03/05/2021 | News release | Archived content
Some explicitly racist housing policies have been eliminated, but the effects of past discrimination, such as redlining, continue to affect Black and Brown neighborhoods, resulting in lower home values and long-term disinvestment in these communities.
That's according to two keynote panelists who were among the experts who gathered to discuss structural racism in the U.S. housing system and its effect on economic outcomes for all Americans. The discussion was part of the fourth event of the Federal Reserve's The Racism and the Economy virtual event series, which focused on housing.
"People blame external factors like education, crime, and safety for lower (home) values," said Andre Perry, senior fellow, Metropolitan Policy Program at the Brookings Institution. "(But) we controlled for every fancy Zillow metric and found that homes in Black neighborhoods are undervalued."
"As long as public policies are yoked to a sector that, from its inception, has conjured and maintained racist practices to build value into the market, we'll continue to see … these problems persist," said Keeanga-Yamahtta Taylor, assistant professor of African-American Studies at Princeton University.
The Racism and the Economy series is sponsored by all 12 Federal Reserve Banks. It examines structural racism, its impacts, and ways to dismantle it.
The March 1 conference focused on how racism, racial exclusion, and predatory practices have limited housing opportunities and wealth-building for communities of color.
For Perry and Taylor, policies rooted in segregation are still damaging Black neighborhoods and communities, but many don't understand that.
"Most people just don't know anything about redlining or Reconstruction," said Perry. "People don't know the extent to which discrimination has played a role in the material well-being of Black people."
Perry also pointed to a flawed "zero-sum" mentality that believes investment in Black communities comes at a cost to everyone else. In reality, he said, everyone loses from the underinvestment in Black communities.
Taylor said another obstacle is that people who benefit from the current system have no incentive to change it.
"There's a business model that has been profiting off this, even though we've been talking about this for 100+ years," he said.
A separate panel proposed policies that can expand housing and wealth-building opportunities for communities of color. Among them:
The presidents of the Atlanta, Cleveland, and Minneapolis Feds all said multifaceted solutions were needed to address deeply embedded racial inequities in housing.
One of the Fed's key roles in the economy is banking supervision, and Atlanta Fed President Raphael Bostic outlined some of the Fed's enforcement options.
"I'm working hard with our banking partners to pay attention to what isn't working for low-income people," Bostic said. "It's no surprise there are predatory products in low-income communities."
Cleveland Fed President Loretta Mester emphasized the importance of the Community Reinvestment Act, a law the Fed regulates which was created to combat racial discrimination in lending. Mester also highlighted the need to address the wealth gap through the earnings gap.
"This comes back to housing," Mester said. "If you have housing stability, you're much more likely to have access to college and better schooling to get you to college." That, she said, ultimately results in better employment and a greater ability to acquire housing.
Minneapolis Fed President Neel Kashkari said the Fed needs to take advantage of opportunities to "bring attention to the issue and (help) policymakers understand their choices."
Bostic said one way that success can be measured is by how well the Fed lifts up effective practices and policies.
"Many of the things you've heard are not our decisions," he said. "But are we doing what we can to inform those decisions? This took decades to occur. It's going to take some time for it to reverse."