WHY HOUSING?

 

The Problem

Throughout the United States, the American dream is not enjoyed equally among racial and ethnic groups.  Economic prospects, health outcomes, job opportunities, educational opportunities, likelihood of incarceration, chemical dependency rates, and life expectancy all vary significantly by race. In the case of African Americans:

  • Children born into African American households will experience on average higher rates of poverty, higher likelihood to be victims of crime, fewer educational opportunities, lower incomes, greater rates of incarceration, higher rates of drug addiction, lower high school and college graduation rates, and a shorter life expectancy than their white counterparts. 

  • The median wealth of white households in the United States is $171,000, which is 10 times the median wealth of black households, $17,100. 

  • One in four black households have zero or negative net worth, compared to less than one in ten white families.

Wealth disparity along racial lines is more pronounced in St. Louis than in the nation as a whole. For instance the wealth disparity between two neighborhoods in St. Louis less than ten miles apart is striking as demonstrated by the graphic below: 

The differences between 63105 and 63106 are numerous, but perhaps most noteworthy are the very different concentrations of affluence versus poverty and the racial composition of each place despite being less than 10 miles apart.

The differences between 63105 and 63106 are numerous, but perhaps most noteworthy are the very different concentrations of affluence versus poverty and the racial composition of each place despite being less than 10 miles apart.

 

The Cause of the Problem

Many factors contribute to poverty. In the case of African Americans and other minorities, a significant factor is  a long history of state-sponsored discriminatory practices related to housing. Throughout the 20th century, federal, state and local governments actively and overtly segregated cities by race. Specifically, government entities enacted and enforced policies that encouraged and incentivized home ownership in flourishing neighborhoods for whites only, while prohibiting non-whites from enjoying the same financial opportunities.

As a result, the overwhelming majority of African Americans over the last 100 years were forced to rent (or buy at exorbitant prices and with predatory loans) residences in disinvested neighborhoods with little access to competitive schools, employment, healthcare, essential household goods, effective public transportation and critical social networks. The strategies used to ensure segregation in St. Louis and other U.S. cities included the following well documented practices:

  • redlining,

  • racial zoning,

  • land contracts,

  • private race-based covenants and restrictions,

  • racially discriminatory mortgage practices,

  • racially discriminatory insurance practices,

  • providing home ownership subsidies and incentives to whites only, and

  • legislating disinvestment from predominantly black neighborhoods. 

In The Color of Law, Richard Rothstein argues with exacting precision and fascinating insight how segregation in America—the incessant kind that continues to dog our major cities and has contributed to so much recent social strife—is the byproduct of explicit government policies at the local, state, and federal levels.

These policies resulted in 98% of home loans in the United States going to white families from 1934 to 1962. Not only did the ability to purchase homes give whites the ability to accrue wealth, it also attracted new businesses to white neighborhoods, which increased property values and allowed those homeowners access to other wealth building vehicles like college education. As a result, wealth in the white communities compounded and passed to future generations, while wealth in black (and other minority) communities dissipated swiftly.

By the time these practices were officially outlawed in 1968 (with the Fair Housing Act), the die had been cast. Decades of state-sponsored housing discrimination had created pockets of deep poverty and deprivation among black residents in St. Louis and other U.S. cities. These state-created ghettos contributed to high levels of crime, incarceration, drug addiction, unemployment and despair among residents. 

In contrast, the predominantly white neighborhoods that benefited from the government subsidies and incentives that created them experienced rising property values, flourishing schools, economic investment, high access to healthcare, and most importantly, growing generational wealth. 

While the passage of the Fair Housing Act and other well intended laws have gone a long way in ending racist housing policies, they have not reversed the gap in household wealth between whites and non-whites caused in part by decades of racially exclusionary housing laws and policies. 

Realtor finds deed barring black families from purchasing a University City home

This gap is unlikely to disappear entirely on its own.

Realtor finds deed barring black families from purchasing a University City home

 

The Solution 

Homeownership in flourishing neighborhoods is the key to eliminating the gap in household wealth among racial groups. For most Americans, their primary residence is not only a place to eat, sleep and raise a family, but it is also their largest asset, and their greatest opportunity to build wealth and accumulate other assets. In addition, homeownership in flourishing neighborhoods provides families: 

  1. access to competitive school districts,

  2. low crime rates,

  3. increased access to income opportunities via socialization in higher income neighborhoods,

  4. greater access to grocery and retail stores located near higher income neighborhoods, and

  5. greater access to healthcare facilities located near higher income neighborhoods. 

In other words, home ownership directly affects nearly all of the other factors that contribute to a person’s health, wealth and well-being. The FAM exists to help make home ownership – and the American Dream – a reality for those whose ancestors were unjustly denied this opportunity in the past. 

The FAM 

The FAM provides subsidized homeownership opportunities in flourishing neighborhoods to qualified individuals who have been negatively affected by the history of race-based state-sponsored discrimination in the area of housing. 

Here’s how it works:

1. Fundraising

The FAM raises funds through grants, corporate gifts, individual donations, and eventually the home loan repayments of its clients.

2. Home Purchases 

The FAM assists clients to purchase affordable homes throughout the St. Louis region in neighborhoods with competitive school districts, low crime rates, high access to necessary services, high economic investment, and increasing property values. The FAM also assists clients to purchase homes in historically low-income neighborhoods that show signs of improvement and likely increases in home values.

3. Client Selection 

The FAM interviews and selects qualified individuals to participate in The FAM’s program. The FAM considers a number of factors when selecting clients, including employment history, financial need, financial opportunities, prior homeownership history, credit score, etc. To qualify for the program, individuals must meet the following criteria:

  • Demonstrated Impact of Past Race-Based State-Sponsored Discrimination.

    The FAM considers applicants of all races and ethnicities who can demonstrate having been impacted by unjust housing policies.  This evaluation includes a review of the historical housing status an applicant’s parents, grandparents and guardians. 

  • Financial Stability:

    Applicants must demonstrate that they are financially capable of making the payments on the subsidized home purchase.

  • Primary Residence:

    Applicants must demonstrate that they are seeking to purchase the home as their primary residence. Applicants may not own two “The FAM” homes concurrently.

4. Transaction

The FAM assists its clients to purchase homes by providing down payment and closing cost assistance.

5. Training: Individuals selected to participate in the program will be provided with training and education related to homeownership and personal finance.

6. Holistic Support 

The FAM seeks to surround its clients with a range of professionals to support their goals, such as:

  1. financial planners, 

  2. counselors,

  3. social workers, 

  4. lawyers, 

  5. home repair services, and

  6. appliance repair services.

7. Benefits to clients: The FAM aims for its clients to experience the following benefits as a result of their participation in the program:

  1. increased personal wealth through equity in their home,

  2. greater opportunity for generational wealth through homeownership,

  3. access to competitive school districts,

  4. residence in neighborhoods with low crime rates,

  5. increased access to income opportunities via socialization in higher-income neighborhoods,

  6. greater access to healthcare facilities located near higher-income neighborhoods,

  7. greater access to grocery and retail stores located near higher-income neighborhoods, and

  8. holistic support services provided to clients by The FAM.

Articles and Resources

The FAM recommends the following articles and resources to learn more about the historical impact of discriminatory housing practices.  The FAM is not a political advocacy organization, and expresses no opinion on specific public policy recommendations offered by these or other third parties.

 

INVEST IN THE FUTURE.

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BE THE SOLUTION.