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January/ February 2013 A House Divided

Why do middle-class blacks have far less wealth than whites at the same income level? The answer is in real estate and history.

By Thomas J. Sugrue

In 1973, my parents sold their modest house on Detroit’s West Side to Roosevelt Smith, a Vietnam War veteran and an assembly-line worker at Ford, and his wife, Virginia (not their real names). For the Smiths—African Americans and native Mississippians—the neighborhood was an appealing place to raise their two young children, and the price was within their means: $17,500. The neighborhood’s three-bedroom colonials and Tudors, mostly built between the mid-1920s and the late ’40s, were well maintained, the streets quiet and lined with stately trees. Nearby was a movie theater, a good grocery store, a local department store, and a decent shopping district. Like many first-time home buyers, the Smiths had every reason to expect that their house would be an appreciating investment.

For their part, my parents moved to a rapidly growing suburb that would soon be incorporated as Farmington Hills. Their new house, on a quiet, curvilinear street, was a significant step up from the Detroit place. It had four bedrooms, a two-car attached garage, and a large yard. It cost them $43,000. Within a few years, they had added a family room and expanded the small rear patio. Their subdivision, like most in Farmington Hills, was carefully zoned. The public schools were modern and well funded, with substantial revenues from the town’s mostly middle- and upper-middle-class taxpayers. All of the creature comforts of the good suburban life were close at hand: shopping malls, swim clubs, movie theaters, good restaurants.

My parents lived in the Farmington house for a little over twenty years. When my father retired in the mid-1990s, the property had appreciated by about $100,000. They did not get rich from the proceeds of their home sale—indeed, after adjusting for inflation, the house was worth slightly less than they paid for it, not even counting interest costs and taxes. But it nonetheless allowed them to walk away with about $80,000.

For the Smiths it was a far different story. Detroit had been losing population since the 1950s, and especially after the 1967 riots there was massive “white flight” from the city. The neighborhood in which the Smiths invested went from mostly white to black within a few years, along with the rest of Detroit. For the city as a whole, those who remained were not as well off on average as those who left, meaning that even as the tax base shrank, the demand for city services went up, setting off a vicious death spiral. Soon, schools and infrastructure groaned with age, and the city’s tax base shrank further as businesses relocated to suburban office parks and shopping centers. By the end of the ’70s, the decline of the auto industry and manufacturing generally compounded Detroit’s woes, as production shifted to Japan or the South in search of cheaper labor and fewer regulations.

As the downward cycle continued, investors and absentee landlords—fearful that their property values would decline as Detroit got poorer and blacker—let their properties run down. Rising crime led to a drop in pedestrian traffic both downtown and in neighborhood shopping districts, and also to increasing demand for additional police protection. As the cost of city services surged and the tax base shrank, Detroit came to have among the highest property tax rates in the nation, which was another reason for people to move out if they could.

Meanwhile, places like Farmington Hills, which were all white in the ’70s and ’80s, were direct beneficiaries of Detroit’s decline. The seemingly insatiable demand for suburban real estate raised housing values; well-funded schools attracted families with children; local malls had few, if any, vacancies; and new shops and office parks seemed to spring up daily.

The same year that my father retired, I visited my childhood neighborhood, and drove past the Smiths’ house. The lawn was lush, the shrubs well tended. They had built a garage. The old siding had been replaced and the original windows updated. I stopped at a local real estate broker’s office to check out the housing prices in the area. The Smiths’ home was not for sale, but another house just two blocks away, almost identical to it and in move-in condition, was on the market for $24,500. Over two decades, Roosevelt and Virginia Smith’s house in my parents’ old neighborhood, despite love and care and investments, had appreciated by only about $7,000. After adjusting for inflation, their house was worth about 60 percent less than they had paid for it.

In the United States, where real estate is the single largest source of asset accumulation for the middle class, the story of the Sugrues and the Smiths goes a long way to explaining the expanding disparities between white and black wealth. The two families—like many Americans—invested in real estate both for its use value and as a gamble on the future. But one family did far, far better than the other.

Every once in a while, a scholarly book fundamentally shifts how we understand a problem. One of those books was published in 1995, two years after my parents sold their house. Sociologists Melvin Oliver and Thomas Shapiro’s Black Wealth/White Wealth stepped into a stale debate about race, class, and inequality in the United States with new data and a fresh perspective. The authors acknowledged the gains of the civil rights era: Black-white income gaps had narrowed. Minorities were better represented at elite institutions of higher education than could have been imagined in 1960. And while in the ’60s the most prominent black elites were car dealers or owners of “race businesses” that catered to black customers, by the end of the twentieth century the number of black engineers, lawyers, and corporate executives had grown. Newsmagazines trumpeted the high incomes of black sports stars and celebrities. “The New Black Middle Class” became a tagline. African Americans might not have wholly overcome the legacy of centuries of slavery and segregation, but they had come a long way.

But Oliver and Shapiro told another story, a sobering one about the persistent gap between black and white wealth. They methodically gathered and analyzed data about household assets, like real estate holdings, bank accounts, stocks and bonds, cars, and other property, that constitute a family’s portfolio. Their findings were staggering: despite all of the gains of the previous quarter century, the median black family had only 8 percent of the household wealth of the median white family. The asset gap was still strikingly wide among middle-class and wealthy blacks, who, despite their high incomes, still had about a third the assets of comparable whites.

The racial wealth gap has several specific causes beyond the broad legacy of systematic racial segregation, discrimination, and unequal opportunity. Wealth is passed down from generation to generation—even if only modestly. But going back generations, blacks had little opportunity to get a stake hold. Upon emancipation, they were mostly penniless, without land or access to credit (see Reid Cramer, “The American Dream, Redeemed,” page 45), and almost all blacks were excluded from the various Homestead Acts that, beginning in 1862, allowed so many poor white families to accumulate land and, with it, wealth.

Thomas J. Sugrue is the David Boies Professor of History and Sociology at the University of Pennsylvania. His most recent book is "Not Even Past: Barack Obama and the Burden of Race."

Comments

  • Michael J Smith on January 14, 2013 4:09 PM:

    The only "white flight" in Detroit I can think of refers to the influx of well-intended, paleface gentrifiers who aspire to reconstruct the city in their own transplanted Image.

  • Tim Schoenherr on January 15, 2013 8:13 AM:

    A compelling piece. Brings to mind the great PBS documentary - Race: The Power of An Illusion. Episode 3: The House We Live In speaks to much of what you have written. Well done, Dr. Sugrue.

  • Darcel Green on January 23, 2013 7:50 PM:

    Great reading. However more could be said about the free labor that Blacks gave Whites for years, thus aiding to the gigantic lead Whites maintain in finances.

  • Bobloblaw on January 25, 2013 9:20 AM:

    """"Great reading. However more could be said about the free labor that Blacks gave Whites for years, thus aiding to the gigantic lead Whites maintain in finances.""

    Most whites who live in the USA don't have roots that go back before the civil war. You think the German immigrant to Iowa in 1910 was better off beause of slavery 50 years before??? Contrary to liberal thinking, slavery wasnt free labor. Slaves had to be fed, clothed and housed. Their costs of maintenance wasnt much lower than employing Irish or Italian immigrants in NYC.

  • Bobloblaw on January 25, 2013 9:23 AM:

    Blacks suffer less wealth accumulation even after they reach middle class because blacks think and act poor even when they aren't. Bad investment decisions, borrowing on bad credit terms. Not saving properly. Spending on items they cannot afford

  • Richard Ilfeld on January 25, 2013 9:36 AM:

    There are undoubtedly numerous individuals in the black community who have accumulated wealth comparable to whites of the same station in life. In my community are many retired military of all races, and, to my eye, of comparable circumstances. Compare within the target group rather than averaging their performance, and we might find we are dealing with two discrete cultures (or more). As from a distance we see the tribes of the Pacific islands as a 'South Pacific' whole, while anthropologists see a multiplicity of discrete cultures.

  • Isabel Janes on January 25, 2013 10:45 AM:

    This article ties in perfectly with the ideas of leftists and affirmative action believers: Blacks have less wealth because of the injustices of the past, so something (by government, of course) must be done to even things up. Though this author has provided anecdotal evidence to support his view, I and others could provide anecdotal evidence to support a different explanation. Comparison of blacks with other ethnic sub-groups within the US is also very telling. The most important intergenerational factor affecting wealth in the US has been the cultural influences pasted on by parents to their children which have affected habits and attitudes towards education and saving and investing: People in the US are overwhelming not wealthy because they inherited wealth from their families.

  • Steve W from Ford on January 26, 2013 1:03 AM:

    Modern liberalism contributes to the destruction of the black community by constantly emphasizing their status as "victims", just as this article continues. This and the disdain of many blacks for educational achievement along with a 70% + rate of bastardy is plenty to explain why blacks as a group fail to prosper.
    One has only to look at the economic success of black immigrants to the US from other parts of the world to see that discrimination, sub-prime lending and lack of access to credit play little part in the current difficulties many US born blacks suffer.
    It is sad to see but really this community needs to take a page from the book of previous ethnic groups and pull themselves up by their own bootstraps. Marry before having children, get an education and work hard and all will be well for blacks just as it has been and continues to be for other groups.

  • Alex on January 26, 2013 4:13 PM:

    A well-written and well-thought-out piece juxtaposed with moronic comments.

  • Amused skeptic. on January 27, 2013 2:32 AM:

    Alex, why bother to think for yourself when you can just spit out slogans as a substitute? I understand it's easier on the mind but it doesn't necessarily help a discussion becoming more intelligent.

    As for the article, it's very sloppy.
    First, and most importantly, just as Asian-Americans voting for Obama in huge numbers undermined the (Republican) myth of 'takers and makers, so do Asian-Americans destroy the myth of a society where you can only succeed when you're white.

    Asians look dramatically different, they often have different religions(think Indian-Americans and Hinduism or Sikhs) and come from far away from a very different culture.

    Yet, they do better than American-born whites on nearly on metrics that matter.
    The vast majority of the immigrants are poor when they get here.

    I'm sorry, but until you can explain Asian-American success(and of course you can't, which is why the left avoids the painful topic) then this theory of overt racial discrimination is laggard at best since the most successful ethnicities are Jews, Indian-Americans and East-Asians. So no, minorities, religious or racial, are not actively discriminated against.

    But I get it: personal responsibility isn't a popular topic. Better blame everyone else.

    The reason why the values of their homes fell through the roof was because the black crime rate was and remains astronomical. And again, it's not due to poverty(see poor Asian immigrants, even if I know you'd like to ignore that inconvenient fact).

    This is why the left will never - ever - get it's way on these issues. There are facts and then there is universe separated from facts. What the GOP is to climate change, the cultural left is to race relations.

    More emotion and slogans, born out of ignorance, than facts. But the rest of us are not obligated to be nice to either of you and tell you the truth: you're stupid and you haven't thought about these issues clearly enough. So don't waste our time.

  • joel on January 27, 2013 1:05 PM:

    At what point in time do blacks get to be regarded as full adults and full fledged citizens? They can vote, drink, marry whom they will, work where they want, start a business, live where they want, buy a house, etc.

    At what point does the rapidly diminishing white population of this country get to stop worrying about American blacks? Why not tell the Asians or Latinos about their responsibility to black people.

    Why do the white elitists who worry so about blacks, and show so much empathy for them, show such contempt for poor whites, you know, those bitter clingers.

  • joel on January 27, 2013 4:22 PM:

    Seven people murdered in Chicago on Saturday, six by shooting.

    I wonder how black wealth is holding up in that part of town these days?

    And, to think that people waste ink trying to explain why blacks have less wealth than whites in this country.

    BTW, do you really think most blacks worry about this statistical wealth gap, or are they just more worried about schools and crime and jobs? I suspect this wealth gap is only an issue which white elitists will use to their own advantage. Like the white-black gap in home ownership pushed by the white elitists awhile back which led directly to the housing bubble and great financial pain for blacks and whites alike, and which will burden this nation for decades.

  • MikeM on January 28, 2013 12:36 PM:

    Personal responsibility is the key. The vast majority of blacks especially (and Obama supporters) believe every wrong they encounter is due to some imagined wrong.

    Until they understand that sometimes they are not the most qualified and it is their action (or inaction) that is the cause, they will never integrate into society.

    I happened to stumble across BET and the United Negro College Fund awards last night. I have no problem with the goals they are trying to achieve, I do have a problem that I can't have a United Caucasian College Fund.

    Call me a racist, but I experience this attitude everyday in my business.

  • David in NY on February 05, 2013 7:35 PM:

    God, so many of the comments here don't even address what the article says.

    Their response seems essentially that blacks are inferior (live in murderous Chicago, only do well because they get special treatment, etc.) so of course they've got less wealth. And the white people who don't have their own "Caucasian College Fund" are victims, or something.

    And you know what that makes the commentators, don't you?

    Soreheads.

  • yellowdog on February 05, 2013 10:58 PM:

    Professor Sugrue has illuminated some troubling themes in U.S. history and in the contemporary economy. I appreciate his work, though I find it quite hard to read. That is not a criticism of his writing but his subject. I wish there were easy answers, equal to the depth of the problem.

  • emjayay on February 08, 2013 10:43 PM:

    Prof Segrue made a lot of excellent points. So did the commenters. I agree with both. But David in NY, I don't think any commenter you disagree with is claiming that blacks are inferior. They are talking about culture and typical behavior.

    I read here or on a similar blog very recently that Moynihan's famous analysis of black culture blamed everything basically on a history of slavery but that notion is old hat. OK, I never read it, but I've come to the same conclusion. And lingering racism, the other side of the coin of course. And I have to say, big liberal that I am, the introduction of welfare and food stamps and housing projects to a population whose close ancestors lived under slavery was, well meaning though they may have been, totally the wrong thing at the wrong time.

    I taught in middle and high schools in San Francisco, and trust me, all the stereotypes about various groups are generally (not specifically) true.

    Amused skeptic wrote "Asians look dramatically different, they often have different religions(think Indian-Americans and Hinduism or Sikhs) and come from far away from a very different culture." Yes, but what does anyone (me anyway) think generally when they see someone of those groups? When I see non-Indian Asians, I'm thinking "Hard working, stellar parents, smart, thoughtful, academically oriented." Why? Because that's my experience reinforced over and over. When I see black people or Hispanics, I have different stereotypes in mind. Why? Same reason. The stereotypes are generally (not specifically) true, actually the informed-by-lots-of-experience ones anyway.