Homeownership Town Hall – Making DC Homes Affordable

2016 Homeownership Town Hall flyer English

On June 4th, MANNA will be hosting our first annual Homeownership Town Hall in collaboration with our partners LEDC and CNHED. The concept of this event was envisioned by our Housing Advocacy Team (HAT), and they have been diligently     working to make this event a success.

What is a Homeownership Town Hall you ask? It is an event in which both current homeowners, and future homeowners are able to gather together, and share and receive resources to improve their homeownership experience. This event also provides attendees with the opportunity to hear their elected officials and government agencies speak about and commit to homeownership initiatives.

In addition, we will have several workshops at this event that attendees will be able to choose from. Guests will have the opportunity to learn how to improve their credit; they will be able to receive home improvement and maintenance tips, as well as learn how to advocate for tools that make homeownership in DC affordable. We will also have a number of vendors at this event who will be able to share resources that can help improve people’s homeownership experience.

One of the most unique features of this event is that it will offer future DC homebuyers an opportunity to meet, build relationships and learn from current MANNA homeowners and others. It takes commitment, resilience and support to purchase a home in DC. This event will provide guests with the opportunity to gain the support and knowledge they need to purchase a home from people who have completed the home buying process.

Here at MANNA, we know the value of affordable homeownership. Homeownership has been linked to a number of positive outcomes for families and communities, which is why we want to ensure that everyone who wants to become a homeowner in the District has the resources they need, in order to do so. Increased homeownership has been found to lead to a decrease in crime within communities, and children of homeowners have a greater likelihood of completing college, than children on non-homeowners. In addition, homeowners benefit from being able to accumulate wealth from the equity in their homes, which they are able to use to invest in themselves and their families. Past MANNA homeowners have used their equity to start their own businesses and to send their children to college. Homeownership is an amazing opportunity, and the goal of this event is to get people excited about homeownership advocacy and connecting folks to resources to make homeownership possible and maintainable in the long-term.

We hope that you come out to this event, and bring a friend! It is on Saturday, June 4, 2016 from 1:00pm to 4:30pm. It will be held at All Souls Unitarian Church – 1500 Harvard Rd NW in Washington, DC. We look forward to seeing you there! CLICK HERE to learn more about the event.

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Choice-Vouchers

A Case for Universal Housing Vouchers in DC

MANNA is a strong supporter of the continuum of housing.  The continuum entails a range of housing services and options, which consists of various forms of supportive housing, assisted rental housing, and assisted homeownership. Every aspect of the continuum is important, and in order for the continuum to be effective there have to be mechanisms in place that allow people to move from supportive housing, to homeownership. It is also important to note that each component of continuum is unique, and that it serves a particular function. When one aspect of the continuum is weak, it places excess pressure on the other parts of the continuum. For example: gaps in supportive housing result in individuals becoming homeless. Lack of affordable rentals forces families to turn to shelters, when what they really need is an apartment that they could afford on their salary. While lack of assistance for or development of affordable homeownership forces people to continue to rent, when many of those people can become mortgage ready and some desire to have a place they can call their own. There needs to be funding support for all of the housing options on the continuum, but an equally important endeavor is ensuring that enough affordable housing exists to house people.

According to the DC Fiscal Policy Institute, 64 percent of DC’s lowest income residents spend half or more of their income on housing. Many moderate-income families in the District have been identified as being cost burdened as well. This is problematic, because being cost burdened prevents a household from being able to afford basic necessities. It also leaves them without a safety net in the event of an emergency, and makes them susceptible to homelessness (Hendey et al 2014). Furthermore, in DC, the cost of rent has been steadily increasing, while incomes have remained stagnant (Rivers 2015). “The number of apartments renting for less than $800 a month fell from almost 60,000 in 2002 to 33,000 in 2013” (Rivers 2015). Moreover, recent findings suggest that there are very few low-cost housing options in the private market, other than subsidized housing.

Subsidized rentals can take different forms. They can be restricted to a certain building such as public housing, or to an apartment complex that designates some of their units as “affordable”. Research is finding that housing vouchers are the most economical way to provide affordable rentals. However, the problem is that there are not enough affordable housing vouchers to go around. According to the DC Housing Authority, 10,500 families in the city participate in the Housing Choice Voucher Program, and thousands more are on the waiting list. DC has seen an increase in the number of available rental units, but the problem is that the number of affordable rentals is decreasing. In order to address the lack of vouchers provided by the federal government, DC created its own Local Rent Subsidy Program in 2007. However, that program is unable to serve everyone who needs rental assistance.

Research has been conducted in other states, exploring the idea of providing housing vouchers to everyone who needs them. In Wisconsin, and Indiana, an experimental housing program was implemented for 10 years. The program provided housing vouchers to all low income residents who qualified. These residents would pay up to 30% of their income towards their rent; if their rent exceeded that 30% mark, the voucher would cover the rest of the cost. The study found that the vouchers encouraged landlords to keep up with building maintenance because all of the low-income residents had vouchers, and in order to use the vouchers, certain building codes had to be met. Furthermore, the vouchers spurred the development of additional market rate units, and the study also found that the vouchers did not have a substantial impact on market rents (Currie 2006). Of course DC’s housing market is different from that of Indiana and Wisconsin in a number of ways however, hypothetically, a universal housing voucher system could be modified to meet the District’s needs.

Currently, the housing voucher system in the U.S. works like a lottery, in which only the “lucky” low income earners are able to receive them. Conversely, if a housing voucher program was expanded so that everyone who qualified received the voucher, it could prevent renters from being cost burdened, incentivize the market to supply additional non-luxury units, and protect families from slipping into homelessness. DC has been making strides towards addressing our affordable housing crisis. I wonder whether the District would be open to taking a step, as big as implementing a universal housing voucher, in order to address this issue.

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In Memory of Our Dear Friend, Marilyn Phillips

Sadly, on Monday, April 11, 2016, MANNA lost Marilyn Phillips, a dear advocate, volunteer, colleague and friend. Marilyn had been a member of both MANNA’s Homebuyer’s Club and Housing Advocacy Team for the past four years. Marilyn and her husband purchased a MANNA home at the Buxton condominiums in Historic Anacostia, just a couple blocks from their apartment. She loved her neighborhood and dedicated herself to promoting positive and inclusive change in Ward 8. She and her husband worked on preparing their finances and improving their credit score for a few years before they purchased their home, putting forth a tremendous amount of commitment and effort. Marilyn believed that “housing is the foundation of our communities”, and she wanted other people to experience the benefits of homeownership as well.

Unfortunately, Marilyn was diagnosed with breast cancer in 2006; she was on the road to recovery, when she was diagnosed with metastatic breast cancer to the bone in 2009. Due to her health conditions, and many doctor appointments, she was unable to continue her job as a legal assistant. However, her cancer went into remission for several years and during that time she became very active with MANNA. She testified at a number of City Council hearings and spoke at numerous Advocacy Days and Town Halls through CNHED. She also volunteered in MANNA’s office on a weekly basis, helping people secure affordable rentals and a host of other things.

Marilyn refused to let her health challenges tie her down – she was a beautiful fighter, for herself and for others. She made sure that she was available to help out at MANNA, and advocate for housing programs. Marilyn was a loving and caring person, always ready to lend a helping hand. She loved MANNA, and we loved her. We are better because of having known Marilyn.

Below are some videos and photos of Marilyn being the wonderful advocate and DC resident that she was, that she will always be in our hearts:

Feb 2013 – Marilyn cheers on Mayor Gray’s affordable housing announcement of $100 million - https://www.youtube.com/watch?v=QhN2Aaf3lSU

May 2013 – Marilyn speaks at Tenant Town Hall - https://www.youtube.com/watch?v=-a-EvV5v4u8

2014 – Marilyn and other Ward 8 residents speak about what homeownership means to them - https://www.youtube.com/watch?v=MaMORrrp_4c

 

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Marilyn (bottom right) with MANNA’s Housing Advocacy Team.

 

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Marilyn on her back porch with Mayor Marion Barry at the grand opening of the Buxton Condominiums.

 

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Marilyn and her husband Kelvin after they settled on their new home.

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Evictions and the Affordable Rental Crisis

Currently, our nation is in what Brian Sullivan, spokesperson of the Department of Housing and Urban Development identified as “an affordable rental crisis” . In 2015, the number of people who pay more than 30 percent of their income in rent, had increased to 21.3 million households. “Those paying more than half of their income rose to a record 11.4 million.”  “An NPR analysis of data from the Urban Institute found that nearly half of all counties in the U.S. saw a decline in affordable housing availability from 2000 to 2013, while fewer than 7 percent of counties saw an improvement.”

Being cost burdened has caused some families to be faced with the issue of eviction. When a tenant believes that he or she has a reasonable explanation for why they are behind on their rent, they go to tenant court to plead their case. It is common for tenants to fight eviction on the grounds that they were withholding rent from their landlord due to substandard living conditions. Other individuals go to tenant court to petition for more time to pay their rent. NPR did a recent piece on the tenant court system in Baltimore, and what brings people to use the system.

According to the NPR piece, most of the people who end up in tenant court are African-American mothers who have a high school diploma or less. Only 15 percent of them get housing aid such as vouchers to help cover their rent, and most of them lose their cases. In general, most tenants who are taken to court for being behind on their rent have no legal representation while most landlords do. However, studies have shown that tenants with lawyers have greater success at avoiding eviction.

Not only is there a rental crisis, according to Harvard Sociologist, Matthew Desmond, there is a national eviction epidemic. He highlights that, “Most poor, renting families pay more than 50 percent of their income on housing. One in 11 expects to be evicted within the next two months.”  Many people who are evicted end up homeless, or in poorer living conditions from which they left, which makes their poverty more severe. Desmond notes that evictions don’t just happen because someone is in poverty, but they are also a cause of poverty, by making lives more insecure. “People don’t just lose their homes in evictions… you often lose your neighborhood and your school. Children often have to switch schools and miss long stretches”.

Our widespread eviction issue is a problem for all parties involved. According to Mike Clark, a board member of the National Apartment Association Clark, landlords prefer not to evict tenants if they don’t have to, because it is costly, and finding a new tenant takes up time. Furthermore, landlords explain that when they don’t receive timely payments from their tenants, it hinders them from being able to make the necessary repairs to the building.

There are various factors creating this high eviction rate, such as increasing rents, national wage stagnation and the overall lack of affordable housing. Some proposed solutions that I came across to address the eviction crisis include providing free legal help for low-income tenants. Another idea is a universal housing voucher system, for people below a particular income. Mark Clark from the National Apartment Association listed a host of housing incentives that he believes could be used to address the issue, by increasing the affordable housing stock, such as: “Tax credits, property tax breaks, reduced utility rates, reduced hookups, and zoning alternatives”.

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HPAP and the Power of Advocacy

Fair-Housing262x153The Home Purchase Assistance Program (HPAP) has seen years of funding cuts, and subsequent years of budget stagnation. However, as of March 24th, HPAP’s future has changed. The Mayor announced in her budget that in addition to another $100 million in the Housing Production Trust Fund, she will be adding $6.3 million to HPAP! The proposed HPAP budget is now $16 million! In addition to this, there is currently HPAP legislation moving forward to increase the maximum HPAP loan amount to $80,000. All of these advances are good news to the affordable housing community. It is an indicator that we have government officials who care about affordable housing, and are listening to their constituents. It is an even greater indicator of the effort of affordable homeownership stakeholders and residents, and the power of advocacy.

As discussed in previous blogs, The Home Purchase Assistance Program (HPAP) is a loan assistance program that has existed in the District for 30 years. The program provides interest-free second mortgages to first-time low-to moderate income homebuyers. This interest free loan, which the homebuyer repays, serves as a down payment on a house and also covers most of the closing costs. HPAP prepares its recipients by providing intensive financial and home buyer education, preparing them for the responsibilities and challenges of homeownership. This program has helped over 13,000 DC residents become homeowners, building assets for their families and anchoring them in their neighborhoods.

Last year, HPAP took a severe budget hit; funding was cut from $12.2 million to $9.7 million. Moreover, prior to the Great Recession, the maximum loan amount a person could receive from HPAP was $70,000, however it was cut to $40,000 during the recession, and has only increased to $50,000 since then. These cuts have undoubtedly impacted the program’s ability to serve the people of DC, with much greater demand than settlements, which is why housing advocates have been passionately fighting for funding increases and program improvements. This victory is key in the fight to improve HPAP.

HPAP is a program with a lot of potential, and it has enabled thousands of DC residents to purchase homes. Through previous advocacy efforts, and our work with DHCD, steps have been taken to make HPAP more efficient. Last year, we were able to improve the HPAP process, by eliminating the second inspection that HPAP required, which was costly and deterred people from selling to HPAP buyers. This increase in the HPAP budget is just another step towards making the program one that effectively serves the needs of DC residents.

 

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Transportation, The Hidden Cost

The metro line shutting down a couple of weeks ago caused me to reflect on a couple of things. The first is how integral the metro train is to many of us who live in the D.C. metro area. Also, I immediately recognized that the shutdown would have a disproportionately negative impact on certain workers. While many people I know had the opportunity to telework, I realized that certain workers would not have that privilege, and I could see how this shut down would have a notable impact on low-income workers. For many D.C. residents, bus is a preferred method of transportation, yet, in general, commuters living further away from downtown DC or in Maryland or Virginia have less public transportation options.

The metro train is a key source of transportation for residents who live in the area, and although the metro shutdown affected people of all income levels, those of higher incomes had greater access to transportation alternatives (such as car services like Uber or taxi cabs), are more likely to own a vehicle, or have greater flexibility to work from home than lower wage earners. However, as I looked into this matter further, I realized that the truth is that the lack of transportation is not a phenomenon that low-income people faced only during the metro shutdown, but they are at a disadvantage when it comes to transportation access all year around.

This issue of access to transportation goes hand-in-hand with access to affordable housing. Affordable housing isn’t truly affordable if a significant portion of one’s income is spent on transportation. Transportation is now being recognized as the “hidden cost” of housing. Traditionally, people have been identified as cost burdened if they spend more than 30% of their income on housing. However, those who study affordable housing and transportation have begun using a rule that “states that housing and transportation (H+T) should be no more than 45 percent of a household’s income.”

To complicate this issue, housing around metro lines is growing increasingly more expensive, due to the demand generated by the high income earners that are moving into those areas. This makes it harder to build and preserve affordable housing near metro lines, and it is contributing to price hikes of housing in these areas. This trend is pushing lower income people away from transit accessible housing, to areas where rents may be less but their transportation costs are greater. Over the years we have seen this become increasingly problematic in D.C., but it is also a problem in many other cities across the nation. At a Brookings event last month, Housing Secretary Castro spoke on this issue, stating, “We need to stop stacking and segregating poverty. Improving transportation and fair housing are keys to equality and opportunity”. Hopefully, as we continue to advocate for affordable housing options we will find innovative ways to address these two needs simultaneously.

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What Government Can Do To Close The Racial Wealth Gap

As discussed in recent blogs historically, the government has made intentional efforts to increase the wealth of certain demographics through past legislation, like the Social Security Act and the FHA, while systematically preventing other groups from gaining wealth. In addition, we have current policies in place that negatively affect minorities’ abilities to acquire wealth, such as our laws pertaining to our criminal justice system, or laws that excluded farmers from work place protections. Furthermore, we are currently in an affordable housing crisis, and some cities have called a state of emergency in regard to homelessness. It is estimated that only“65 affordable units exist for every 100 extremely low-income renters, and only 39 units are available per 100 extremely low-income renters”. Despite the lack of investment in affordable housing, for those of modest incomes the wealthiest people in this country receive the largest amounts of financial housing assistance, mostly in the form of the mortgage interest deduction. Moreover, the households with incomes of $200,000 or more receive a larger share of housing aid than households with incomes of $20,000 or less, which are disproportionately families of color. The aforementioned policies are just a few examples of government legislation that has contributed to the racial wealth gap, and has increased the wealth gap between the rich and the poor of all races.

The issue of wealth inequity in this country has been a growing topic of discussion in certain non-profit and community circles, in academia and politically. These disparities have been exacerbated due to the Great Recession. Collectively, Americans lost trillions of dollars due to the recession.  However, the effects were especially damaging to the wealth of African-Americans, whose net worth fell by 34%, and Latino wealth, which fell 15% respectively; white wealth rose 2% during that timeframe. The inability to accumulate wealth directly affects the financial stability of families and can be seen through the fact that the average white household has a little over one month’s income in accessible savings, compared with only 12 days for the average Latino household and five days for the typical African-American household. These wealth disparities are so great that it puts Latinos and African Americans in a position where the slightest emergency, or change in work schedule, could have a tremendous impact on families’ savings.  These issues need to be addressed in order to help families build wealth and become economically mobile. Currently, research is being conducted on how to decrease the wealth gap.

In January, the Annie E. Casey Foundation released a report listing four proposals on how to close the wealth gap. All of these suggestions have been shown to lessen the gap in the states where they were implemented. The first suggestion is making myRAs (My Retirement Account) permanently accessible through banks and employers, and increasing awareness about them. The purpose of this program is to jump-start people’s retirement savings.  These accounts would be established by employers, and would be invested in government savings bonds, so they won’t have the risk of losing principal.  Furthermore, myRAs wouldn’t require an initial fee. Another benefit of myRAs, is that if an emergency occurs, and the participates need to access the funds, they can do so risk free. Once $15,000 has been saved in the myRA, the funds must be rolled over into another account, and people should be encouraged to place their funds in vehicles where they can receive greater returns. According to the Annie E. Casey Foundation, “If everyone eligible saved the maximum, myRA could reduce the black-white wealth gap by 5% and the Latino-white gap by 7%”.

Another proposal that would reduce the wealth gap is raising asset limits for public benefit programs. Currently, people who have more than $1,000 in savings get dismissed from TANF. However, $1,000 is such a small amount; people need more money than that in their savings in order to be prepared for rainy days, or in order to make an investment that could help uplift themselves out of poverty. Consequently, this $1,000 limit creates a disincentive to earn more money or to save.Federal policy should permit program participants to have at least $12,125 in savings — the equivalent of three months’ income for a low-income family of four.” In Ohio and Virginia, where the limits were raised, there was not an increase in the number of people who tried to use TANF. Furthermore, allowing families to keep assets that provide adequate transportation and housing, as they transition out of assistance programs, and work to become self-sufficient can have a positive impact in reducing the wealth gap.

The third proposal is “building savings from birth.” This proposal recommends that the federal government establish universal savings accounts for each child that is born. A modest deposit would be placed into each child’s account upon birth, with the greatest amounts of funding given to babies from lower-income families. The goal of this program is to have a system in which money is saved for children, so once they become 18, they can use the funding to pay for higher education, training, a business or a home. This program would be costly, but “depending on funding and participation, these accounts could reduce the racial wealth gap by about 20 to 80%, it would increase the wealth among all groups, and reduce dependence on public benefits, increase consumer buying power, boost investment in businesses and homes.”

The last proposal is a concept that MANNA knows well, which is expanding access to homeownership. In order to increase access to homeownership, The Annie E. Casey Foundation recommends expanding the Family Self-Sufficiency program. The program is implemented through the U.S. Department of Housing and Urban Development (HUD). The program helps those with housing vouchers, or who live in public housing, increase their income, build assets and increase their financial stability. “Through the program, an escrow account is established for participants. As their earnings rise, they pay more rent, but the amount of each increase is deposited in their accounts monthly over five years.” At the end of the five years, the money can be used for any purpose they would like. Participants of the program also receive coordinated services, such as “child care, transportation, education, job training, employment counseling, financial literacy, and homeownership counseling, among others”. Currently, 70,000 people use the program, but 3 million people are eligible.

The policies and programs I have discussed are a sample of some of the proposals out there, that the government could use to reduce the racial wealth gap in this country. I am not suggesting that these recommendations are the cure for the gap, but they are creative ways to address wealth disparities. These are not the only potential solutions that exist, but the aforementioned programs have been tried, and have successful results. Maybe the best policy for addressing this gap isn’t one that I have mentioned. Perhaps the best policy is one that has not been created yet. However, what I can assure you is that more than one policy is needed in order to close this gap. It will take multiple well thought out policies, and time to fix this problem, just like it has taken numerous policies and centuries of inequitable legislation to create these issues.

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Housing For All

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A couple of weekends ago, on March 5th, over 1,000 people attended the Housing for All Rally, which was hosted by CNHED in partnership of the Way Home Campaign. The title of the rally, ‘Housing for All’ is fitting, because everyone needs quality housing, some would even argue that housing is a fundamental right. Quality housing is important regardless of your socioeconomic status and despite the form of housing that you live in. This is why the government subsidizes housing in many different ways. This can be done through tax breaks, subsidizing land for development, distributing funds for the development of supportive housing, etc. Different forms of subsidized housing benefit different socioeconomic groups. Although the term subsidized housing is typically associated with low-income people, the government provides financial assistance to people of all economic levels, with the bulk of housing assistance given to the wealthy.

One federal program that assists higher income people is the mortgage interest deduction, which allows owners to make tax-free interest payments on their mortgage loans. This program is framed as one that is supposed to assist the middle class with home purchases. However, it is mostly beneficial to people with higher incomes. The program allows homeowners to deduct up to a million dollars in interest on mortgages, even when the loan is used to buy a secondary home. Consequently, the mortgage interest deduction can be seen as an incentive to buy expensive homes or vacation homes, and does not necessarily incentivize the purchase of reasonably priced homes for the middle class.

The mortgage interest deduction isn’t the only tax deduction that higher income people benefit from as a result of owning a home. “In fact, 70 percent of the tax savings from the mortgage interest and property tax deductions accrue to the top income quintile, 8 percent to the middle quintile, and almost nothing to the bottom two quintiles”. According to available data, more than half of federal housing spending provides financial assistants to households with incomes above $100,000.  “The 5 million households with incomes of $200,000 or more receive a larger share of such spending than the more than 20 million households with incomes of $20,000 or less, even though lower-income families are far more likely to struggle to afford housing.”

These statistics may surprise you, especially because government spending on housing isn’t typically associated with the wealthy. This disparity is in part due to the fact that there is more housing assistance available for homeowners than for renters. This is not an inherently negative thing, however, the majority of low-income people are renters, which leaves them excluded from much of the housing assistance that exists. In this country, only “65 affordable units exist for every 100 extremely low-income renters, and only 39 units are available per 100 extremely low-income renters”. Unfortunately, about only a quarter of low-income families eligible for rental assistance receives it, and waiting lists for assistance are hopelessly long or closed in many parts of the country.

This 1 to 4 ratio indicates a serious need for affordable housing in our country, and more specifically, a need for affordable housing in D.C. The rally brought together residents, council members, and the mayor, to call for rent control, ending chronic homelessness, and ensuring affordable housing. There were many powerful testimonies at the rally, but the one that stuck with me the most was given by a man who was formerly homeless. He spoke about how good it felt to finally have keys to his own place, and how a home not only protects you from the physical elements of the outdoors, but it also protects you emotionally, by comforting you, and giving you a place of solitude after a long day. In our current society, higher income earners have greater access to housing, and are given greater financial assistance in order to secure it. Now it is time that we ensure housing for all.

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Not All Policies Are Created Equal

One’s beliefs regarding why people are low wealth, low-income earners influences their opinions of how to combat poverty. When forming ideas about the causes of poverty, and the racial wealth gap, it is important to acknowledge the legislative policies that initially created this gap, and those policies that continue to expand it today.

In the last blog, I discussed how the G.I. Bill of 1944 and the Social Security Act of 1935 enabled many Whites to accumulate wealth and expanded the White middle class, while minorities were excluded from the benefits of these bills. I also discussed how redlining practices were enacted, and led to banks offering few if any financial services to minority neighborhoods and, as a result, forced those communities into economic decline. Although these laws are no longer in place today, we still have policies that perpetuate inequality, and widen the wealth gap.

Even institutions, laws and policies that appear to be non-monetary in nature have negative financial impacts on communities of color, and lead to the widening wealth gap. For example, current laws deny certain workplace protections in the farming industry, which disproportionately affect Latino children. In our criminal justice system, Blacks and Latinos are disproportionately incarcerated, and are given lengthier sentences for the same offenses committed by their White counterparts. And inequality is even seen in our healthcare system: many US southern states declined Medicaid expansion, which has a disproportionate impact on African Americans since 57 percent of the African American population lives in the south. Such policies exacerbate the disparities between White wealth and minority wealth, and end up representing a form of structural racism.

Unfortunately, the aforementioned policies are not the only ones that contribute to wealth disparities in this country. Inequities can be seen throughout our society, especially in the housing and lending arena. In recent years, banks have been sued for predatory, race-based lending practices, and more and more articles are being released about Blacks and Latinos being discouraged from moving into White neighborhoods, even when they are better qualified financially than their White peers. It is amazing that 82 years after the Federal Housing Administration implemented redlining (which ended in 1968) there is still discrimination in our housing market. This discrimination occurs, despite the fact that we know that exclusion in the housing market has accumulative effects.

When home values and residential patterns are dictated by race, minority communities suffer, and they are left with “fewer sources of family wealth, as well as fewer investments in, and limited services”.  As a result of how our tax system is constructed, local property taxes help fund primary education; consequently, minority communities, which tend to have homes of lower property value, often see a negative effect on school quality. The quality of schools affects students’ likelihood to matriculate to higher forms of education, which reduces their chances of obtaining a high quality job, and accumulating wealth (in which they are already likely to be generations behind). The effects of current laws and policies, in part, explain why White households hold nine times more wealth ($110,637 on average) than households of color ($12,377 on average). It is clear that discriminatory policies have a negative cyclical effect on minority communities. They create inequality, which leads to the lack of opportunity, which in turn leads to more inequality and greater wealth disparity.

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Disparities and Poverty

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The issue of race-based income and wealth disparity in the United States is ingrained in our history. As the country continues to progress, and select groups see large financial gains over generations, other groups have been systematically left out. There are countless numbers of nonprofits and government programs that exist to give aid to those who are impoverished in our country. However, many of these services simply help people get by. The big name government assistance programs in particular i.e. TANF, EITC, and SNAP are able to aid millions of Americas, but none of them deal with the issue of wealth building, and some even have asset limits in regards to how much you can have in savings and still access the programs. Furthermore, when there are budget cuts to these programs or people no longer qualify due to their incomes, or they have exceeded their time limit, they are left to struggle. Our current method of addressing income disparities do not provide a plan to enable recipients to become economically mobile.

It is important that we discuss the root causes of poverty, so we can learn how to combat it. There are two mainstream explanations for poverty. The first one is the idea that people are impoverished due to decisions they have made (i.e. teenage pregnancy or due to cultural attitudes, a lack of value placed on work or education). The second common explanation states that poverty is caused by forces beyond people’s control (i.e. a poor job market or disadvantages due to intergenerational poverty) (Darity et al 2013). These two viewpoints are quite different, and you can probably imagine how one’s beliefs regarding the causes of poverty could impact their perception and attitudes towards those who are impoverished. However, what these explanations fail to address is the role that the government has played in causing some communities to become disadvantaged, and in exacerbating the race wealth gap.

Savings and homeownership are two factors that contribute to income and wealth. However, African American, and Latino families are behind white families in both of these categories. 71% of whites own their homes in the U.S., compared to 41% of blacks and 45% of Latinos. “In addition, African Americans (38 percent) and Latinos (35 percent) are over twice as likely as whites (13 percent) to hold no financial assets at all and to have no or negative net worth” Based on your beliefs about poverty, and its root causes, you may have some assumptions regarding why such disparities exist. However, it is important to look at these inequities through a historical lens as well.

There are numerous federal, state and local policies that have been enacted with the distinct purpose of increasing the wealth of white Americans, and leaving minorities economically and socially immobile. Some policies included the Social Security Act of 1935, which enabled several states to deliver more adequate assistance to the elderly, those with disabilities, and dependent children. The act also provided maternal and child welfare, public health, and the administration of unemployment compensation laws, but it intentionally excluded farmers and domestic workers from its provisions with the purpose of denying aid to African Americans who commonly held those positions. The GI Bill of 1944 is also on this list. This piece of legislation offered college tuition and low-interest home loans to millions of veterans after WWII. The bill is praised for expanding the middle class. However, the majority of the African Americans who returned from the war were denied the benefits offered in this bill. Not only were they denied the free education and affordable housing, but white only suburbs were created, and white flight began in the cities. Meanwhile, the Federal Housing Administration started the practice of redlining which prohibited banks from offering mortgages and other financial services based on race. This prevented communities of color from purchasing and selling their homes, and starting businesses. As a result, certain minority communities went into economic decline.

When addressing the wealth and income gap between various racial groups, it is important to look at the policies that have caused damage to communities of color and evaluate what new policies and programs can be enacted in order to repair them. The effects of past policies, especially those related to housing still exist, and not just symbolically or as relics of the past. Certainly the racial demographics of today’s neighborhoods and the amount of wealth one’s family has accumulated over generations has been heavily influenced by past legislative decisions however, discriminatory policies still exist today. Stay tuned for another blog post or two on this topic, looking at current day discriminatory policies as well as policy solutions to address the racial wealth gap.

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