Rethinking The Affordable Housing Crisis, Part 3
Homes in Chicago's Bronzeville neighborhood on Chicago's South Side. Source: The City of Neighborhoods Project
Back in 2018, I attended and participated in an event called “Tools Toward Market Restoration”, hosted by the Federal Reserve Bank of Chicago. The event was held in Detroit. At the event I got a chance to meet Richard Rothstein, author of The Color of Law: A Forgotten History of How Our Government Segregated America, a fantastic book about government-sponsored segregation in America. The book garnered quite a bit of attention at the time for reintroducing the phrase “redlining” to the public, but truly explored all of the segregation tactics (racial covenants, public housing policy, urban renewal, Interstate highway development, white flight, blockbusting, and mob violence, among others) utilized in this country. It’s a wonderful book that blows up the myth of any distinction between de jure and de facto segregation – each type feeds the other.
Following Rothstein’s presentation I remember asking him if he thought cities that were deeply segregated like Detroit had suffered most acutely from segregationist policies and actions. When he said no, the nation’s been impacted equally, I disagreed. My thinking was that certainly places that were on the front line of divisive policies, such as mid-century manufacturing centers like Detroit, bore the brunt. Intuitively, I reasoned that segregation was an exercise in property depreciation for some, but property appreciation for others.
Turns out that we were both right. Cities like Detroit did suffer far more from deep segregation as the nationwide decline in manufacturing took hold in the 1970’s and beyond. But all cities suffered because all levels of government, the real estate industry and homebuyers and renters all employed the same practices to maximize value. And all of us are paying for it as a result.
In the last entry into this series, I wrote about Yonah Freemark’s study of upzoning's impact on Chicago property values from a few years ago. He found that the act of upzoning and any resulting new housing construction could produce a short-term boost in property values, rather than a decline, because property owners see an opportunity to recoup their investment. There’s even a name for it – housing exuberance.
But if we want to place blame on NIMBYism (Not-In-My-Back-Yard) for today’s affordable housing crisis, I suggest starting with studying the OG of NIMBYism causes, Black/White segregation in American cities.
How NIMBYism became learned behavior
Brookings Institution Senior Fellow Andre Perry has done exactly that. Perry has written extensively about the devaluation of homes in majority Black neighborhoods across the country. In a study he conducted in 2018, Perry found that home values in neighborhoods with a Black population of 50 percent or more were valued at 50 percent less than homes with few or no Black residents. When adjusted for homes of similar quality and amenities, Perry found that homes are still worth 23 percent less in majority Black neighborhoods, or about $48,000 per home on average, when compared to neighborhoods with few or no Black residents.
When Perry’s study was published, he estimated that the cumulative loss of wealth to Black homeowners was about $156 billion. Perry noted that the study found “a positive and statistically significant correlation between the devaluation of homes in Black neighborhoods and upward mobility of Black children in metropolitan areas with majority Black neighborhoods.”
I looked at the data by large metro areas in Perry’s report to get a sense of the devaluation phenomenon. Let’s start with this map from his report:
A few things stand out. First, Black home devaluation seems to be strongest in Midwest metro areas, followed by those in the South. Northeastern metro areas seem to be mildly impacted, while metros west of Texas are largely invisible (this is due to the paucity of majority Black neighborhoods in Western metro areas in the data, a point I’ll address further later).
I also wanted to see how the 56 metros with more than 1 million inhabitants fared in this analysis. Here, the data tells a deeper story:
Among large metro areas, housing values in majority Black neighborhoods were on average worth 20 percent less than in neighborhoods with few or no Black residents. Only four metros had a positive or neutral showing (Boston, Nashville, Tampa/St. Petersburg and Oklahoma City). A staggering 37 of the 56 metros showed a negative valuation of homes in majority Black neighborhoods compared to neighborhoods with few or no Black residents, ranging from -2.9% in Hartford, CT to -65.0% in Rochester, NY. Fifteen large metros had no data because they had no majority Black neighborhoods.
Last, I wanted to see how metro areas compared with each other on a regional basis. See this table:
The largest devaluation percentage differential was in the Midwest, at -27.5%, and the lowest was -9.0% in the Northeast (I put Washington and Baltimore in the Northeast, and Buffalo and Rochester in the Midwest; the switches make better cultural and economic fits for all). The largest price differential was -$80,716 in the West, and the lowest was -$17,184 in the Northeast. Southern metros had the second largest percentage differential (-19.8%) and the second largest price differential (-$27,298), putting them very near Midwestern levels.
Getting back to the earlier point made about the paucity of majority Black neighborhoods in Western metros. Only three of 15 large Western metros (Las Vegas, Los Angeles, and San Francisco) were represented in the data, which compared majority Black neighborhoods (presumably census tracts) with other neighborhoods.
I’m left to conclude that many large Western metros have no majority Black census tracts (none in Seattle? Denver? Phoenix? San Diego?). Meanwhile, Western metro residents frustrated with the high housing prices they experience as well as with the analysis I’m presenting might be asking a question – if Black housing devaluation props up housing prices elsewhere within metros, but it’s not driven by majority Black neighborhoods being present in my metro area, then what’s causing it? It’s pretty simple to me. In the West, and lesser extent the Northeast, rising populations and/or rising incomes are pushing housing values upward, not devaluation policies.
Well, that and the fact that lots of Midwesterners might have brought along many of the segregationist tactics they practiced with them as they moved west, and called it NIMBYism.
Why does this matter?
I willingly admit that my experience as an urbanist is shaped by living my entire life in a region of the country that’s been nearly static for a half century. The region has seen its share of change this century, but not like other regions. It’s not called the Rust Belt for nothing. The Midwest’s population increased by only 7.1% from 2000-2020, compared to the nation’s overall increase of 17.8%. The South (up 26.0% from 2000-2020) and the West (up 24.4%) drove the nation’s population gains; the Northeast (up 7.5%) was on par with the Midwest. In the Chicago metro area, where I live, population was up only 5.7%.
That’s led me to seek other explanations besides simple supply and demand to figure out why the nation has the housing affordability crisis it has. As I showed in part 2 of this series, despite being a slow-growth metro area, Chicago has its share of high-priced areas. Yet, just as you would expect from a slow-growth metro area, it has concentrations of low-priced areas. And I maintain that exuberance plays a role in all areas, fast or slow-growth.
But a changing global economy and tepid population growth did not stop Midwestern homeowners from finding ways to preserve their property values. They circled the wagons, established enclaves of affluence where they could (city and suburbs), and profited.
This should not be concern simply for Black homeowners, or for that matter, all Black people. This should be a concern to all people interested in housing in America. Why? Because this is not a wealth loss to Black households as much as a wealth transfer to everyone else. Home values that are artificially low in some parts of a metro area essentially guarantee that home values can remain high in others.
Or, as I’ve noted many times before, there is no isolation without insulation.