The Legacy of Race

Infrastructure Decisions, Property Valuation, Investment and Hiring Practices Build a Gap Between Black and White Household Wealth

We hold these truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty and the pursuit of Happiness. 

The Declaration of Independence

Brian K. Rice bought eight buildings in Birmingham’s Ensley Community and quickly ran into barriers to his plan to help revitalize the property. (Photo by Solomon Crenshaw Jr.)

The founding fathers artfully crafted the phrasing that acknowledges the pursuit of happiness as one of the unalienable rights due all men. Part of that pursuit comes in one’s ability to get a job, develop a career, build wealth through an honest wage and establish a home. Many Black Americans have found that pursuit stymied by forces often beyond their control.

According to an article published by The Hamilton Project of Brookings Institute, the net worth of a typical white family was $171,000 in 2016, nearly 10 times the $17,150 net worth of a Black family.

The report said that gaps in wealth between Black and white households reveal the effects of accumulated inequality and discrimination, as well as differences in power and opportunity that can be traced back to this nation’s inception. The Black-white wealth gap reflects a society that has not and does not afford equality of opportunity to all its citizens, the report stated.

The Brookings report said the median net worth for white households has far exceeded that of Black households through recessions and booms over the past 30 years. While movements in white wealth are easier to see due to the larger scale, during the most recent economic downturn, median net worth declined more for Black families — 44.3% from 2007 to 2013 — than for white families — 26.1% in those years. In fact, the ratio of white family wealth to Black family wealth is higher today than at the start of the century.

Andre Perry is a fellow in the Metropolitan Policy Program at Brookings Institute, a scholar-in-residence at American University, and a columnist for the Hechinger Report. He said Birmingham has a clear history of having two tracks when it comes to economic development, a white track and a Black track.

“Call it what you want, but that economic development has not led to the wealth creation in black communities,” Perry said. “Clearly, there are systems in place that advantage some at the expense of others.” ­

Two U.S. Census Bureau researchers determined that the biggest determinants of household wealth are owning a home and having a retirement account.

Using data from the 2015 Survey of Income and Program Participation, Jonathan Eggleston, an economist, and Donald Hays, a survey statistician in the Bureau’s Social, Economic and Housing Statistics Division, found that the wealth inequality between homeowners and renters is striking, with the former having median net worth 80 times that of the latter. Further, they found wide variations in wealth across demographic and socioeconomic groups. Given that the two are using 2015 data and with the rapid increase in home values since then, the degree of inequality today is likely greater.

Non-Hispanic white and Asian householders had more household wealth by far than Black and Hispanic householders. Non-Hispanic whites had a median household wealth of $139,300 and Asians had $156,300, compared with $12,780 for Black and $19,990 for Hispanic householders.

Dr. Paulette Patterson Dilworth, vice president of diversity, equity and inclusion at UAB. (Source: UAB)

Dr. Paulette Patterson Dilworth, vice president of diversity, equity and inclusion at the University of Alabama at Birmingham, cited the work of the late Berkeley researcher John Ogbu, who spoke to the notion of what it means to be a citizen in the United States.

“How you entered the country has a lot to do with the context in which you function,” she said, differentiating between those who arrived as voluntary immigrants and those who came involuntarily as slaves.

“The U.S. has always had a racialized history that has, to me, gone unchecked in many ways,” Dilworth said. “There’s always been this racialized history that’s embedded in how we have come to be as a nation at this particular point in time.”

 Race Affects Hiring

Allen Tharpe, an associate professor in the Department of Social and Behavioral Sciences at Miles College, said employers often bring bias into their decisions of who they will hire. Who gets hired, in turn, impacts income.

“People tend to hire people that look like themselves,” Tharpe said. “They tend to promote people that look like themselves. You have to go out of your way to hire somebody who doesn’t look like you.”

Dilworth agreed that achieving diversity in hiring doesn’t happen by chance.

“We must be thoughtful, purposeful and intentional in our efforts,” she said. “The way you do that is to consider that diversity, equity and inclusion efforts should undergird the framework that helps you build the organization.”

ProPublica recently published a report, What Coronavirus Job Losses Reveal About Racism in America. It said that, while the devastating job losses of the past few months have affected all groups of Americans, Black, Hispanic and other workers of color have seen especially steep declines.

The report said that disparity is partly because many workers of color, especially Black workers, didn’t come into the crisis on equal footing. At the beginning of 2020, when the U.S. was at what most would have considered peak economic prosperity, the unemployment rate for Black workers was more than double that of their white counterparts.

“The classic fact about Black unemployment,” said William Darity Jr., an economist at Duke University who studies racial inequality, “is that it’s been two times the white rate since we started measuring it.”

Looking at the past decade, ProPublica researchers found that Black Americans have faced unemployment levels for years that would be considered an economic catastrophe if they were the national average. “The Black unemployment rate is always ridiculously high, but we don’t treat it like a crisis,” said Jessica Fulton, vice president of the Joint Center for Political and Economic Studies.

The report further noted that some groups of Americans, such as college graduates in wealthy households, have been relatively insulated from economic swings and have had some of the lowest levels of unemployment for the past decade. But even in these groups, the Black-white gap persists.

Researchers say there is only one plausible explanation for this persistent disparity. “It’s racial discrimination,” said Valerie Wilson, director of the Economic Policy Institute’s Program on Race, Ethnicity and the Economy. “We see (the disparity) at different age cohorts, we see it all across the country, we see it at every level of education.”

Devaluing Black Communities

Tharpe, the Miles College associate professor, said the racial divide in America has been intentional.

“Slavery was pretty deliberate,” he said. “The whole Jim Crow era was deliberate. Local communities set boundaries about where African Americans should live. There were sections of town they couldn’t live. They (municipal leaders) put in zoning regulations that said houses in this area can’t be sold to a Black person. So, yeah, it was deliberate, in my opinion.”

Allen Tharpe, an associate professor in the Department of Social and Behavioral Sciences at Miles College. (Photo by Solomon Crenshaw Jr.)

Tharpe also cited the locations of industrial plants, taking note of those in North Birmingham blamed for high levels of pollution that led to an Environmental Protection Agency Superfund clean up.

He pointed to other infrastructure decisions that negatively affected Black neighborhoods in the city.

“Look where they built the freeway,” Tharpe said. “That part of (Birmingham) began to go downhill rapidly because the freeway split the community. They didn’t even attempt to go around it. They just drove right through it.

“Look where 20/59 goes. They said they wanted to take the shortest route, but they didn’t always take the shortest route when they were building that. They took into account residents. So who’s living there? Primarily black people. We can build in that area because they don’t have any political power.”

Investing in Black Communities

Perry, the scholar-in-residence at American University, this year authored Know Your Price: Valuing Black Lives and Property in America’s Black Cities. He dedicated a chapter to Birmingham real estate developer Brian K. Rice, who purchased eight buildings in Birmingham’s Ensley Community with the vision of breathing new life into the area.

“There are efforts all across the country by black developers who are pursuing a buy-back-the-block strategy,” Perry said. “(Rice) represented a number of people across the country who truly want to develop commercial corridors in ways that help develop the adjacent community.

“I was compelled by (Rice) because that’s what we absolutely need to excite economic mobility in areas that have been devalued by racism,” Perry continued. “At some point, you need to see investment in homes and commercial corridors and businesses on those corridors if you want to see the quality of life improve for Black people in those areas.”

Perry cited instances of Blacks who have “family and friend dollars” to purchase properties only to be unable to get financing to develop that property. Conversely, he said he’s seen white developers whose investments to develop structures do not help neighboring communities, but they are still able to get financing to develop those projects.

Perry wrote of Rice’s allegation that his appraisers intentionally devalued eight properties. The appraisal lists the total value of his block at $45,000, which includes $170,000 in land and property value minus $125,000 in demolition costs.

“According to Rice,” Perry wrote, “the appraisers willfully selected the worst property comparison scenarios, comparing his properties to dissimilar rural parcels more than 10 miles away.”

The developer argues that the devaluation of his property is evidence of racism. “Rice also argues,” Perry wrote, “that his bank is complicit in this bias, as they avoided ordering an appraisal for seven months.”

Brian K Rice speaking at a Juneteenth event in front if his buildings in Ensley. (Photo by Solomon Crenshaw Jr.)

Rice told BirminghamWatch that he has spoken with lawyers for the National Community Reinvestment Coalition. “This is the number one organization that fights redlining issues in the entire country,” Rice said. “They’ve already done their internal reviews and they have done a couple desktop appraisals and they have identified this as unfair.”

Rice also recently was the subject of a BBC News report, “The Frustration of Trying to Invest in My Hometown.”

Perry said Rice’s story represents a city and a historic Black neighborhood that has a lot going for it, from its proximity to downtown, to transportation lines, to its history.

“But what it doesn’t have is investment and a willingness to break the cycle of poverty,” Perry said. “And nothing grows without investment. If Birmingham as a whole wants to improve the quality of life for Blacks in the city in which there is a majority, they (city leaders) have to prove that they can develop a Black part of town. For me, (Rice) represented a great case that I could then follow.”

Andre Perry speaking during a Zoom conversation. (Source: Zoom)

Perry recently took part in a livestreamed conversation hosted by Schott Foundation for Public Education, called Valuing Black Lives: Understanding Racism in American Education, Housing and Policing. During that event, Perry said it’s possible to quantify the “hundreds of billions of dollars” that’s been extracted from the Black community by racism.

Perry said a lot of his research revolves around housing devaluation. His research shows a connection between the devaluation of housing and deficiencies in education in Black communities. He said home prices in Birmingham are significantly lower than in other cities, resulting in less property taxes for the city.

“The city uses tax revenue to fund things like education, police, infrastructure,” he said. “Birmingham is losing millions because of housing devaluations.”

Perry compared housing prices in a neighborhood where the share of the Black population is greater than 50% with one where the Black population is less than 1% percent. He controlled for all the reasons people say houses in Black neighborhoods have lower prices, including education, crime, walkability, “all those fancy Zillow metrics,” as he put it.

Perry’s research determined that homes in Black neighborhoods are devalued by 23%, or approximately $40,000 per home. Nationally, he said, that amounts to about $156 billion in lost equity.

“In Birmingham, in particular, the Birmingham-Hoover metro, there’s a 39% difference between equivalent homes in Black neighborhoods than white neighborhoods, resulting in a close to $45,000 difference in home value per home,” Perry said. Partly because of that disparity, education gaps between white communities and Black communities are not solely the fault of teachers, students or school boards.

“It’s clear that housing devaluation is robbing billions from cities, and financing to help education and educational support services,” he said.

“We need to stop blaming Black people. I say this all the time, that there’s nothing wrong with Black people that ending racism can’t solve.”

Ending racism begins with investing in Black communities, investing particularly in endeavors that amplify the investment, the researcher surmised.

“When you invest in Black teachers, that investment leads to the heightening of human capital for children,” Perry said. “When you invest in police, you’re literally arresting economic mobility. That investment in Brian Rice is the kind of investment that leads to economic growth. Many would rather put police in Ensley rather than invest in a commercial corridor.”