Lisa Rice of the National Fair Housing Alliance was the keynote speaker at the Grounded Solutions Network Intersections conference in Pittsburgh on Oct. 3. She presented a fascinating and powerful account of the ways that government has been involved in increasing the wealth of certain groups of people in this country since its founding and before. She started with headrights, a policy under which European immigrants were given land stolen from indigenous people, with the acreage based on the size of their households—including indentured servants and slaves. She went up through the Homeowners Loan Corporation redlining maps and the ways our two separate and unequal financial markets combine with neighborhoods that are still effectively segregated to reinforce racial disparities in credit scores.
In the question and answer session, someone asked, “Why should the people buying homes in programs like community land trusts (CLT), who are mostly low-income people of color, be asked to ‘pay it forward’ in the form of resale restrictions, when the white people who benefited from all of these programs didn’t have to?”
(For those who are not familiar with resale-restricted shared-equity homeownership, the idea is that one subsidy creates permanent affordability because in return for a below-market price, owners agree to resale price restrictions that allow them some appreciation but not unlimited windfalls, keeping the home affordable to households in the same income bracket in perpetuity.)
It is a powerful question, and a familiar one to proponents of shared-equity homeownership. The standard responses to this concern go something like this:
- People buying homes through these programs wouldn’t be able to purchase a home at all without the program’s assistance, so when compared to renting, they are still coming out ahead in terms of asset building through the lower cost, forced savings, and predictable, if not windfall, equity building.
- Most community land trust homeowners do build enough equity to move into the unrestricted private market if they want to, so these programs can be seen as stepping stones if that is the desired goal. Land trust homeowners in Portland’s Proud Ground, for example, currently end up with an average of $76,000 in equity after 10 years.
- Land trust homeownership has a lot of support and safeguards built in, such that it creates a more stable asset-building opportunity for the long term, unlike the billions of dollars in home equity that people of color lost in the foreclosure crisis. From the 1970s to the mid-1990s, 50 percent of first-time lower income and minority homeowners lost their homes in under five years. In community land trusts, by contrast, 94 percent of owners make it past the five-year mark. And you must typically own for at least five years before you make money from owning a home. Especially for modestly-priced homes, appreciation matters less to building wealth than simply owning for a long time and paying a sound mortgage on time and in full.
- You can help a lot more people build wealth, and have access to neighborhoods that help them get access to other opportunities, with the same amount of subsidy with this model.
All of these things are true, and, I believe, good arguments.
The History of Home Appreciation
But hearing the question directly after Rice’s presentation crystalized something I’ve been trying to put my finger on for a long time. The concern about CLTs and Black owners particularly contains an unspoken assumption—that those massive windfall wealth gains that many white Americans accumulated through land appreciation in the 20th century were a natural result of homeownership, and would be replicable for African Americans now as long as they can get over the barriers to becoming homeowners at all.
But what Rice’s presentation itself reminded us of is that a very large portion of that wealth should be seen as ill-gotten gains. The increased value concentrated in segregated areas didn’t happen through some natural process that can just be extended to everyone like we could do with voting rights or public accommodations (however imperfectly we’ve actually done so).
By and large, buildings do not appreciate. They require maintenance and capital inputs to stay functional. Just ask any affordable housing asset manager. When we think of homes appreciating, it’s almost always the land and the location that is changing value. How it changes is not up to the homeowner, and it doesn’t always increase. Land values for homes are based on the changing fortunes and perceptions of the place the home is located—usually in contrast to other places.
And those changes have been driven by policies, or the ripple effects of policies, that have largely been applied in racially discriminatory ways—investments in infrastructure, schools, transit, parks; locations of jobs and amenities; access to credit, insurance, mainstream financial products; urban renewal and rezoning, and so on.
Previous generations of white wealth was based on land stolen from indigenous peoples and given to white people, and on slavery. The 20th-century homeownership wealth gains that compounded those disparities were realized because of policies and practices that affected the amount of appreciation in various communities. White wealth realized through homeownership was so disproportionately large because segregated white communities were able to hoard resources at the expense of other communities. That is what Rice’s presentation, The Color of Law, and any other look at the intersection of race and place in the 20th century tells us.
White homeowners were not all making an explicitly racist choice if they moved to these neighborhoods (though plenty were). They were, however, following and benefiting from the incentives of a system that concentrated resources and land value in segregated areas.
Fixing the Racial Wealth Gap
Let’s be clear about a few things:
- The racial wealth gap that segregation and redlining helped to cause is yawning and unconscionable, and needs to be fixed. In 2013, the median net worth of white households was $134,000. The median net worth of black and Latino households was $11,000 and $14,000, respectively.
- Access to safe, stable homeownership and home financing should be equitable. There are many reasons people want to own a home. Race should not play a factor in how possible that is, and it currently does.
- Stable, long-term homeownership does tend to help people build intergenerational assets through housing stability, access to neighborhood opportunity, forced savings, access to home equity, ability to pass something on to children.
But given why it was white households that were able to end up with so much wealth through publicly created, privately realized land appreciation, we shouldn’t expect that part of the experience to be exactly replicable. Those astronomical rises were predicated on the destabilizing of communities of color and the creation of concentrated poverty elsewhere. Today, redlined communities are still far lower in value than places that didn’t face redlining.
Even though a few homeowners of color are now able to benefit from the legacy of that system by realizing windfall profits in gentrifying areas, that’s not changing the system, it’s gaining very limited access to a system that is still generating much of its profits based on fears of “the other”—and inspiring exclusionary behavior from most people who want to profit from it.
Shared-equity homeownership on the other hand, is an example of changing the system. It is a sharing of risk and reward between individual and community that should contribute to shrinking inequality; a way to stabilize communities, benefiting renters and owners; a way to reduce the wealth gap while reducing economic segregation and without harming others by pricing them out; an attempt to spread homeownership to more people. It is an attempt to democratize our severely unequal system of land ownership. It is a rethinking of what’s possible.
(Certainly, for shared-equity homeownership to be a tool for racial equity will require explicitly looking at how well it’s doing, not just assuming it’s working. The field will need to track just how well the model is working for homeowners of color specifically, and listen to concerns coming from communities of color and tweak policies where needed.)
Shared-equity homeownership is not for everyone, and it will certainly not fix the racial wealth gap on its own. That will require taxing assets and unearned income more heavily so we can fund reparations-style programs with meaningful amounts of money. It will require fixing the biases in the credit scoring and lending system. It will require fully enforcing the Fair Housing Act. And many many other things.
People who are focused on fixing the racial wealth gap should by all means continue to fight for increases in targeted housing subsidies that match the scale of the problem and for fair access to credit and homeownership. But they should stop implying that we could close the gap by trying replicate how home appreciation worked for white families under segregated conditions, or by extension that shared-equity homeownership is somehow unfair. There’s plenty that’s unfair still out there, but shared-equity is part of the solution.