contract" from white speculators at inflated prices. Under these agreements, the buyer held no legal title until the entire contract was paid off, often over 15 to 20 years, while the seller retained ownership and could evict the buyer for missing a single payment. Unlike traditional mortgages, contract buyers could not build equity, refinance, or make repairs without risking forfeiture. As a result, thousands of Black families lost homes and savings, while white sellers extracted enormous profits. This predatory practice robbed Black communities of homeownership opportunities and contributed significantly to the racial wealth gap we see today.
Deed Covenants
Deed covenants, also known as racially restrictive covenants, were legal agreements written into property deeds that explicitly barred the sale, lease, or occupation of a home to individuals based on race, most commonly targeting Black Americans. Widely used during the early to mid-20th century, these covenants allowed white homeowners, developers, and neighborhood associations to enforce racial segregation by law or custom, even in the absence of formal zoning policies. Courts upheld these covenants until the 1948 Shelley v. Kraemer Supreme Court decision, which ruled them unenforceable—yet their impact endured as lenders, realtors, and municipalities continued to use other exclusionary practices. By locking Black families out of appreciating white neighborhoods, racially restrictive covenants helped entrench patterns of residential segregation and contributed directly to the racial wealth gap.
During the twentieth century, racially-restrictive deeds were a ubiquitous part of real estate transactions. Covenants were embedded in property deeds all over the country to keep people who were not white from buying or even occupying land; their popularity has been well documented in St. Louis; Seattle; Chicago; Hartford, Connecticut; Kansas City and Washington D.C. [5]
Deed Theft
Deed theft in Black communities has contributed to the racial wealth gap by stripping families of generational assets through fraud, coercion, and legal loopholes. In many historically Black neighborhoods, particularly those facing gentrification or rising property values, bad actors have forged signatures, exploited heirs’ property vulnerabilities, or deceived elderly homeowners into unknowingly signing over their deeds. Once the title transfers, victims often lose their homes without compensation or legal recourse, erasing decades of accumulated wealth. These stolen properties are then flipped or redeveloped for profit, transferring wealth out of Black hands and into the portfolios of speculators and developers. This predatory practice not only robs families of home equity and housing stability but also undermines community cohesion and trust, perpetuating intergenerational poverty and exacerbating the racial wealth gap.
Criminalizing Deed Theft in Communities of Color - Word In Black
Developer Loan Covenants
Developer loan covenants were agreements tied to financing that required builders to include racially restrictive clauses in property deeds as a condition for receiving loans or backing from banks and federal agencies like the Federal Housing Administration (FHA). During the mid-20th century, developers who sought government-insured loans were often required—or strongly encouraged—to create whites-only subdivisions to ensure “stable” property values. These covenants barred the sale of homes to Black families and other people of color, institutionalizing segregation at the earliest stages of neighborhood development. The FHA’s underwriting manuals explicitly favored racially homogeneous communities, reinforcing segregation practices across the country. Long-term patterns of racial segregation and wealth inequality persist today.
Public Housing: Government-Sponsored Segregation - The American Prospect
GI Bill Discrimination
The GI Bill, passed in 1944 to support returning World War II veterans, excluded Black servicemembers from its most transformative benefits—especially access to low-interest home loans—through discriminatory implementation at the local level. Although the bill’s language appeared race-neutral, white-controlled banks and local Veterans Affairs offices routinely denied Black veterans access to guaranteed loans, particularly in the segregated South, where racist lending practices and redlining prevailed. As a result, while millions of white veterans used the GI Bill to buy homes in rapidly appreciating suburbs, Black veterans were often confined to renting in under-resourced neighborhoods or forced into predatory lending arrangements. This denial of fair access to homeownership deprived Black families of the opportunity to accumulate equity, pass wealth to future generations, and escape cycles of poverty. The GI Bill’s discriminatory legacy thus played a pivotal role in expanding the white middle class while deepening the racial wealth gap for Black Americans.
How the GI Bill's Promise Was Denied to a Million Black WWII Veterans
HOA Bylaws
Homeowners Association (HOA) bylaws were often used as tools to enforce racial segregation by restricting who could buy or occupy homes within certain neighborhoods. These bylaws frequently included racially restrictive covenants that prohibited the sale or rental of property to non-white individuals, especially Black Americans. Even after the 1948 Shelley v. Kraemer decision made such covenants legally unenforceable, HOAs continued to exert social and economic pressure to maintain racial homogeneity, often through informal discrimination, selective enforcement of rules, or exclusionary membership practices. By controlling access to neighborhood amenities, enforcing architectural conformity, and influencing property values, HOAs effectively preserved all-white enclaves and contributed to the broader system of housing discrimination that underpins today’s racial wealth gap.
Homeowners associations reflect systemic racism – Spartan Shield
Documenting Racially Restrictive Covenants in 20th Century Philadelphia on JSTOR
Loan fraud in Black communities has contributed to the racial wealth gap by deliberately targeting Black borrowers with deceptive and exploitative lending practices that strip wealth rather than build it. Predatory lenders have historically saturated Black neighborhoods with high-interest subprime mortgages, misleading terms, balloon payments, and hidden fees—even when borrowers qualified for safer, prime-rate loans. During the 2000s housing boom, lenders disproportionately steered Black families into risky loans that led to widespread foreclosures during the 2008 financial crisis, causing a catastrophic loss of Black homeownership and generational wealth. Fraudulent practices such as falsifying income data, misrepresenting loan terms, or charging unnecessary fees further drained financial resources. These tactics, driven by institutional racism and profit motives, robbed Black families of the equity, security, and intergenerational advantages that homeownership can provide—widening the racial wealth gap and destabilizing entire communities in the process.
Property Taxes/ Selective Reassessment
Selective property tax reassessment in Black neighborhoods contributes to the racial wealth gap by disproportionately increasing the tax burdens of Black homeowners while undervaluing properties in predominantly white areas. Local tax assessors often overestimate property values in historically disinvested Black communities, despite slower home appreciation or deteriorating public services, resulting in inflated tax bills. Conversely, homes in wealthier white neighborhoods are frequently under-assessed, allowing their owners to pay less than their fair share. This systemic imbalance drains wealth from Black families—who already face barriers to homeownership and equity building—by reducing disposable income, increasing the risk of tax delinquency, and in extreme cases, contributing to foreclosure or forced sale. Over time, these unjust tax practices strip wealth from Black communities and deepen the racial wealth gap.
How the property tax system harms Black homeowners and widens the racial wealth gap
Detroit overtaxed homeowners $600M. They're still seeking compensation (freep.com)
The Assessment Gap: Racial Inequalities in Property Taxation - Equitable Growth
Black Homeowners Pay More Than 'Fair Share' in Property Taxes | The Pew Charitable Trusts
Study of property taxes nationwide finds racial inequalities
Race for profit: Keeanga-Yamahtta Taylor on housing discrimination in America - Vox
Redlining
Redlining emerged in the 1930s when the federal government, through the Home Owners’ Loan Corporation (HOLC), created residential security maps to guide investment and mortgage lending practices. These maps color-coded neighborhoods based on perceived lending risk, with predominantly Black or racially mixed communities marked in red and labeled as “hazardous.” Banks and government-backed lenders used these maps to deny mortgages and home improvement loans in redlined areas, regardless of a borrower's creditworthiness. This practice locked Black families out of mainstream credit markets, stifled investment in their communities, and drove disinvestment, decay, and segregation. Meanwhile, white families in “greenlined” areas received favorable loan terms and federal support, enabling them to build wealth through homeownership. Redlining institutionalized racial segregation and laid the foundation for the vast racial wealth disparities that exist today.
Redlining was banned 50 years ago. It’s still hurting minorities today. - The Washington Post
New Evidence on Redlining by Federal Housing Programs in the 1930s | NBER
Public Housing: Government-Sponsored Segregation - The American Prospect
Redlining: Mapping Inequality in Dayton & Springfield - ThinkTV
Reverse credit exclusion
Reverse credit exclusion in Black communities has contributed to the racial wealth gap by systematically denying credit to creditworthy Black borrowers while flooding these same communities with predatory financial products. Unlike traditional redlining, which excluded all forms of lending, reverse credit exclusion targets Black neighborhoods with high-cost subprime loans, payday lending, rent-to-own schemes, and other exploitative financial tools, despite residents often qualifying for safer, lower-cost credit. Banks and lenders have used racial profiling and profit-driven risk models to justify these practices, steering Black borrowers into loans with excessive interest rates, hidden fees, and punitive terms. These financial traps lead to cycles of debt, foreclosure, and loss of wealth, while white borrowers with similar financial profiles are offered prime-rate loans that enable wealth accumulation. This two-tiered credit system has stripped billions in assets from Black communities and remains a significant force driving the racial wealth gap today.
Tax Liens
Tax lien purchases in Black neighborhoods contribute to the racial wealth gap by enabling private investors to profit from the financial distress of homeowners, often leading to the loss of generational property. When homeowners—disproportionately Black due to systemic economic disadvantages—fall behind on property taxes, municipalities can sell their tax debts as liens to third-party investors. These investors then charge high fees and interest, and if the debt remains unpaid, they can foreclose on the property and take ownership. This predatory system strips wealth from Black families by turning temporary financial hardship into permanent dispossession, often for tax debts that are minor compared to the value of the property. By transferring home equity from vulnerable families to speculators, tax lien sales exacerbate racialized land loss and erode the primary source of intergenerational wealth in Black communities.
Tax Liens Cost Generations of Black Americans Their Land - Bloomberg
How the property tax system harms Black homeowners and widens the racial wealth gap
Property taxation in Black communities has contributed to the racial wealth gap by disproportionately overburdening Black homeowners with inflated assessments while under-assessing properties in wealthier, often white, neighborhoods. Local governments, relying on property taxes to fund services, have often overvalued homes in Black neighborhoods despite slower appreciation and deteriorating infrastructure. These inflated assessments result in higher tax bills, placing undue financial strain on Black families, many of whom already face systemic barriers to wealth accumulation. At the same time, white homeowners in more affluent areas benefit from under-assessments that lower their tax obligations and increase disposable income. This unequal taxation undermines Black homeownership, increases the risk of delinquency or foreclosure, and diverts wealth away from Black communities—reinforcing historical patterns of dispossession and compounding the racial wealth gap.
How the Real Estate Boom Left Black Neighborhoods Behind - The New York Times (nytimes.com)
Historian Says Don't 'Sanitize' How Our Government Created Ghettos : NPR
White violence against Black families has played a direct and devastating role in creating housing disparities and deepening the racial wealth gap by forcibly removing Black residents from homes, neighborhoods, and even entire towns. From racially motivated riots—such as those in Tulsa (1921), Rosewood (1923), and East St. Louis (1917)—to mob attacks, cross burnings, and fire bombings aimed at Black families who moved into “white” areas, white violence has served as a brutal enforcement mechanism of segregation. These acts not only destroyed property and lives but also sent a chilling message that Black homeownership and upward mobility would be met with terror. Often, law enforcement either participated in or ignored such violence, allowing perpetrators to act with impunity. As a result, many Black families lost homes, land, and community wealth, while others avoided investing in property or relocated under duress. This sustained racial terror erased generational assets, curtailed mobility, and cemented patterns of residential segregation that persist today, fueling the enduring racial wealth gap.
Additional Viewing and Reading Materials
1.Race for Profit: How Banks and the Real Estate Industry Undermined Black Homeownership (Keeanga-Yamahtta Taylor)
2.The Color of Law (Richard Rothstein) [9]
3.Segregation by Design (Jessica Trounstine)
4.How the GI Bill's Promise Was Denied to a Million Black WWII Veterans
Not in My Neighborhood: How Bigotry Shaped a Great American City by Antero Pietila
Questions for Research and Reflection
Which myths based in white supremacy culture did you grow up with?
- If you just work hard enough, anyone can buy a house.
- Segregation just happened; it reflects people’s natural choices to be apart.
- Housing laws are applied fairly to everyone; racism can’t be a factor.
- Redlining happened in the past
- Black people just don’t want to live here, that’s all
After reviewing the materials in this course, how would you counter these myths?
Ask older relatives or research on your own:
- When did your family first acquire a home?
- How was it acquired? Where?
- How easy was it to get a loan?
- Did your family receive GI Bill veteran's benefits to buy a home?
- How many non-white families lived in your neighborhood growing up?
- How does housing figure into your family’s net worth?
- Have ancestral homes been passed down through generations? What is the value of wealth that has been passed down?
- What zoning codes in your neighborhood affect whether people of color live there?
- Are there any non-white families living on your block? How well do you know them?
Was your city redlined? Click on the link below and find the city nearest the one in which you grew up. Find your neighborhood. What is the HOLC color code?
Red (Grade D – “Hazardous”): Neighborhoods outlined in red were considered the riskiest for mortgage lending and were labeled “hazardous.” These areas were typically home to Black families, immigrants, and working-class residents, regardless of the actual quality of housing. HOLC appraisers marked them with racial and ethnic language, explicitly citing the presence of “undesirable” populations as justification for redlining. Properties in red areas were denied access to affordable loans and investment, leading to decades of disinvestment, declining property values, and entrenched segregation that fueled the racial wealth gap.
Yellow (Grade C – “Definitely Declining”): Yellow-coded neighborhoods were marked as “definitely declining,” often due to their age, housing stock, or proximity to non-white residents. Though considered more stable than redlined areas, yellow neighborhoods were still viewed as risky and faced restrictive lending. These areas often became targets for speculative investment, contract selling, or gentrification over time. Residents struggled to secure home improvement loans or conventional mortgages, which contributed to stagnation and vulnerability to economic shifts.
Blue (Grade B – “Still Desirable”): Blue areas were labeled “still desirable” and typically housed white, middle-class families. These neighborhoods received favorable lending terms, encouraging investment, maintenance, and community stability. HOLC considered them upwardly mobile and worth protecting from the “infiltration” of minority populations. As a result, blue areas received ample financing and development support, helping residents accumulate wealth through rising property values and access to federally backed loans.
Green (Grade A – “Best”): Green-coded neighborhoods were deemed the “best” places for mortgage lending and investment. These were new or recently developed suburbs, exclusively white, and explicitly protected from racial and economic “threats.” HOLC and FHA policies reinforced these areas as ideal for homeownership, providing residents with easy access to low-interest loans, infrastructure, and appreciation in home values. These advantages allowed white families to build generational wealth, while exclusionary practices in green areas helped institutionalize segregation and deepen the racial wealth divide.
- How might HOLC map grades influence the racial wealth gap in your city?
- What is your family's prosperity story? How might you change your story given what you've learned in this mini-course?
- These maps were government-sponsored. Do federal, state, or local governments bear any responsibility for restitution for harms experienced by African Americans due to discriminatory housing policies?
- How would you design a plan of housing repair?
Reckoning with an Unjust Past: a Spoken Word Series by Veronica Wylie