Michael Neal on the history of housing discrimination

Neal explains what inequality within housing means for today’s borrowers

This HousingWire Daily podcast transcription features the first episode of Honest Conversations, a new miniseries that examines the state of minority homeownership. In this episode, Michael Neal, a senior research associate in the Housing Finance Policy Center at the Urban Institute discusses the history and data behind minority homeownership and housing discrimination.

During the episode, Neal explains how housing inequality came to be and what it means for today’s borrowers.

Listen to the full episode here or below and make sure to subscribe to the podcast on iTunes.

Below is the transcription of the interview. These transcriptions, powered by Speechpad, have been lightly edited and may contain small errors from reproduction:

Alcynna Lloyd: Hello, listeners. Welcome to “Honest Conversations,” the show that examines the state of minority homeownership in America. I’m your host, Alcynna Lloyd, and this is “Honest Conversations.” If you ever wanted to know the data and history behind housing, well, you probably want to hear this interview. It’s all about how housing discrimination came to be and what it means for today’s borrowers. My guest, Michael Neal, is a senior research associate with the Urban Institute. And today, we’ll have an honest conversation on housing. Michael Neil, welcome to our show.

Michael Neal: Thank you. Thank you. It’s good to be here.

Alcynna Lloyd: Of course. Thank you. Michael, let’s take it way back and discuss the history of housing discrimination in America. To frame the question, let’s start with the 1940s, which is credited with the rise of the modern American suburb. During this time and the decades following World War II, American businesses were thriving, unionization peaked, and wages climbed, therefore stimulating economic growth and introducing a new consumer economy. The economy was doing so well.

The government enacted the Readjustment Act in 1944, also known as the GI Bill, which offered Americans many things like low-interest home loans, a college stipend, loans to start a business, and unemployment benefits. Michael, what was this time like for the average American family?

Michael Neal: You know, I think the trajectory was certainly moving forward. I mean, you know, we had just exited World War II, the Great Depression was still in the rearview mirror. But on the other hand, the United States, by and large, was the only game in town. A lot of the other previous powers had really been decimated by the war in a way in which the United States was not. And I think that there was a general opportunity, and particularly for those that had served their country, to be given the chance to build their life, having given a number of years in service to America.

In that kind of ethos, so to speak, the legislation that you mentioned was passed in large part to support that process. And I think you saw that. At a macro level, you saw very strong economic growth. You saw a recovery in terms of population growth, as people were getting married and having children. We know that fertility rates were quite high during this period. But we also know that people were getting a college education. Manufacturing was growing, wages were growing, as you mentioned, and access to homeownership was expanding. And all of that, I think, led to…all of that combined with innovations that were taking place really led to, I think, the beginnings of a recovery from what was a fairly tumultuous period, at least in the aggregate.

Alcynna Lloyd: Now I want to focus on what many Americans believe was the first modern American suburban community, Levittown, which was built in the late 1940s in Long Island, New York, by William Levitt.

Matthew Blake: In 1947, real estate developer Abraham Levitt and his two sons, William and Alfred, broke ground on a planned community located in Nassau County, Long Island. The former farmland was transformed into a suburban community, Levittown, that was quickly rented out to thousands of men, many veterans returning from World War II.

Following the success of the mass-produced, well-manicured Levittown, the Levitts created similar communities in New Jersey and Pennsylvania, in turn, establishing the American suburb. These initial suburban communities were clean, cost-effective, and popular. They also were explicitly racist, practicing housing discrimination. Each renter had to sign a lease agreement that the house cannot “be used or occupied by any person other than members of the Caucasian race.”

Alcynna Lloyd: Michael, how did new economic structures in suburban spaces of the post-war period influence housing inequality and affluence?

Michael Neal: Now, that, I think is kind of…it’s a question I think we’ve been grappling with then, and what we are really grappling with today, but to not get ahead of all of this. You know, I think that, number one, in aggregate, I think things were moving upward for sure. That being said, though, you know, the devil is in the details. And what we really observed was that a certain category of people were able to take advantage of these opportunities and use them for their good. And others were actively and consciously excluded from them.

And so, additional housing in the suburbs certainly allowed particularly white Americans to access the credit and to access the opportunities to move into those neighborhoods. And over a period of time, to experience the benefits or the financial benefits, at least, in the form of price appreciation and broader equity. But I think that there was a certain group of people who were…particularly people of color, who by and large did serve their country also, who were actively and consciously excluded from these opportunities and were not allowed into these new-fangled suburban communities. And by and large, they were, therefore, not able to benefit due to housing discrimination, at least to the same degree.

Alcynna Lloyd: All right. So, it’s interesting that you brought that up. Because in the 1950s, when many middle- and lower-class white Americans were moving to suburbs with the help of the government through spending programs like the FHA and the GI Bill, data shows many African Americans and other racial minorities were systematically shut out. What were some of the laws or rules that prevented them from accessing equal housing?

Michael Neal: Yeah. Really, you know, redlining is one that really comes to mind, and the covenants, and the rules that were put into those covenants that kept people of color from achieving homeownership in those particular communities. Laws such as redlining that kept people from getting a mortgage, and therefore not being able to access homeownership.

So we’ve really described two steps. We’ve described rules that kept you from achieving homeownership. But then we’ve described, given that you weren’t able to achieve homeownership, you were not able to access it in the places that could give you the maximum amount of benefit. Over time, that’s going to build on itself and lead to, I believe, a portion of the gaps that we see today with respect to homeownership, and with respect to wealth more generally.

Alcynna Lloyd: So history shows, as we examine relationships between federal organizations like the HLC, FHA, and private banks, lenders, and real estate agents, there’s a story of standardized policies that have promoted segregation and housing discrimination in the market. Michael, how has it impacted the legacy of housing for people of color in America today?

Michael Neal: Yeah, you know, I think that’s such a key question because of where we are. That is, by and large, why we saw a bit of an improvement in the homeownership rate for African Americans in the few years leading up to the current pandemic. The gap between African Americans and white Americans with respect to homeownership, remained as wide as it was back in the days in which we were talking about in spite of a lot of the policy action that has been taken to try to eradicate it.

I think that that is very important, number one, because homeownership has very important implications for family outcomes. And not just wealth, not just in terms of housing equity, but also in terms of household stability, development of the community in which you live, as well as political clout. We know that homeowners in a particular community tend to have a stronger say and tend to be much more involved in the local politics than, say, renters. So all of that I think has combined and really puts homeownership into a very key light.

Alcynna Lloyd: All right. Thank you for answering that. And as we wrap up today, I’d like to end with one of my favorite parts of the interview. I like to ask each “Honest Conversation” guest the same two questions. What is your biggest area of concern for minority homeownership? And what can the industry do today to address this gap?

Michael Neal: Yeah. You know, for me, I think that the biggest concern that I have is that African Americans and Hispanics, in particular, are not experiencing the benefits of homeownership to the degree that their white counterparts are. That is, even if we were somehow to close the gap in homeownership, the gap with respect to the financial benefits of homeownership remains wide for a number of reasons. Part of which I think are rooted in a history of systemic racism and housing discrimination. Part of which are the economics that currently prevail.

So I encourage both myself in my own research and my own analysis, but also for the industry more generally, that it’s not just enough to get African Americans into homeownership and Hispanics into homeownership, we must also take the extra steps and implement the necessary policies to ensure that these new homeowners actually benefit to the same degree as the other Americans are able to.

Alcynna Lloyd: Thank you so much for joining us today, Michael.

Michael Neal: Thank you.

Alcynna Lloyd: Of course. Join us next Wednesday for some more “Honest Conversations.”

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