New Findings Have Uncovered ‘Segregation Tax’ In Majority-Black Neighborhoods
By: Brianna Wigfall
With segregation ending in 1964, you would think that African Americans would be basking in equal right opportunities, but a new joint Brookings Institution and Gallup study says otherwise. It’s been found that Black American investments in residential property are undervalued. The study says the real estate in majority-black neighborhoods are consistently being under-appraised and undervalued. On Average, each home is sold for $48,000 less than it’s actually worth. These lowball prices have cost African American homeowners $156 billion in cumulative losses, and the report has deemed it a ‘segregation tax.’
What Is The Cost Of Racial Bias?
A question posed by the study due to the noticeable difference in majority-black communities based on real estate and property value.
“Majority-black neighborhoods hold $609 billion in owner-occupied housing assets and are home to approximately 10,000 public schools and over 3 million businesses,” the study said. “We find that in the average U.S. metropolitan area, homes in neighborhoods where the share of the population is 50 percent black and valued at roughly half the price as homes in neighborhoods with no black residents.”
In the study, researchers focused on owner-occupied homes using homes prices from Zillow and ‘black population shares across the full range of neighborhoods within individual metropolitan areas that have at least one majority black neighborhood and at least one neighborhood with less than 1% black population shares.’
What Is Devaluation?
“Devaluation is defined as the percent discount in median home values between neighborhoods with 50% black population and neighborhoods with no black residents, after accounting for structural characteristics of homes and neighborhood amenities.”
The study says despite the reasons that would lower the property value like ‘higher crime rates, longer commute, and less access to high-scoring schools, and well-rated restaurants,’ these factors still don’t explain nearly half the reason to devalue the homes in black neighborhoods.
“Homes of similar quality in neighborhoods with similar amenities are worth 23 percent less in majority black neighborhoods, compared to those with very few or no black residents,” this being how they have averaged out the losses to be $156 billion in losses.
It also points out that the metropolitan areas that show the greatest amount of devaluation of black neighborhoods are the ones that are more segregated.
“This analysis finds a positive and statistically significant correlation between the devaluation of homes in black neighborhoods and upward mobility of black children in metropolitan areas with majority black neighborhoods.”
Black families are put at a disadvantage in this matter because black children who are born into poverty are more likely to have a higher income if they grew up in a metro area where black owners properties are valued parallel to the standard market price.
The devaluation of black homes will keep African Americans behind hindering them from accruing wealth over time and making it hard for them to pay for education, start a business, or retire. The study focuses on owner-occupied homes because a homes appreciation brings wealth to the owner and renting out the property can be an advantage to renters.
“The devaluation of owner-occupied housing makes it easier to acquire the home, but once purchased, it is unambiguously disadvantageous to the owner and occupier, who would otherwise benefit from being able to refinance, borrow, or sell at a higher valuation.”
The study shows an interactive map that shows the devaluation of black homes in 113 metropolitan areas with at least one majority black neighborhood. A Burgandy circle represents homes in majority black neighborhoods that are worthless and a green circle for homes in a majority black neighborhood that is worth more. Just to name a few:
Los Angeles, Anaheim, CA: devaluation of -17.1% and an absolute price difference of $70,442.
Miami, Fort Lauderdale, Florida: devaluation of -20.3% and an absolute price of $41,012.
Atlanta, GA: devaluation of -29.8% and an absolute price of $48,427.
“We believe anti-black bias is the reason this undervaluation happens, and we hope to understand better the precise beliefs and behaviors that drive this process in future research,” researchers said.
By: Brianna Wigfall | Web: Briannawigfall.weebly.com | Instagram: Brianne. Live