Zoning, Housing Regulation, and America’s Racial Inequality

The Biden White House has been publicizing America’s new 19th federal holiday, celebrating the end of black slavery and the ongoing fight for true black independence and equality. One of the White House announcements may have puzzled some people: “Exclusion Zoning: Its Effect on Racial Discrimination in the Housing Market”.

Zoning? We could understand protecting and expanding voting rights, fighting job discrimination or attacking white supremacist organizations (all that the Administration is doing). But why highlight housing and zoning policy?

Biden’s people know what they’re talking about. America’s housing and zoning policies are rife with systemic racism. And that ongoing racism fuels long-term, ongoing negative impacts on Black income, wealth, and equality. Whites are much more likely to inherit wealth than blacksAnd much of that inherited wealth comes from real estate equity.

High house prices are currently hurting the economy and homes across the country. But they are having an especially pronounced impact on black families, where rising prices compound the historic discrimination they have always faced in American housing markets.

Home ownership has been the best way to build wealth in households and also qualify for a better home, establishing credit worthiness and building financial equity. Research by my colleague Darrick Hamilton and Chris Farmighetti found that the homeownership gap between blacks and whites grew between 2004 and 2017, even among college graduates.

Housing expert Jim Carr says that despite the struggles and victories of the civil rights movement and anti-discrimination laws, America’s black and white homeownership gap is actually five points higher today than it was in 1920. Of course, Few people owned homes back then, but America’s great homeownership boom after World War II was racially exclusive as well.

The racial divide has been caused by official government policy, housing finance practices, economic discrimination and exclusion, and the way our metropolitan regions are politically organized.

Start with government policy. In the 1930s, during the Great Depression, the federal government entered the housing market to help shore up failing banks. As part of that national policy, consistent appraisal and valuation standards were developed to make the national capital market more effective.

Established by the Homeowner Loan Corporation (HOLC), those standards were drawn on city maps, marking which neighborhoods were considered best or worst for housing investments. The neighborhoods were color-coded, with red being the worst.

The term “red line” – excluding some neighborhoods from government-backed home loans – comes from those maps. Red lines were drawn around segregated black and non-white neighborhoods, Block pre-existing patterns of discrimination. in the emerging national financial market.

When the United States resorted to massive postwar spending on education and housing through the GI Bill, federal lending agencies and private housing finance embraced those discriminatory housing standards. As Richard Rothstein details in his groundbreaking book The color of the lawAmerica’s housing programs were “equivalent to a state-sponsored segregation system.”

Discriminatory lending was amplified by the practices of real estate agents. Sociologist Rose Helperdocumented a variety of anti-black practices by agents, including the undervaluation of black properties, requiring excessive financial documentation of black buyers and driving them away from white neighborhoods, and “blockbusting” techniques designed to scare homeowners targets at below-market selling prices where brokers pocketed the difference.

Ultimately, housing discrimination was anchored by the growth and political organization of America’s suburbs. All-white suburbs grew up around increasingly non-white cities, with racially excluded housing policies at the center. Many suburban home developers, such as JC Nichols in Kansas City or the Levitts of Long Island Levittown, put explicit racial restrictions on the contracts, prohibiting blacks from buying them or from white owners selling to blacks.

These racial restrictions were combined with exclusion zoning, allowing only single-family homes on large lots. This impeded multi-family developments, further excluding non-whites and keeping their children out of better-funded public schools. (We fund much of our public education through local property taxes, which grew the fastest in these wealthier suburbs.)

Many cities are now heavily zoned for single-family homes, and the suburbs are even more exclusive. In 2019, the New York Times produced amazing single-family zoning amount maps dominates residential land in cities. And it wasn’t just conservative cities: high levels were found in Minneapolis (70%), Los Angeles (75%), Seattle (81%), and San Jose (94%).

Some places are changing politics. Minneapolis voted to end single-family zoning on 70% of its residential land, Portland will allow up to four units on previously restricted lots, and Berkeley has voted to end single-family zoning, driven by the recognition of its racially discriminatory impacts.

But restrictive zoning is deeply embedded in urban and suburban politics, protected by homeowners’ associations that are very politically active. Therefore, the Biden Administration’s push for federal incentives, education, and guidance is welcome. Given the multifaceted forces blocking Black home ownership, that won’t be enough to reverse America’s racially biased policies. But it is an important start.

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