Devaluing Homes is Destroying Black Wealth
A new report from the Brookings Institution shows that owner-occupied homes in Black neighborhoods are undervalued by $48,000 per home on average, amounting to $156 billion in cumulative losses. Majority-Black neighborhoods hold $609 billion in owner-occupied housing assets and are home to approximately 10,000 public schools and over 3 million businesses. Andre Perry and David Harshbarger, the authors of the report, found that in the average U.S. metropolitan area, homes in neighborhoods where the share of the population is 50% Black are valued at roughly half the price as homes in neighborhoods with no Black residents. Home appreciation results in higher home values which brings wealth to owners. The large wealth gap between Blacks and other racial groups in the U.S. can, in large part, be attributed to differences in homeownership rates and the value of housing. “Black homeowners realize lower wealth accumulation, which makes it more difficult to start and invest in businesses and afford college tuition,” the authors wrote. “By controlling for commonly held causes of price differences including education, lower home quality, and crime, this paper suggests that bias is likely to be a large part of the unexplained devaluation of black neighborhoods.” Nationwide, a $48,000 devaluation works out to a square-foot pricing discount of about 23%, relative to similar homes in similar white neighborhoods. But in Rochester, NY -- the city with the highest levels of devaluation -- the typical home in a majority-Black neighborhood is worth 65% less than a similar home in a similar white neighborhood. By contrast, in a small number of cities, Black homeowners actually enjoy a price premium relative to homes in majority-white neighborhoods. In Boston, for instance, that premium works out to a gain of about 23%. Read the full report here.