Donald Trump attracted attention for seeming to suggest in the second presidential debate with Hillary Clinton that African Americans and “inner cities” are synonymous. In truth, more African Americans now live in suburbs than in urban ghettos, about 23% of young African Americans are now college graduates, and about a third of all African Americans are middle class or higher, with incomes above the median US household income.
Yet middle-class African Americans continue to suffer discrimination. The wage of a typical black college graduate is only 81% that of a white college graduate: an average of $26 an hour for African Americans, versus $32 for whites. The gap is even greater for those with advanced degrees—84%. The old adage that African Americans have to be twice as good to succeed still seems to apply in 2016.
This is particularly true when it comes to housing discrimination. Several lawsuits have established that prior to the housing bubble collapse in 2008, major financial institutions—such as Bank of America and Wells Fargo—discriminatorily offered African-American homeowners sub-prime refinance loans with exploding interest rates and prohibitive pre-payment penalties, even when these homeowners qualified for conventional loans with low rates and no penalties. An epidemic of foreclosures in middle-class African-American neighborhoods followed, forcing some residents back into apartments after having lost their lifetime savings when their home equity disappeared.
Before the Great Recession, half of all African Americans owned their own homes. By 2013, it had fallen to 44%. Before the Great Recession, the net worth of African-American homeowners averaged $144,000. By 2013, it had fallen to $80,000. This was not a natural calamity that befell the black middle class but one precipitated in part by unlawful banking and governmental practices that have mostly gone unremedied.
Since many policymakers appear to overlook the existence of a black middle class, it’s not surprising that there is a dearth of proposed solutions to its problems. So I’ll offer one that any leader can and should adopt: take steps to remedy the unlawful predatory lending, and the subsequent foreclosures and evictions, that have diminished the wealth and security of middle-class African Americans.
During the Great Recession, homes in African-American neighborhoods lost more value than homes in white neighborhoods. In the more recent housing price recovery, homes in African-American neighborhoods recovered their value at a lower rate than homes in otherwise similar white neighborhoods. These trends are partly attributable to unlawful predatory lending in black neighborhoods prior to 2008; properties in neighborhoods with more boarded-up, foreclosed homes will have less value than properties in otherwise identical neighborhoods with fewer foreclosures.
Property tax rates are established in American communities when a city, county, school district, or other jurisdiction adopts a budget and then divides it by the jurisdiction’s total assessed home values. A home’s assessed value need not be its actual market value, but in a fair and non-discriminatory system, all properties must have assessed values that are the same percentage of market values. An assessed value that is a uniformly higher share of market value will result in a lower tax rate, and an assessed value that is a uniformly lower share of market value will result in a higher tax rate, but the tax paid will be the same in each case: A higher assessed value multiplied by a lower rate yields the same tax owed as a lower assessed value multiplied by a higher rate.
By law in most states, properties must be regularly re-assessed. But in many urban areas, assessors have fallen way behind. Because African-American properties have lost more value than white properties, their assessed values are a greater (in some cases much greater) share of market values than assessed values of white properties. Since people of all racial backgrounds have the same property tax rate in any jurisdiction, African Americans pay excessive tax amounts because their assessed values bear a higher ratio to their market values than do the assessed values of homes in non-black neighborhoods. The failure, therefore, to keep assessments up to date violates the 1968 Civil Rights Act (the Fair Housing Act).
The next attorney general should file suit against cities and counties that have failed to keep assessed values in equal proportion to market values. The Justice Department should compel these jurisdictions to refund excessive property taxes paid, mostly by African American (and in some places, also Latino) homeowners. Where local governments seized properties and evicted homeowners for failure to pay exorbitant property-tax assessments, additional remedies should also be pursued. Restoring the security of the African-American middle class should be a priority for the incoming administration.
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