The Color of Wealth in the Nation’s Capital

Capture

By Kilolo Kijakazi, Rachel Marie Brooks Atkins, Mark Paul, Anne Price, Darrick Hamilton, William A. Darity Jr.

November 1, 2016

The 2007–09 Great Recession and housing crisis erased approximately half of Black and Latino households’ wealth, while Asians suffered the largest absolute lost in wealth (McKernan et al. 2014). Asian and Latino households tended to live in geographic areas that were hit hardest by the housing crisis (De La Cruz-Viesca, Hamilton, and Darity 2015). But the dramatic wealth disparities between White communities and communities of color long predate the dramatic economic downturn. This report explores racial and ethnic differences in net worth, focusing on Black families in Washington, DC, and shows, through a chronicle of their history in the city, how discrimination and systemic racism have contributed to today’s wealth gap in the nation’s capital.

The authors document assets, debts, and net worth for racial and ethnic groups living in the DC metropolitan area from a 2013–14 phone survey.

White Households in DC Have a Net Worth 81 Times Greater than Black Households

In 2013 and 2014, the typical White household in DC had a net worth of $284,000. Black American households, in contrast, had a net worth of $3,500.

Home Values Are Significantly Lower for Black Families

Much of Americans’ net worth is in their homes. Yet here, too, there are sharp disparities. The typical home value for Black households in DC is $250,000, about two-thirds of the home value for White and Latino households.

More distressing, homeownership disparities are not a function of education. Higher education is closely tied to higher incomes, which should make homeownership more attainable. But in DC, 80 percent of Whites with a high school diploma or less are homeowners, while fewer than 45 percent of all Blacks in the District are homeowners. Fifty-eight percent of Black households do not own homes.

Parity in Business Ownership but Not in Value

Unlike for other places, we find near parity for owning a business asset in DC, but gross differences remain for business ownership values, and most of the sample does not have business equity, Black or White.

Black Unemployment Is Higher in DC than in the Nation

Despite much higher rates of employment in public sector in the DC area, Black unemployment rates in DC and racial unemployment disparity is much larger than in the rest of the nation. However, if the entire DC metropolitan statistical area is considered, racial employment differences remain pronounced, but the Black unemployment rate is lower in the metro area than for Blacks across the nation. This suggests that suburban living is associated with better employment.

A Long History of Blocked Wealth

These enormous wealth disparities did not arrive with the housing crisis or recession. Black people in DC have faced more than two centuries of deliberately constructed barriers to wealth building, and some of the highest barriers were embedded by design in law. Whether enslaved, barred from jobs in lucrative sectors, diverted from a stake in land giveaways, seeing their neighborhoods targeted for “urban renewal,” or watching their housing options squeezed by federal redlining, Black families in the District have had little chance to build wealth.

A short history of the barriers to building assets:

1840s: “Free” Black people are governed by Black Codes that prohibit them from owning and operating eating establishments and taverns and that deny them licenses for any trade other than driving carts or carriages.
1862: White people who enslaved Black people in the District are compensated for their “financial loss” after emancipation in the District, but Black people are not compensated for being held in bondage.
1870s: President Johnson returns most of the land confiscated during the Civil War to Southern Confederates. His actions constrain freed Black people from building wealth by acquiring land and limit Black people to working for others and obtaining whatever income they can under highly restrictive conditions.
1940s: Barry Farms, a community developed at the end of the Civil War by 500 freed Black families, is largely demolished to create space for public housing and is further devastated by the decision to have Suitland Parkway cut through the community, destroying individual and community assets.
1950s: White flight to suburbs begins. Black families are excluded from most suburban developments, confining them to central cities. The White population in the District falls 33 percent, and the Black population climbs 47 percent.
1960s–70s: Urban renewal sweeps cities “clean.” DC’s largely Black southwest neighborhoods are targeted by eminent domain. More than 500 acres are bulldozed, along with 1,500 businesses—including many Black-owned businesses—and 6,000 homes. Approximately 23,000 residents, predominantly Black, are displaced with little compensation. The 5,800 new homes are to be inhabited by 13,000 middle- and upper-middle-class residents.

Looking Ahead: Gentrification and Displacement Vulnerabilities

The history of blocked opportunity to build wealth has left many Black families financially vulnerable, and the recession of 2007–09 only exacerbated that vulnerability. Now another trend threatens households.

The nation has rediscovered the benefits of living in central cities, and DC is no exception. White and affluent families are returning. Climbing from 28 percent of the District’s population at its nadir, the White population today is nearly half the city’s total. The Black population stands at 48 percent, down from 70 percent in the 1970s.

The demographic shift is accompanied by gentrification. While gentrification can bring benefits to neighborhoods, it can also bring strife. Displacement is a threat when rents, home prices, and property taxes rise. As one real estate expert put it, having wealth means having staying power. The typical Black household in DC has only $2,100 in liquid assets—resources they can quickly convert into cash when faced with an emergency. Whites, in contrast, have $65,000 in liquid assets.

Rents for a two-bedroom apartment rose 45 percent between 1999 and 2005. In addition, many owners of subsidized apartments opted to not renew the Section 8 lease, further reducing the supply of affordable housing. By 2010, there were only 34,500 low-rent apartments in the District, half the number of units available in 2000.

The housing crisis slowed rising rents, but it introduced another hit to Black economic stability. Black residents were three times as likely to be targeted for subprime loans during the housing boom, and their home purchases were much more likely to end in foreclosure.

Residents without the assets to build wealth, stabilize housing costs, and smooth consumption are at risk of displacement and continued vulnerability. As the authors write, “There is a tendency to attribute the racial wealth gap to individual character flaws among people without wealth.”

This report shows that building wealth is hindered by a history of structural barriers and practices that helped create wealth for White families and blocked asset building from Black families.

Read More: http://www.urban.org/research/publication/color-wealth-nations-capital