The wealth gap between blacks and whites in the US is more than the traditional economic inequality involving income disparities. The opening is determined by historical, social, and economic factors and is reflected by a vast difference in resources and financial assets between black and white populations. The literature review addresses the study question, “How are Housing Policies Related to the Black and White Wealth Gap?” Through researching discriminatory housing practices, redlining, and more significant economic factors, we hope to understand more about this complex problem. The discussion contributes positively and furthers the current debate on racial and economic justice and advances toward a just society where money is equitably shared among racial and ethnic groups.
Derenoncourt et al. (2022) observe a worrying trend of stagnation in reducing the gaps from the 50s, suggesting that inequality may grow. The authors construct a data set from post-emancipation to modern times that reveals crucial historical details critical to understanding ongoing disparities. Although the reduction rate in the income disparity was slower than expected, discriminatory forces were still present to hinder economic progress. Immediately after emancipation, the 60-to-1 difference had already decreased to a 6-to-1 ratio. Even with equal capital gains and savings rates, the difference would remain at 3-1, thus signifying the enduring effects of earlier injustices (Derenoncourt et al., 2022).
The research highlights the crucial role of different housing and investment portfolios in analyzing the impact of discriminatory housing rules. With a significant proportion of their earnings coming from real estate, Black households find themselves struggling as the wealthiest Americans, who are usually White, accrue more advantageous returns from rising share markets. Derenoncourt et al. (2022) argue that the wealth gap narrowed much more faster during and after the civil rights movement than in the preceding decades, implying that these actions and legislative changes positively impacted black people’s ability to accumulate wealth. Therefore, slavery and other discriminating practices directly caused the unequal income between Blacks and Whites.
Herring and Henderson (2016) stress the structural and cultural factors that contribute to the racial wealth disparity between the Black and White communities. The authors extensively scrutinize the wealth gap issue, considering the relationship between historical and modern factors that keep inequalities alive. It focuses on the historical aspect by looking into the legacy of racial discrimination and slavery and their long-term effects. The writers examine how cultural dimensions cause income inequality through societal attitudes and beliefs. Ubiquitous cultural components like stereotypes and prejudices have been proven to affect the economic prospects and outcomes for Blacks significantly.
There is an in-depth examination of the institutional causes, including discriminatory housing, educational, and labor practices. Herring and Henderson (2016) recognize how these factors are interlinked and the cumulative impact of their combination on income differences. The housing policy is also noted as an essential factor that discriminated against lending practices and redlining that hindered the ability of Black people to accumulate wealth.
Herring and Henderson (2016) argue that there are no distinct differences between structural and cultural elements. Instead, they interact and support one another. Prejudices and biases in institutional processes create a vicious cycle to prevent Black people from benefiting from the chance of making profits. The combination brings cultural and structural views either to improve our comprehension of the racial wealth disparity. Firstly, it provides a new dimension to the body of knowledge as it illuminates how historical legacies, cultural dynamics, and structural inequalities combine to produce the observed disparities.
Hilber and Liu (2008) examine the significant homeownership disparity between Black and White Americans and note how conventional theories focused on income and demographic variables cannot entirely contribute to this difference. Using intergenerational data from PSID, authors find the impact of household wealth, parental externalities, and locational preferences on homeownership.
According to the data, African-American households are 6.5 percentage points less likely to own a property, even using only traditional explanatory variables. Nonetheless, the gap widens when wealth and desired site types are considered. However, Hilber and Liu (2008) note that the housing finance disparity is unlikely to have increased over time, thereby challenging previous studies highlighting the significance of credit constraints in explaining the race gap in homeownership.
Rather than credit restrictions, Hilber and Liu believe that differences in household wealth, parental externalities, and geographical preferences can explain the unexplained homeownership gap. It shows that the residual disparity is lower for location-type decisions and relative homeownership costs. It suggests that the wealth of parents has a significant impact on housing occupancy outcomes. Therefore, Hilber and Liu (2008) thoroughly examine the Black–White homeownership gap and emphasize the roles of wealth, locational choices, and parental externalities.
Krivo and Kaufman (2004) examine the differential housing equity of blacks, Hispanics, Asians, and non-Hispanic whites to better understand the intricacies of housing and wealth disparity in the US. Despite this study using data from the American Housing Survey, it has proven that even after considering numerous locational, life cycle, socioeconomic, family, immigrant, and mortgage-related factors, housing equity has not been equalized, especially for blacks and Hispanics compared to whites The results suggest that differences in housing equity experienced by blacks and Hispanic groups are still prominent after adjusting for age, socioeconomic status, and housing market value. The outcome illustrates that racial-ethnic differences in acquiring housing wealth are widespread. The study also demonstrates that minority households, especially blacks and Hispanics, receive less mortgage and housing services compared to whites. It is also supported by the growing stratification view on income and housing inequality proposed by Krivo and Kaufman (2004), where their position highlights the role of larger social and institutional processes of racial-ethnic stratification. It demonstrates how these processes prefer one group to the other, particularly Whites, and how this results in continued disparities in residential equality.
Sullivan et al. (2016) cover the effect of housing policy on the racial wealth gap between black and white households in the U.S. Redlining was a historical discriminatory housing practice that has largely contributed to the present-day gaps. The inability of Black households to obtain mortgages through redlining and other policies consistently denying such loans contributed to the stagnation of wealth creation and limited homeownership options. The discriminatory regulations also affect education and career prospects, adding to a much bigger racial wealth inequality.
Sullivan et al. (2016) further point out how residential segregation causes overcrowding of Black and Latino pupils in poor-quality and underfunded schools, especially children from low-income households. Policy changes that have moved away from integrating public education and financial inequities have maintained an already inequitable educational system, making segregation even worse. Even though the racial wealth gap is moderately shrinking as a result of equalizing college graduation rates, it is highly improbable that matching the current levels of college degree attainment of white households will significantly reduce the racial wealth gap. It implies that focusing only on educational inequalities might not fully solve the wealth gap, emphasising the need for policies targeting the structural factors (Sullivan et al., 2016). In order to narrow the gap in wealth between black and white households, there is a need to come up with a broader policy of addressing the discrepancies in education.
Hanks et al. (2018) point out, among others, that housing rules aggravate the disparity in wealth among the whites and black. For decades, housing has been a significant way to build wealth, and discriminatory regulations have greatly affected black families. It has been established that in 2013 black households had 69 per cent of their wealth in home equity while their white counterparts had 57 per cent of their wealth in home equity. Redlining and racially restrictive covenants were tools that maintained economic discriminations against the black families and limited their chances of homeownership. Redlining and other practices related to racial discrimination forced black families into higher-interest loans or denied them loans in all. According to the study, discriminatory practices still persist despite the 1968 redlining prohibition (Hanks et al., 2018).
However, more than raising the percentage of homeowners will be needed to bridge the wealth disparity. According to the study, racial wealth disparities would be reduced by 31% if the homeownership gap between white and black households were closed and by an additional 16% if returns on homeownership were further equalized (Hanks et al., 2018). The viewpoint implies that while rectifying discriminatory housing rules is important, more steps are required to solve the wealth gap. To close the wealth gap between blacks and Whites, deliberate and focused initiatives are needed in opposition to past discriminatory housing laws.
Costa (2019) reaffirms how housing policies affect the economic disparity between Black and White people. He quotes “The Color of Law,” a book by EPI Distinguished Fellow Richard Rothstein that describes how systematic and institutionalized housing discrimination from the 1940s onwards greatly exacerbated the startling wealth gap. According to Rothstein, African-American families were deprived of the chance to become homeowners due to federal housing laws that were put into place during the 20th century, especially those that were enforced by the Federal Housing Administration. The wealth disparity between the median white American family and the median black family is significant, with the former possessing twelve times the wealth of the latter.
Not only did discriminatory practices take the form of exclusionary legislation, but they also frequently took the form of violence directed at Black families who were trying to relocate into communities reserved for White people. Redlining, the practice of drawing red lines on maps of black congregations, continued until it was barred by the Fair Housing Act (1968) (Costa, 2019). To fully comprehend the historical context and its profound influence on the unconstitutional residential environment of American cities, Rothstein highlights the importance of doing so. The author highlights the complexity of the problem and proposes that by identifying and addressing the unlawful living environment brought about by clear racial segregation regulations, certain reversals may be achievable by a well-informed government.
A thorough literature review helped to clarify the complex variables influencing the income disparity between Blacks and Whites. When historical context is examined, these works reveal a heritage of discriminatory behaviors and systematic racism that have sustained economic inequality. The studies explore the history of discriminatory housing laws, including information on segregation, redlining, and Black populations’ unequal access to housing possibilities. Furthermore, the literature examines economic disparities, examining the crucial roles that income disparities, job possibilities, and patterns of wealth accumulation have played in forming the observed wealth gap.
Conclusively, a comprehensive literature review addresses the research question: How do housing policies contribute to the black-and-white wealth gap? They show shows that housing regulations have shaped and perpetuated the black-white wealth difference. Derenoncourt et al. (2022) and Herring & Henderson (2016) highlight redlining, which halted black families attempts of owning homes and creating wealth. Hilber & Liu (2008) shows how redlined districts still struggle economically. Krivo & Kaufman (2004) and Sullivan et al. (2016) highlight how historical housing regulations continue to affect racial inequality. In Hanks et al. (2018) study, the Economic Policy Institute emphasizes the wealth gap’s complex nature, including labor market discrimination and union density reduction. Moreover, Costa (2019) blames systemic, legalized housing discrimination for the wealth disparity and recommends informed policymaking to reverse it. The literature agrees on the importance of housing policies in detail; however, Hanks et al. (2018) complicate variables with labor market discrimination and diminishing union density, adding to the wealth disparity without conflicting with housing rules. The future study must examine their mechanisms in changing socioeconomic conditions. Fair housing legislation, marginalized community homeownership, and equitable economic practices are recommended to reduce the black-and-white wealth gap.
References
Costa, P. da. (2019, April 8). Housing discrimination underpins the staggering wealth gap between blacks and whites. Economic Policy Institute. https://www.epi.org/blog/housing-discrimination-underpins-the-staggering-wealth-gap-between-blacks-and-whites/
Derenoncourt, E., Kim, C. H., Kuhn, M., & Schularick, M. (2022). Wealth of two nations: The U.S. racial wealth gap, 1860-2020. National Bureau of Economic Research.
Hanks, A., Solomon, D., & Weller, C. E. (2018, February 21). Systematic Inequality: How America’s Structural Racism Helped Create the Black-White Wealth Gap. Center for American Progress. https://www.americanprogress.org/article/systematic-inequality/#:~:text=Similarly%2C%20blacks%20are%20much%20less
Herring, C., & Henderson, L. (2016). Wealth inequality in black and white: Cultural and structural sources of the Racial Wealth Gap. Race and Social Problems, 8(1), 4–17. https://doi.org/10.1007/s12552-016-9159-8
Hilber, C. A. L., & Liu, Y. (2008). Explaining the black–white homeownership gap: The role of own wealth, parental externalities and locational preferences.Journal of Housing Economics, 17 (2), 152–174. https://doi.org/10.1016/j.jhe.2008.02.001
Krivo, L. J., & Kaufman, R. L. (2004). Housing and wealth inequality: Racial-ethnic differences in home equity in the United States. Demography, 41 (3), 585–605. https://doi.org/10.1353/dem.2004.0023
Sullivan, L., Dietrich, L., Traub, A. M., Ruetschlin, C., Draut, T., Meschede, T., & Shapiro, T. (2016). The Racial Wealth Gap: Why Policy Matters. Demos.
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