In Atlanta, a new study found that homes in predominantly black neighborhoods lost value even as homes in predominantly white neighborhoods gained. Chris Rank/Bloomberg

Economic plans like Mike Bloomberg’s assume that boosting black homeownership and entrepreneurs will close racial wealth gaps. New research suggests it won’t.

Owning a home and a business has always been central to the American Dream. But recent scholarship has called into question the idea that fulfilling this dream has actually improved African Americans’ quality of life.

For decades, encouraging African-American homeownership and entrepreneurship has been a common proposal for those who want to narrow the racial wealth gap. In a recent prominent example, Michael Bloomberg unveiled a plan in his presidential campaign to bolster economic outcomes for African Americans that banks on these tools.

(Disclosure: CityLab was recently acquired by Bloomberg LP. Michael Bloomberg is the company's founder and majority owner.)

The top-line goals of the plan, known as the Greenwood Initiative, are creating one million new black homeowners, 100,000 new black businesses, and investing $70 billion in the 100 “most disadvantaged” neighborhoods of the U.S. The New York Daily News called it “an initiative similar to calls for reparations for slavery,” and the Bloomberg campaign says it will “close the racial wealth gap” while saying homeownership in particular is “a vital way to build generational wealth and community and is a pillar of the American Dream for many.”

It’s a worthy effort considering that the homeownership gap between black and white Americans is larger today than it was 50 years ago, before the Fair Housing Act was passed. In fact, the wage gap between black and white workers is also significantly wider now than it was in 2000, despite black wages last year exceeding 2000 levels for the first time since the recession dissipated.

Amongst 2020 Democratic candidates, Warren’s and Sanders’ racial equity plans advocate for more sweeping wealth-redistribution changes, such as the Green New Deal, free universal health care,  reparations, and offering federal housing assistance to victims of redlining. The Greenwood Initiative offers federal matching funds for housing down payments in the country’s most disadvantaged communities and offers to streamline housing down-payment programs in general. It’s a results-oriented tack that’s garnered Bloomberg quite a bit of black support, despite his more reckless record on other issues important to the black community, such as stop-and-frisk policing practices. But it’s not clear that it will achieve its intended goals.

Several new studies cast doubt on the idea that simply owning homes or businesses can help dissolve racial economic inequities. The first, from a group of University of Georgia geography scholars, concludes that a “racial appreciation gap” exists in the housing market that hinders African Americans’ ability to generate wealth through owning a home. The research team analyzed home sale values throughout the city of Atlanta and its immediate suburbs — areas that have some of the highest rates of black homeownership and some of the most economically diverse populations of black homeowners in the U.S. — and found that houses in predominantly black neighborhoods have failed to appreciate in value since the mortgage crash recovery began. Meanwhile, houses in predominantly white neighborhoods have appreciated considerably.

By comparing the price of Atlanta homes before the most recent housing boom (from 2000 to 2003) with housing prices during the  housing crash recovery (2014 to 2016), they found the largest price upticks occurred in neighborhoods that were at least 75% white and had the highest household incomes. These neighborhoods saw their houses appreciate by $91,414 in the study time period. For white neighborhoods with moderately high incomes, houses appreciated by $71,094, and by $57,742 in low-income white neighborhoods.

In the same time span, black neighborhood housing prices depreciated at every income level: By $22,168 for high-income, by $23,163 in moderate-income, and by $37,686 in low-income black neighborhoods.

“That is not to argue that programs designed to lower down payments and reduce interest rates on home loans should not be pursued,” reads the study, published this month in the International Journal of Urban and Regional Research. “It is rather to stress that the persistence of a racial appreciation gap severely constrains the ability of such mechanisms to abate racial wealth inequality.”

Racial segregation also plays a role in how companies are perceived by customers, and their profitability. A new study from the Brookings Institution found a correlation between positive Yelp reviews and revenue growth — but not for minority-owned businesses. In fact, the businesses located in majority-black neighborhoods with the highest Yelp ratings actually saw less revenue growth between 2016 and 2019 than poorly reviewed businesses located in predominantly white neighborhoods. That’s true regardless of the race of the owner, which means the revenue gap is likely a function of racial segregation — people spending less money with a business because of the black racial composition of the community.

Overall, the researchers found a “2% annual revenue gap between businesses in non-Black-majority neighborhoods and Black-majority neighborhoods, amounting to $1.3 billion in unrealized revenue each year,” reads the report. “This gap jumps to $3.9 billion when comparing highly-rated businesses in Black-majority neighborhoods with highly-rated businesses in other neighborhoods.”

Racial segregation in both the housing and credit-finance markets have perpetuated the racial appreciation and revenue gaps described by the studies above. And Anne Price, president of the Insight Center for Community Economic Development, argues in a new paper that without reconstructing the systems that created those gaps in the first place, there will be little improvement in black lives mattering.

“Focusing exclusively on ‘closing the gap’ distracts us from reckoning with the systemic economic decisions that are actually driving racial wealth inequality and thus hinders us from addressing its root causes,” she writes in her report, “Don’t Fixate on the Racial Wealth Gap.”

Case in point: The same systems that helped black families buy homes and open businesses are the ones that foreclosed on those homes and businesses, particularly during the housing and finance crashes of 2008. Price’s report points out that after the housing market collapse, cities with large black populations began increasing their reliance on criminal fines and court fees to plug budget holes, which in many places had a disproportionate effect on African Americans. Passing laws that eliminate voter suppression, strengthen labor laws, dissolve mass incarceration and curb corporate power — all the myriad ways in which forces have extracted wealth from African Americans — is a more important emphasis, Price argues.

“If we focus on the structural, then we can think about this beyond just the pure financial measure of looking at a dollar amount, but rather focusing on all the kinds of less-tangible areas that wealth bestows,” Price told CityLab, “such as allowing us greater kinds of decision-making and less-constrained choices, which enables us to live much more dignified lives.”

Warren’s and Sanders’ plans to address racial justice issues tap a bit more into the structural revolutions that Price calls for. They both have explicit promises to end redlining, in all of its forms (though their solutions, too, may not quite be tailored to solve the problem), while Bloomberg seemed to be struggling in 2008 with what the real deleterious impacts of redlining have been for black communities.

Warren and Sanders are also both co-sponsors of a bill to create a commission to study reparations (as is fellow presidential candidate Amy Klobuchar), which Price believes is one of the most impactful policies on the table, along with a reconfiguration of the finance and credit structures that have produced the racial imbalances. The University of Georgia scholars, too, conclude that only comprehensive policies like reparations can provide meaningful fixes to wealth gaps.

Policymakers should “challenge its fundamental assumptions and ask why it is homeownership –– an institution irrevocably imbued with racism –– that is the suggested path to financial security in the first place,” they write. “Why not a more robust social welfare system that would render the accumulation of personal wealth redundant? ...Why not a comprehensive reparations program?”

Bloomberg supports the legislation to study reparations for African Americans, according to a campaign aide, but has otherwise been mum on the topic. (Joe Biden and Pete Buttigieg also support studying reparations.) His Greenwood Initiative and Wall Street reform plans do call for programs that suss out race and gender bias in the credit and finance industries, as well as a shoring up of laws such as the Consumer Reinvestment Act.

In a statement, a Bloomberg campaign aide added: “The studies you cite make a valuable point: Measures aimed directly at closing the racial wealth gap — such as increasing ownership of homes and businesses — will fall short on their own, in the absence of policies to address its root causes.” The aid says that’s why Bloomberg’s plan incorporates measures to “defend civil rights, reverse systematic discrimination and make major investments in areas such as early childhood, health, education, infrastructure, environment and employment.”

Despite plans that are more overtly progressive, Warren and Sanders both trail Bloomberg nationally among prospective black voters according to the latest (February 10) Quinnipiac poll. Not only that, but Bloomberg has picked up the endorsement of several high-profile black leaders, most recently, former Baltimore Mayor Stephanie Rawlings-Blake and dozens of current black mayors. Among those is Houston Mayor Sylvester Turner, who announced his support at the height of the fallout over Bloomberg’s leaked stop-and-frisk comments, and currently chairs the Bloomberg campaign’s infrastructure team.

From the Bloomberg campaign’s “Mayors for Mike” page, where dozens of black mayors offer their endorsements and support.

Asked why she supports Bloomberg in a recent New Yorker interview, Washington, D.C. Mayor Muriel Bowser, who is a Bloomberg national co-chair, said that black voters want to know, “What is your plan for black America? How are you going to create more black homeownership and close the income gap between blacks and whites? What are you going to do to create jobs and help small businesses grow?”

Another explanation is that Bloomberg is offering distinct benchmarks that voters can hold him accountable on, according to Black Economic Alliance co-chair Charles Phillips, who is also the board chair for Infor, one of the world’s largest business software applications companies. The Black Economic Alliance is a non-partisan organization comprised of African Americans focused on improving the economic outcomes of black communities. It includes among its advisory board black figures across the political spectrum, from former Demos president Heather McGhee to former Republican National Committee chair Michael Steele.

The BEA endorsed Bloomberg’s Greenwood Initiative on January 20,  saying it has the “breadth and vision ... designed to address the disparities — particularly economic — that have long stifled the dreams and aspirations of Black Americans.”

It was one of the first African-American organizations to publicly show support, though its endorsement was purely for the plan, not the candidate. However, Phillips says none of the Alliance’s members have recanted support for Bloomberg’s economic plan since stories of his controversial past surfaced, nor have any of their donors pulled funding.

“We liked [Bloomberg’s] numbers,” said Phillips. “What we were looking for is specifics in the plans and quantified goals. It’s hard to hold people accountable to something if you don’t have a specific target and scoreboard to measure them by. So, to take the Bloomberg plan, he’s committed to one million new black homeowners in the next decade and 100,000 new black-owned businesses. The big one is the $70 billion in the top 100 most-disadvantaged neighborhoods in the country to invest in job centers and help entrepreneurs. Those are tangible things that you can point to and track year-by-year.”

Price said that African-American support of Bloomberg’s plan could be explained by investment in the American Dream narrative — that personal labor, education, and checkbook-balancing skills best dictate a person’s economic destiny. She points to the Project Mosaic survey conducted by The Groundwork Collective last year, which sought to explain how black and Latinx Americans understand their economic experiences. In that survey, when asked what single factor most contributed to their economic status, black adults were more likely to say it was their “personal drive and persistence” rather than “experiences with racism and race-based discrimination” — college-educated African Americans were the most likely to cite “personal drive.”

“I think this speaks to why African Americans are resonating with Bloomberg’s policy platform,” said Price. “This perspective deserves greater interrogation and understanding.”

CORRECTION: Due to an error in the Brookings Institution’s study, an earlier version of this story misstated the percent difference in annual revenue between businesses in non-black-majority neighborhoods and black-majority neighborhoods. It is 2%.

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