Neighborhood segregation of African Americans is one dimension of discrimination that the federal government has enabled through policy over the past century. A major proponent of the generational racial wealth gap is the lack of equity people of color face from not owning property. The growing wealth disparity between races is partially due to a state sponsored system of segregation that prohibited African Americans from purchasing property from 1930 to 1960. The Federal Housing Administration (FHA) was established in 1934 and enabled “redlining”, a segregation effort that refused mortgage insurance in or near African American neighborhoods. Simultaneously, the FHA subsidized businesses building housing for white families only, explicitly requiring that homes cannot be sold to African Americans in order to receive subsidies. This is a component of the Black Lives Matter movement and economic, political, and social racial discrimination that much of society is not aware of.
The FHA implemented these racist policies with the idea that the demand and therefore prices for housing in metropolitan suburbs would decrease if African Americans were able to compete in the market. This is because of social prejudices that white families would not want to live in neighborhoods with black families. The discrimination effort from the government was severe to the extent that the FHA suggested that highways be created between black and white neighborhoods. However, the opposite effect would have occurred in the market if there were no segregation efforts, as African Americans would have been willing to pay higher prices for housing than white families as black families housing options were restricted. This would have boosted the market and allowed for people of color to accumulate wealth through owning property. By the 1960s, when these policies ended with the Civil Rights Movement, black families had been financially oppressed for decades. Alongside the inflation of the housing market, homeownership for the average black family was no longer an affordable option. As a result of these biased laws, there are modern implications that have segregated neighborhoods and made it difficult for black families to purchase homes.
A 2017 study shows that white families are 30.1% more likely to own property than black families. Only 41.8% of black families are homeowners, compared to 71.9% of white families. This current day gap is larger than it was when de jure policies like the ones from the FHA were in place. Income differences can account for 31% of the racial homeownership gap. The following Urban Institute graph represents the impact income and race have on homeownership.
As inferred from the data, despite level of household income, black families are still less likely to own property than white families. Furthermore, the lower the income rate is, the wider the gap between racial homeownership rate. This is partially due to white families having more generational wealth and therefore the necessary resources to provide young adult children making lower incomes with down payment support on houses. These trends in modern day homeownership are results of century long discrimination and segregation policies that prevented African Americans from economically elevating from second class citizens.