Do Racial Inequalities Continue to Exist OR is everyone really treated equally?


I.  Compare relative status of different groups within the population.

	Median Income
	Educational Attainment
	Percentage in Poverty

II.  Black Wealth/White Wealth (Oliver and Shapiro, 1996)
	Income differentials when matched by education.

	Comparing groups by wealth shows the real extent of inequalities 
        that exist
	Wealth tells the real story because 1) it reveals the structural 
        inequalities and 2) we can see the outcome of practices which have 
        continued over time.

	Show Black/White wealth differentials (table)

	Net Worth: The straightforward value of all assets less any debts.
	Net Financial Assets: Excludes equity accrued in a home or vehicle 
        from the calculation of a households available resources.

	Why does these differentials exist?
	The most important source of wealth for most people is their home, 
        so it is necessary to focus on housing to understand the wealth 
        differentials.

III.  Institutional and Policy Factors Generating Wealth Inequality
	HOUSING
		We have to recognize that segregated housing markets continue 
                to exist.  
		Detroit is rated the second most segregated city in the 
                country

		To desegregate housing entirely, 78% of blacks in Northern 
                cities and 67% of blacks in Southern cities would have to 
                move to new neighborhoods.

		By 1993, 86% of suburban whites still live in places in which 
                Blacks represent less than 1% of householders (Massey and Denton)

		Continuing segregation is not a choice blacks freely 
                make; rather, it is a social condition that results from 
                racial steering, redlining, hostile white attitudes, and lender 
                discrimination (Faegin and Sikes)

	MORTGAGE LOAN REJECTION RATES
		Federal Reserve Bank studies show that black and Hispanic 
                applicants were denied mortgage loans two to three times 
                more often than Whites.  Banks turned down high-income 
                minorities in some cities more often than low-income whites.

		Even after controlling for financial, employment, and 
                neighborhood characteristics, "black and Hispanic mortgage 
                applicants are roughly 60 percent more likely to be turned 
                down than whites" (Oliver and Shapiro, 1997)

		Why?
		Loan officers are far more likely to overlook flaws in the     
                Credit records of white applicants or to arrange creative 
                financing for them than they were in the case of black applicants.  
                "whites seem to enjoy a general presumption of creditworthiness 
                that black and Hispanic applicants do not, and that lenders seem 
                to be more willing to overlook flaws for white applicants than 
                for minority applicants."

		Read Quote from Oliver and Shapiro p. 140


	INTEREST RATE DIFFERENTIALS

                Overall, Blacks pay a .54% higher rate on home mortgages 
                than Whites.
                A half-point difference on the median Black home mortgage 
                of $35,000 adds up to a $3,951 over the course of a twenty-five 
                year loan.  Every Black homeowner thus is deprived of nearly 
                $4000, money that potentially could have been invested in 
                financial instruments earning interest and accruing further capital.

                On home loans made without VA or FHA participation Blacks 
                pay nearly a full percentage point more.

                Intergenerational Wealth Transfer:
                Preliminary findings from recent data suggest that White 
                home buyers are twice as likely to receive family assistance 
                in purchasing a home as blacks (Los Angeles Survey of Unrban 
                Inequality)

               Racial Differences in Mortgage Rates

              	WHITE	BLACK	DIFFERENCE
% Homeowners	62%	40%	22%
Mortgage Rate	9.07	9.614	0.54
Non-FHA/VA Rate	9.19	10.11	0.92



     HOUSING VALUES
          Homes owned by Black couples are valued substantially lower 
          than those of similar white couples in 1980.
          Using national data for married couples, Black-owned houses 
          were $11,352 less valuable than White owned houses after making 
          adjustments for racial differences.

          In general, homes of similar design, size, and appearance cost 
          more in White communities than in Black or integrated communities.  
          Their value also rises more quickly and steeply in White communities.

          The mean value of the average White home increse $53,000 in 
          comparison to $31,100 for Black homes from 1967 through 1988.

          What are the effects of this?
          Depressed home values adversely affect the ability of Blacks 
          to obtain home equity loans or loans for business start-ups 
          or education.
          Racial isolation restricts individuals to information about 
          and access to jobs and better quality schools.


The Cost of Being Black in the Housing Market:
     10.5 billion paid to banks in extra interest
     58 billion in lost home equity
     If mortgage approval was the same for whites, 14,200 more blacks per year would own
     homes. That's 355,000 over a period of 25 years - 13.5 billion.
     Current generation of Blacks about $82 billion.
     If this continues unabated, it will cost the next generation of black homeowners %93
     billion. 

     [Show chart]

What does "Redlining" Mean?
     The FHA was established in 1939 to bolster the economy and increase 
     employment in the construction industry.

     People could buy homes with a small down payment at reasonable interest 
     rates

     There was over a 100% increase in housing purchases within the first 10 
     years.  It was limited however, to suburban housing.
     Why: 1) bias towards single family detached homes (cities were 
     congested so new housing went to the peripheries), 2) bias towards 
     new purchases rather than fixer-uppers and 3) continued use of 
     the "unbiased professional estimate"

     The Unbiased Professional Estimate 
     Government introduced standardized appraisals in which they considered 
     the racial composition of a neighborhood to be a variable in determining 
     the "productive life of the housing".
     Communities that were changing racially or were already Black were
     deemed undesirable and placed in the lowest category.  The cateories, 
     assigned various colors on a map ranging from green for the most 
     desirable (all new, all-White housing) to red (all-Black areas).
     These designations were then used by the FHA loan officers who made
     loans on the basis of these designations.

     The FHA Underwriting Manual stated openly that"if a neighborhood is
     to retain stability, it is necessary that properties shall continue 
     to be ocupied by the same social and racial classes".  It recommended 
     that "subdivision regulations and suitable restrictive covenants" 
     are the bst way to ensure neighborhood stability.

     Effects:
     Blacks were systematically locked out of the greatest mass-based 
     opportunity for wealth accumulation in American History.