Mortgage money squeeze for blacks

September 30, 1997|By Derrick Z. Jackson

ACCORDING TO Tom Shapiro, any discussion of racism in America must begin with the fact that even when African-Americans reach the same education, job, and income status, the net wealth of African-Americans remains today a true pittance compared to that of white Americans.

"This is a very sensitive moment in race relations," said Mr. Shapiro, a sociology professor at Northeastern University. "You have many white people who say, 'I don't discriminate. Don't penalize me for something that happened 150 years ago.'

"But to truly make progress in the conversation we need a greater appreciation of institutional behaviors that seem normal but continue to disadvantage blacks and advantage many whites, especially middle- and upper-class whites."

Mr. Shapiro and co-author Melvin Oliver won the Distinguished Scholarly Publication Award from the American Sociological Association for "Black Wealth, White Wealth: A New Perspective on Racial Inequality."

In its citation, the ASA said the authors demonstrate that government mortgage policy has been the "linchpin" for the white middle class to transmit class privilege more effectively than middle-income African-Americans can.

The ASA said that the book shows how wealth is fundamental to understanding how racism is "structurally perpetuated."

Professors Shapiro and Oliver, using federal data, found that the median income of African-Americans is about 60 percent that of white Americans, $15,630 to $25,384.

But the median net worth of African-Americans, meaning all assets that remain after debts, is only 8 percent of the median net worth of white Americans, $3,700 to $43,800.

Subtracting home equity, the median net financial assets of white Americans is $6,999. The median net financial assets for African-Americans is zero.

The authors considered all conceivable non-racial possibilities for the disparities, such as education, job status, family structure, and spending habits -- in other words, black choices for which white Americans are not responsible.

Disparities in worth fail to shrink even when incomes rise. While upper blue-collar African-Americans have a net worth 23 percent that of similar white Americans, the net worth of upper-white-collar African-Americans is 18 percent of like white Americans.

Gaps of wealth

Most startling of all, the mean net financial assets of white Americans in poverty is nearly equal to the net financial assets of the highest earning African-Americans, $26,683 to $28,310. The net worth of white families, in which the highest level of education is elementary school, is $24,943. The net worth of African-American families, in which at least one member has a postgraduate college degree, is $17,874.

"This demonstrates a break in the chain in the American credo of equal opportunity," Mr. Shapiro said. "Our data shows that not only when equal opportunity but equal achievement is factored in, the results are still extremely unequal."

The unequal results are caused by an unbroken 132-year legacy of government affirmative action in asset building, mainly benefiting white Americans. White Americans received far more land for homesteading at the end of the Civil War than African-Americans.

In the 1930s, federal programs and tax policies promoted housing and business expansion in the suburbs for white Americans while the Federal Housing Authority denied loans to African-American neighborhoods.

Banking redlining lasted into this decade. The damage done was tremendous. The wealth of white families, enhanced by a rise in home equity twice that of African-Americans from 1967-77, are in a far better position to transfer wealth to kin, start up businesses and make other long-term investments.

African-Americans, with much less up-front money, continue to be punished today in the home buying market, paying on average a half-percent more on their mortgages. Paying higher mortgages means those families have less to invest in college education, stocks or retirement plans.

In all, Messrs. Oliver and Shapiro estimate that institutional biases in real estate have cost the current generation of African-Americans $83 billion in assets. They say that if nothing is done, the next generation will lose $103 billion. Mr. Shapiro adds:

"One of the questions we have to start asking is whether that $83 billion is excess profits for banks or whether that is $83 billion in penalties for blacks."

Derrick Z. Jackson is a columnist for the Boston Globe.

Pub Date: 9/30/97

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