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Housing Discrimination as a Basis for Black Reparations Jonathan Kaplan, Department of Philosophy (from a paper co-authored by Andrew Valls) Oregon State University Oct. 21, 2006. Reparations and Slavery:. Problems for the argument: The “Epistemological Fog” “Long time ago”
Jonathan Kaplan, Department of Philosophy
(from a paper co-authored by Andrew Valls)
Oregon State University Oct. 21, 2006
These problems are not fatal to a reparations scheme based on the harms inflicted by slavery; however, they make defending such schemes more difficult.
The “Wealth Gap”
Equity in Owner Occupied Housing is most of the wealth for most Americans with any wealth (those in the middle 60% of wealth)…
The Black/White wealth gap in the U.S. is in large part explained by the differences in home ownership rates and the value of owner-occupied housing
These differences in home ownership rates and the value of owner occupied housing exist at every income level, and persist when controlling for all standard demographic variables.
Why is this?
Until the creation of the “Home Owner’s Loan Corporation” (HOLC) in 1933, and the “Federal Housing Authority” (FHA) in 1934, relatively few Americans owned their homes.
Homes were seen as an expensive consumable good, not as an investment or way to build equity.
The HOLC and FHA changed all that.
At the beginning of the 20th century, most Black Americans living in cities lived in neighborhoods that were predominantly White (the “segregation index” was relatively low for most American cities, especially in North)
The “Home Owner’s Loan Corporation” (HOLC) assigned “risk” rating to neighborhoods, based on various demographic factors, including especially race (‘mixed’ and predominantly Black neighborhoods were rated as “riskier”)
But the HOLC was willing to insure mortgages in “high risk” neighborhoods, at roughly the same costs; the “risk” ratings were meant (it seems) for internal actuarial use.
And during its short existence, the HOLC found that “high risk” neighborhoods did not have substantially higher rates of default (were not in fact “riskier).
The FHA changed all that …
Upshot: To be insurable, the neighborhood had to start White and stay White.
For the FHA, to be insurable, the neighborhood had to start White and stay White.
Shelley v. Kraemer made racially restrictive covenants illegal and unenforceable, but by itself this did little to increase the access that Black Americans had to home purchases.
Steering and “individual” discrimination remained common, and, until 1968, was in fact legal.
The FHA would still not insure mortgages on homes in “mixed” neighborhoods on an equal footing with “White” neighborhoods, and hence White homeowners (even if not themselves racist) in White neighborhoods had an incentive to prevent Blacks from purchasing homes.
Even after the passage of the Fair Housing Act (Title VIII of the Civil Rights Act of 1968), there was little government interest in enforcing the weak antidiscrimination rules it enacted…
White Americans therefore had an opportunity to build wealth that Black Americans were prevented from having…
The Ghettoization of American Cities
Whites, to take advantage of FHA/VA loans, were essentially forced to move to new suburban developments with restrictive racial covenants.
Blacks were excluded from the equity gains associated with the rise in home ownership in the 1930s-1960s, and were excluded from suburbanization.
“Mixed” neighborhoods in American cities became predominantly Black, and services were then systematically withdrawn from American cities…
Residential Segregation and the disadvantages wrought by FHA/VA/HUD policies:
State-sponsored injustices demand a state response
How much? To whom?
Compare the current average wealth of White Americans due to home equity to the current average wealth of Black Americans due to home equity
This will underestimate the amount owed insofar as it fails to take account of neighborhood effects, etc.
It may overestimate the amount owed insofar as it fails to take account of pre-existing differences in housing-related wealth between White and Black Americans (pre-1934)…
BUT: These pre-existing differences were themselves the result of unjust actions on the part of government agencies!
And in any event, such differences are swamped by the likely value of neighborhood effects
Oh, how much? Well…
Amounts could easily exceed 10 trillion dollars!
It would be politically impossible, and likely foolish, to simply “split” the money and give every Black American an equal share…
Recent immigrants? Have they been disadvantaged to the same extent?
Successful middle-class Black Americans? Have they been disadvantaged as much as poor Black Americans? Or more – would they be doing even better without the disadvantages?
Better might be to institute policies that advantage those disadvantaged by previous policies…
In order to create and fund policies that provide e.g. education and small business grants/loans, subsidized mortgages/mortgage insurance, etc., some of these programs might need to be “race blind.”
However, while this might be a necessary compromise, it remains important that the policies both compensate and be seen as compensating Black Americans for the history of injustice.
But if the results are important, is more important that any policies enacted not be racially indifferent than that they not be racially “blind.”
Don’t let the perfect be the enemy of the good!
“Housing Discrimination as a Basis for Black Reparations” Jonathan Kaplan and Andrew Valls. Forthcoming in Public Affairs Quarterly. Expected Publication: July, 2007.
Work on this project was supported in part by an Oregon State University College of Liberal Arts Research Grant.
Some Key References:
Charles, K. K. and E. Hurst. 2002. "The Transition to Home Ownership and the Black-White Wealth Gap." Review of Economics and Statistics 84: 281-97.
Gordon, Adam 2005. “The Creation of Homeownership: How New Deal Changes in Banking Regulation Simultaneously Made Homeownership Accessible to Whites and Out of Reach for Blacks.” The Yale Law Journal 115: 186-226.
Jackson, Kenneth T. 1985. Crabgrass Frontier: The Suburbanization of the United States. New York: Oxford University Press.
López Turley, Ruth, N. 2003. “When do neighborhoods matter? The role of race and neighborhood peers.” Social Science Research 32: 61-79
McCarthy, Thomas. 2004. "Coming to Terms with Our Past, Part II: On the Morality and Politics of Reparations for Slavery." Political Theory 32: 750-72.
Rusk, David. 2001. "The 'Segregation Tax': The Cost of Racial Segregation to Black Homeowners." Washington, DC: Brookings Institution Center on Urban and Metropolitan Policy.
Yinger, John. 1995. Closed Doors, Opportunities Lost: The Continuing Costs of Housing Discrimination. New York: Russell Sage Foundation.
Thanks to: Sharyn Clough, Samuel Wheeler, an anonymous reviewer, and participants at the “Race and Political Action” session of the American Political Science Association’s 2006 meeting.