Racism and the Economy: Focus on Housing

Raphael Bostic, President of the Federal Reserve Bank of Atlanta, opens the fourth installment of the series, emphasizing housing's critical economic importance and its historical connection to racism. He highlights the impact of housing on education, job access, health, and safety, explaining that systemic racism has continuously shaped housing in the U.S. through practices like segregated public housing, racially segregated zoning, restrictive covenants, and refusal to back mortgages for people of color. These historical actions have led to ongoing patterns of segregation and disinvestment, underscoring why housing is an essential topic for the series and relevant to the Fed's full employment mandate.

Professor Keeanga-Yamahtta Taylor contextualizes the housing crisis by referencing W.E.B. Du Bois's 1925 article on urban segregation, highlighting restricted covenants, racial zoning, and mob violence. She explains how these historical actions, codified into public policy, continue to shape today's built environment, leading to disinvestment in black communities and manufacturing perceptions of 'good' and 'bad' neighborhoods linked to race. Dr. Andre Perry discusses his research showing that homes in black-majority neighborhoods are undervalued by 23% (approximately $48,000 per home, totaling $156 billion in lost equity), even after controlling for factors like education and crime. This devaluation impacts everything from schools to business financing, emphasizing that racism is embedded in the 'business of racism' within the real estate industry.

The discussion turns to how negative perceptions about black communities perpetuate housing discrimination. Dr. Perry suggests that investing in black people and communities can change these perceptions and repair historical damage, noting that investment in 'underappreciated assets' (black communities) would yield significant economic growth. Professor Taylor emphasizes the need for robust enforcement of existing civil rights laws to prevent discrimination, arguing that a lack of rigorous enforcement and appropriate punishment allows discriminatory practices to persist. Both agree on the importance of an educational component to inform the public about the historical impact of discrimination.

Senator Scott Wiener proposes eliminating single-family zoning, which he defines as 'single-family mandatory zoning,' that prohibits other housing types like duplexes or apartment buildings. He explains that this zoning was historically used to perpetuate segregation after racial zoning was outlawed and continues to do so by limiting housing supply, increasing housing costs, and contributing to climate change. He advocates for allowing diverse housing types to coexist, promoting affordability and reducing urban sprawl.

Dr. Julia Howell proposes addressing racism in the appraisal process, tracing its origins to racialized property evaluation embedded in early American history and institutionalized by the National Housing Act of 1934. She notes that despite fair housing laws, the appraisal gap has persisted and increased, driven by appraisers' racialized evaluations, the appraisal method itself, and federally-created economic incentives. She recommends using new technologies to standardize property assessment, automating the definition of neighborhood boundaries, and adopting uniform appraisal datasets to minimize racial bias. Additionally, she suggests rethinking housing valuation based on costs (natural resources, labor, infrastructure) and calls for reparations and progressive interest rates.

Robin Rue Simmons, Alderman of Evanston, Illinois, presents her city's reparations program for black Evanstonians, funded by cannabis sales tax. The program, Resolution 126-R-19, addresses the specific harm caused by historic anti-black housing policies, including redlining and restrictive zoning, which led to wealth stripping and community exodus. The program offers a $25,000 direct benefit to qualifying residents (those who lived in Evanston between 1919-1969 or their direct descendants) for housing acquisition, mortgage buy-down, or home improvements. Alderman Simmons emphasizes that this is a first tangible step to repair past injustices and build wealth, inviting financial partners to maximize the benefit.

Priscilla Almodovar emphasizes the importance of renters, advocating for their inclusion in housing discussions as the pipeline for future homeowners, and commends Evanston's explicit approach to addressing historical injustices. Bambie Hayes-Brown highlights the need for lived experiences at the policy table, raising concerns about rental affordability requirements and the impact of environmental racism on black neighborhoods. She also stresses internal bias training for appraisers and loan officers and advocates for direct investment to maintain and improve homes of legacy black residents. Bill Rogers, President and CEO of Truist Financial, highlights the need for local, regional, and national participation, expressing support for increasing housing supply and reparations to level the playing field, while also cautioning against unintended consequences as seen in the 2006-2008 housing crisis.

Dr. Julia Howell addresses the concern that technology can perpetuate bias, stating that it's crucial to drastically rethink how value is created in housing, moving away from racialized assumptions. Senator Wiener acknowledges that zoning reform alone won't solve structural racism but emphasizes it as a foundational step. He stresses the need for accompanying policies like strong anti-displacement protections to prevent gentrification and ensure that new housing adds to, rather than replaces, existing communities. The panelists also discuss broader inclusion, noting that while the focus is on black communities due to historical impact, many policies apply to other communities of color and low-income individuals.

The panelists offer calls to action: Priscilla Almodovar emphasizes housing's foundational role in racial equity, urging collaboration across sectors. Bambie Hayes-Brown calls for community involvement and advocacy at all levels. Julia Howell stresses rethinking how society values housing. Bill Rogers encourages direct action at personal and institutional levels. Senator Wiener urges engagement in neighborhood associations and questioning political candidates on their housing platforms. Alderman Simmons challenges everyone to focus on solutions, involve those with lived experience, and advocate for change. Raphael Bostic, Neel Kashkari, and Loretta Mester discuss the Fed's role through research, convening power, and advising policymakers. They highlight the ongoing challenge of addressing historical discrimination and the potential for reparations and targeted policies to level the playing field, and emphasize the importance of educating the public.