Voices for Racial Justice

Protecting the Renters Credit is a Racial Justice Issue: Part One

This is the first piece in a series written in collaboration with Brett Grant (Voices for Racial Justice), Clark Biegler Goldenrod (Minnesota Budget Project), Roberto de la Riva (Inquilinxs Unidxs), and Eric Hauge (HOME line). Read part 2 here

 In Minnesota, people from black and indigenous communities are more likely to be renters than homeowners. For generations of white American families, homeownership has been a fundamental means of accumulating wealth. Their homes have grown in value over time, providing security in retirement, and serving as an asset against which they can borrow for education or other purposes.

For generations of communities of color and indigenous communities who were shut out of early federal programs that promoted homeownership, such as the New Deal mortgage insurance system that generated the mid-20th-century homeownership boom, this missed opportunity to amass wealth that white Americans took for granted is evident to this day. For example, in the African-American community, it is evident in a black-white wealth gap, black-white health disparities, poor living conditions, and dismal educational opportunities for African-Americans.

Historical Barriers to Homeownership for African-Americans

Historically, African-Americans were shut out of early federal programs that promoted homeownership. In the 2017 volume, The Fight for Fair Housing: Causes, Consequences and Future Implications of the 1968 Federal Fair Housing Act, housing expert, Lisa Rice, notes that federal programs created to support homeownership dating to the 19th century “largely, and in some cases, exclusively benefited whites” while making it difficult for black citizens to achieve the dream of owning homes and land.

Black Americans were initially unable to take advantage of the Homestead Act, under which the federal government encouraged westward migration by giving away tens of millions of acres to settler citizens. Former enslaved black Americans gained full citizenship with the 14th Amendment and became eligible for land grants; however, that right became irrelevant with the collapse of Reconstruction, the rise of Jim Crow, and the limitations on the rights of black people that Southern states placed in their constitutions.

This pattern of exclusion continued into the Great Depression. For example, the Homeowners Loan Corporation, established in the 1930s to refinance mortgages, set a discriminatory pattern when it drew lines around black communities — a system known as “redlining” — and decreed them “unsafe” for federal investment.

That system of exclusion was picked up by the Federal Housing Administration, created in 1934 to encourage homeownership with federally backed mortgage insurance. A 2017 study by the Federal Reserve Bank of Chicago featured in the New York Times found “evidence of a long-run decline in homeownership, house values and credit scores” that persists to this day in the formerly redlined neighborhoods.

The Fair Housing Act of 1968 ended the most outrageous forms of housing discrimination and brought a modest rise in black homeownership. But studies continue to show pervasive discrimination in housing, and whites with lower incomes still have greater access than middle-class African-Americans to mixed-income communities.

Unfortunately, the gains and the wealth that the Fair Housing Act of 1968 represented were wiped out a decade ago in the Great Recession, which reduced African-American homeownership rates to levels not seen since housing discrimination was legal in the 1960s. These losses reflect the fact that black people who were eligible for affordable credit were victimized by predatory loans that paid off handsomely for brokers and lenders, but led borrowers to foreclosure.

Current Barriers to Homeownership

An analysis by the nonprofit organization, Urban Institute, of the black-white homeownership gap in 100 cities across the country shows that none have actually closed the ownership gap. The gap was widest in Northeastern and Midwestern cities. The widest gaps, listed in order of severity, were found in Minneapolis, MN; Albany, NY; Buffalo, NY; New York, NY; Salisbury, MD; and Bridgeport, CT. The cities with the smallest gaps were found in Killeen, TX; Fayetteville, N.C.; Charleston, S.C.; Austin, TX; and Augusta, GA.

Communities of color and indigenous communities that were ravaged by predatory lenders during the run-up to the recession have now been shut out of the credit market entirely because of tightened lending standards. Some of these communities have seen the return of a particularly pernicious predatory lending system known as contract for deed. Such contract for deed programs were especially difficult on black communities in Chicago and Baltimore, in particular, during the mid-20th century.