How Government Policy Created White Wealth and Concentrated African American Poverty: Part 2
In part two, author Richard Rothstein says explicit unconstitutional housing policy of the 20th century created America’s enormous racial wealth gap
Jaisal Noor: You also talk about how when this segregation was implemented through public housing and other policies, it also further exacerbated the conditions in the preexisting slums where many African Americans lived. Can you talk about the mechanism of that occurring?
Richard Rothstein: Sure. I apologize, it’s going to be a long answer. It’s a bit complicated, but let me try and make it as brief as I can. I have to introduce it by telling you that another major federal program that the federal government implemented during WWII and afterwards during the New Deal, was the Federal Housing Administration’s program to create white subdivisions, white suburbs, surrounding central cities across the country. They built suburbs by guaranteeing loans to mass production builders of suburbs on condition that those homes only be sold to white families, that no African Americans be permitted to buy homes.
So for example, the best known example perhaps is Levittown, east of New York city, where Levitt built 17,000 homes in the late 1940s and early 1950s, which he could never have assembled the capital to build on his own. Instead, the federal government guaranteed bank loans to Levitt to build that suburb on condition that he sell no homes to African Americans, and in addition the federal government required that he put a clause in every deed in Levittown that prohibited resale to Africans. Well this went on all across the country and the mass suburbanization of the country. California, the biggest example, subdivisions built all over California on explicit condition set by the federal government that no homes be sold to African Americans. Once this was done, the civilian housing then became available again. There had been a big shortage before the ’50s because no civilian housing was built during the war because building materials weren’t permitted to be used for civilian construction. There was a big housing back log even before the war because of the depression.
So when civilian housing construction began again in the 1950s and the federal housing administration subsidized whites to move into these all white suburbs, or explicitly all white, by federal requirement, the whites began to abandon the inner cities and abandon the public housing, which had been primarily designed for them before that time. There was public housing beginning in the mid 1950s, the white projects, and there were many, many more projects for whites at that time than there were for African Americans. White projects began to have large vacancies, black projects had long waiting lists, and the reason was simply the federal government was subsidizing whites to leave cities.
Well, industry then began to leave cities as well. So the African Americans who were living in public housing became poorer and poorer. Jobs disappeared, and African Americans weren’t able to gain the wealth that housing ownership created, so these policies resulted in greater poverty of the African American population.
Jaisal Noor: And I wanted to ask you specifically about that because this really isn’t only about residential segregation as you just mentioned. It really is about the wealth that government policies created for white families that black families did not have access to. So when you look at the racial wealth disparities, the racial wealth gap today, you really trace it to these housing policies that started in the New Deal and that continued in the decades after. Can you really give us a picture of that?
Richard Rothstein: Sure, well let me go back to that example I gave a minute ago of Levittown, which is the most famous of these suburbs, these 17,000 homes east of New York City. Those homes sold in the late 1940s and early 1950s for about eight thousand, nine thousand dollars a piece. In today’s dollars, that’s about 75 thousand to 100 thousand dollars, and as I mentioned, only whites could buy it. There were many, many African Americans who could’ve afford to buy homes in Levittown. 100 thousand dollars in today’s dollars is about twice national median income. Working class families can afford to buy a home at twice national median income, African Americans as well as whites, but African Americans were prohibited. Instead, African Americans were living in cities and renting apartments. Whites were able to buy these homes.
Well today, homes in Levittown sell for 300, 400 thousand dollars. That’s seven, eight times national median income, unaffordable to working class families, to lower-middle class families, whether they’re white or black. So the white families who were able to buy into these suburbs created all over the country by the federal government for whites only, gained 200, 300 thousand dollars in equity appreciation over the next three generations. African Americans who were forced to only rent apartments because they were not permitted to live in the suburbs, gained none of that equity appreciation. In the United States, most wealth of middle class families is attributable to the equity they have in their homes. So today, nationwide, African Americans incomes are about 60% of white incomes, but African Americans wealth is only 5% of white wealth on average. That enormous disparity, the difference between the 60% income ratio and the 5% wealth ratio is almost entirely attributable to unconstitutional federal housing policy that was practiced in the mid-20th century.