Economic policy

Farewell to ‘Racial Neutrality’ – The Case for Race-Sensitive Economic Policy – Non Profit News

This article was co-produced and co-published with the National Coalition for Community Reinvestment.


Perhaps the most important lesson that the last 50 years should have taught us is this: we cannot solve discrimination in housing through an anti-discrimination framework. Race- and class-conscious measures are needed to get to the root of the problems inherent in American inequality.

Fred McGhee, Refuge Strength

Making a meaningful dent in the level of structural racial economic inequality in this country requires changes throughout the American financial system – in our financial regulations, within our financial institutions, and in the loans and investments made by financial institutions. Many of the required changes have been named and identified; it is now up to advocates to build consensus and political power to drive change forward.

The asset poverty of African Americans, Latinx and Native Americans is reinforced in our current funding system. This racialized heritage poverty stems from the theft of Native American lands and the enslavement of Africans, reinforced by centuries of racist politics and resource distribution.

In the wake of the civil rights movement, the Community Reinvestment Act (CRA) was enacted. It was one of many important pieces of legislation passed from the late 1960s to the early 1970s to address racial economic inequality. The CRA was meant to bolster the Fair Housing Act of 1968, the law McGhee was writing about, which was designed to combat housing discrimination and, in turn, advance black homeownership. The Fair Housing Act was passed only after a massive series of black urban rebellions, ranging from the Watts Uprising in 1965 to the hundreds following the assassination of Dr. Martin Luther King Jr.

Advocates of the Community Reinvestment Act aimed to do more than just prevent discriminatory lending practices. ARC explicitly encourages investment in all communities, targeting low- and middle-income neighborhoods. However, it has failed to address racial economic inequality in name and with little impact on minority homeownership. It is a problem. Black homeownership rates have not changed significantly since the CRA was passed in 1977.

Why would a race-conscious approach make a difference? As a housing advocate Stella Adams wrote more than a decade ago, “The explicit inclusion of race in the ARC offers us the opportunity to correct these government and market failures, and would allow us to do more than just reduce the concentration of poverty and spatial isolation in colored neighborhoods. This would allow us to create opportunities for building real transgenerational wealth for minority families…”.

What would a race-conscious policy look like?

The National Community Reinvestment Coalition (NCRC), an organization founded to advance the goals of the CRA, advocates amending this law to include explicit race-conscious goals that better address racial economic inequality. NRC recently partnered with Relman Colfax produce an article, “Added strict consideration of race to Community Reinvestment Act regulationswhich outlined reforms that would place greater emphasis on addressing racial economic inequality.

What does a race-conscious approach require? Part of what is needed is tracking demographics and lending to people and neighborhoods of color. It requires demographic thresholds in subtests of ARC assessments, including retail lending, retail services, community development funding, and community development services.

The paper called for the creation of full-time research positions dedicated to studying the racial components of different bank performance contexts, modeled on work done by the Federal Reserve Bank of San Francisco. Additionally, when selecting assessment areas for ARC review, racial inclusion should be a factor to ensure that minority areas are not excluded from assessment areas. Finally, banks should be required to work with organizations serving neighborhoods of color and organizations led by people of color when developing a strategic plan for the Community Reinvestment Act.

These recommendations come as the NCRC reveals how current financial practices maintain racial inequality rather than address it. Data from the Home Mortgage Disclosure Act (HMDA) shows that Whites are the only major racial/ethnic category represented in mortgage lending levels above their demographic representation. In 2020, whites were responsible for 65% of all mortgages, but only 60% of the population. Black and Latinx shares of the home loan market — 5.2% and 9.2%, respectively — are less than half their population shares of 14% and 19%. The representation of Native Americans in the mortgage market is even worse. The mortgage representation of Native Americans at just 0.4% is only a quarter of their 1.6% share of the US population.

Latinx, African Americans and Native Americans are even worse off than previously stated if there were no federally backed mortgages like Federal Housing Administration (FHA), veterans affairs (VA), and Rural Housing Service (RHS) loans. Nearly 60% of black home purchase requests go through these government programs, and for Latinxs, it’s about 50%. Even with government-backed loans, the private mortgage market maintains the disparities in homeownership that are at the center of America’s racial divide.

The depth and breadth of racial economic inequality is perceived in a data point array. In 2019, median black wealth, not including impaired assets, was $9,000, and median Latinx wealth was $14,000, compared to median white wealth of $160,000. In terms of incomes in 2018, we also see a substantial disparity with the median income of African Americans at $41,000, Native Americans at $42,000, Latinx at $51,000, Whites at $71,000, and American Indians at $71,000. of Asian origin at $87,000. Black homeownership rates are at a low 42%, with Latinxes at 47.5%, while at the same time, whites have record homeownership rates of nearly 73% . In 1977—that’s when the CRA was passed—a paper published by the Federal Reserve Bank of Chicago notes that the black homeownership rate was 43.3%, while the white homeownership rate was 67.5% – in short, the gap widened, not Shrunk.

How can we get there?

Today’s racial economic inequality stems from historical discrimination, exploitation and the concentration of wealth. The foundation of racial inequality is racial economic inequality, and the foundation of racial economic inequality is the racial wealth divide. Over the past 40 years, the nation has failed to make sufficient progress in addressing racial economic disparities.

The pillars of the fight against economic discrimination must be transformed by legislation that economically advances communities with a history and current reality of economic marginalization. A race-blind approach to addressing racial economic inequality has left the nation shackled in public policy efforts to undo ongoing structural racism. It is high time we openly used a racial equity lens to close racial economic inequalities.