Professor says buying a home in a black neighborhood is harmful to wealth building?


Reported by Liku Zelleke

The wealth gap between the races continues to increase and it has never been wider than during President Barack Obama’s presidency. Statistics show that the median net worth of black households is just one-twentieth that of white households.

Dorothy Brown, a professor of tax law at Emory University Law School, writes that although there are many reasons people put forward as to why the gap is so big – including historical problems and blacks themselves – she is sure of one of thing: “When most black people buy homes, we hurt ourselves economically.”

Blacks and whites, for the most part, buy homes in different neighborhoods, and therein lies the folly: The homes in mostly-black neighborhoods do not appreciate as much as those in white neighborhoods. The gap starts to grow whenever a neighborhood constitutes of more than 10% black residents and continues to rise as the percentage also increases.

“If you think this is class and not race, you are wrong,” Brown writes. Quoting a 2001 Brookings Institution study, she says that wealthy minority neighborhoods had less home value per dollar of income than wealthy white neighborhoods which allows for the conclusion that poor white neighborhoods had more home value per income than poor minority neighborhoods.

“Put simply,” Brown writes, “the market penalizes integration: the higher the percentage of blacks in the neighborhood, the less the home is worth, even when researchers control for age, social class, household structure and geography.”

This fact is also what a 2007 study by Gregory D. Squires, a professor of sociology at George Washington University claims: “Evidence indicates that it is the presence of blacks, and not just neighborhood conditions often associated with black neighborhoods (e.g., bad schools, high crime), that accounts for white aversion to such areas. In one survey, whites reported that they would be unlikely to purchase a home that met their requirements in terms of price, number of rooms, and other housing characteristics in a neighborhood with good schools and low crime rates if there was a substantial representation of African Americans.”

“Hopefully someday homeowners, black and white, won’t be penalized for wanting diversity at home,” Brown writes. “In the meantime, in order for blacks to have more wealth at home, we need to start investing outside of it.”


Financial Juneteenth lessons from this story (provided by Dr Boyce Watkins):

1) It appears that Professor Brown is saying that home ownership isn’t necessarily a complete wealth killer for African Americans. Instead, she’s saying that it doesn’t work as well for black people as it does for whites, primarily because whites do not participate in housing markets dominated by African Americans. This makes sense, and to some extent, it’s natural. Both whites and blacks might show a preference to want to be near people they are most comfortable with. I do not, however, see this data as evidence against the value of buying a home, because there are many benefits to home ownership that go beyond capital appreciation. You can almost never pass a rented apartment down to your children.

2) Part of the reason that whites add value to the housing market is that whites possess most of the wealth in America. For example, homes in Silicon Valley are very expensive because many of the city’s residents have gotten rich from the Internet boom, leading to higher prices being bid for the homes in that region. As a result, working class people (even school teachers) have difficulty buying a home in these cities. But the lack of white participation in a market is not enough reason to avoid the market altogether. Sometimes, there is value in supporting your own, even if you’re not making as much money as you could through an integrated market. The same phenomenon holds true for black-owned businesses selling products to black people for one price when they know they could get a lot more by selling their products to whites (which explains why Essence Magazine, BET and many other black-owned companies sold to large corporations, to the detriment of black people everywhere). In fact, this desire to chase the biggest dollar is part of the reason that many black products end up diluted as the owners of these companies seek to expand to bigger (read: whiter) markets. This is one of the pitfalls of a hardcore capitalist mindset while serving a community that is economically disadvantaged. You have to be able to see the double bottom line in order to build the right economic future for your people.

The bottom line here is this: If you’re always seeking to get rich quick, a white market will typically pay more than a black one. That includes the market for a home, the labor market and even the dating market. So, one consideration is to seek value in being a part of the market you value most rather than the one that gives you the most money. True wealth building includes COMMUNITY BUILDING, which isn’t always a completely financial idea.


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