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The American Dream



SREA would like to thank Kiana Pierre-Louis for her enriching and thought-provoking talk, Race and Wealth, and we would like to thank all who were able to attend. As Black History Month begins, we are revisiting a topic we covered a few years ago about homeownership and the wealth gap, which Kiana explained in her presentation. Though many Americans are unaware of this history, it is an important piece of our past that has a tremendous impact on the present.


The American Dream is strongly tied to homeownership and the stability and independence that owning a home can provide. Homeowners benefit economically from accumulating wealth, or savings, in the form of equity, as well as from tax deductions for mortgage interest and real estate taxes paid. The price of renting a home has these costs built in, without the ability to accumulate equity or deduct the expenses. From the beginning of U.S. history, the opportunity to achieve homeownership has not been equally available to all Americans; however, many Americans are unaware of more recent, 20th-century policies that legalized segregation in housing.


The Federal Housing Administration, which was established in 1934, financed the construction of suburban subdivisions, incentivized the purchase of single-family homes, and provided advantageous mortgages almost exclusively for white Americans. Many of these suburban subdivisions, which were built after World War II, received federally backed financing on the condition that homes were sold exclusively to white families. In addition, the Home Owners' Loan Corporation, a federal agency, created “Residential Security” maps to rate the lending risk in cities. The maps labeled areas with Black residents as hazardous, rendering federally subsidized loans unattainable in those neighborhoods. This practice is referred to as redlining, a term that comes from the color-coded maps that were created for all major U.S. cities, including Boston. The GI Bill of 1944 served to exacerbate inequality in multiple ways, especially in access to homeownership and higher education. The repercussions of these government policies directly affect the current wealth gap between white and Black families.


In the United States, the average net worth of a white family is almost 10 times the average net worth of a Black family, and much of this wealth is in the form of home equity. According to a 2020 analysis, across the United States, 44 percent of Black families owned their own home compared to over 73 percent of white families, with some cities having an even higher disparity. The increase in value of U.S. residential real estate from 1945 to the present is responsible for a significant amount of the wealth accumulated by many white families, which has been passed down through generations in a tax-advantageous manner. The effects of excluding Black Americans from the post-war housing boom still exist in the lack of accumulated Black wealth. Though the Fair Housing Act of 1968 made it illegal to discriminate in housing sales and lending, many of the practices persist, and the legacy of legal segregation affects Black homeownership and wealth to this day.


To learn more about these policies, The Color of Law by Richard Rothstein explains in detail how the United States government created the homeownership and wealth gaps through the government-regulated financing practices and suburban development of the mid-1930s through the 1950s. You can listen to Rothstein discussing his book with Ta-Nehisi Coates here. Dorothy A. Brown’s book, The Whiteness of Wealth describes the numerous ways U.S. tax laws benefit white families. Other options include the podcast episode Location! Location! Location! from NPR’s Code Switch and the video Redlined, A Legacy of Housing Discrimination. For more information about Black veterans who fought during World War II, Half American by Matthew F. Delmont details the discrimination African American soldiers faced during the war and once they returned home.


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