Homeownership is central to the American Dream. However, it is hard for many from minority communities to achieve, according to a report by Brookings Institute, titled “The devaluation of assets in black neighborhoods” that addressed the cost of racial bias.
The report found that owner-occupied homes in black neighborhoods are undervalued by $48,000 per home on average, amounting to $156 billion in cumulative losses. It stated that black communities face major impediments to building wealth, commencing and investing in business ventures as well as attaining a proper education, even today.
Analyzing the devaluation of black homeownership, the report found that a majority of black neighborhoods hold $609 billion in owner-occupied housing assets comprising approximately 10,000 public schools and over three million businesses. However, homes in neighborhoods with a population 50 percent black people are valued at roughly half the price compared to homes in neighborhoods with no black residents. The analysis is restricted to113 metropolitan areas with at least one majority black neighborhood. Comparing home values in majority black neighborhoods with those where less than 1 percent of residents are black, homes in majority black neighborhoods have greater appreciation values.
The analysis notes that neighborhood quality is not the key reason for the devaluation of homes in black neighborhoods. Homes of similar quality in neighborhoods with similar amenities are worth 23 percent less ($48,000 per home on average, amounting to $156 billion in cumulative losses) in majority black neighborhoods, compared to those with very few or no black residents.
The metro areas surveyed revealed that 10 percent of neighborhoods are majority black, home to 41 percent of the black population living in metropolitan areas and 37 percent of the U.S. black population. Approximately 5 million non-black Americans live in majority black neighborhoods, the report indicated.
This analysis confirmed the findings that there is a significant correlation between the devaluation of homes in black neighborhoods and the upward mobility of black children in metropolitan areas with majority black neighborhoods, from a statistical standpoint.
According to the report, the median home value in majority black neighborhoods is $52,578 while the estimated median home value in majority black neighborhoods, in absence of devaluation is $65,704. The dissimilarity index of the report stated that 57 percent of the white population would need to move to a different neighborhood for the white and black population to be distributed evenly.