The racial wealth gap in America may just be the most astonishing statistic on this entire website. The latest Federal Reserve Survey of Consumer Finances found an enormous racial wealth gap. In 2022, the median white family had $285,010 in wealth, compared with just $44,890 for the median black family and $61,620 for the median Hispanic family. That is a $240,120 gap between the typical white and black families. Really think about what that means: For every $100 in wealth held by the median white family, the median black family held about $16.
The disparities are even more stunning when looking at averages: mean net worth was $1.37 million for white families, compared with $211,450 for black families and $227,490 for Hispanic families.
Wealth is defined as the total value of everything a family owns – things like homes, cars, cash, retirement/savings accounts, and stock and bonds – and is the best measure of a family’s overall financial health because it determines their financial security. After all, even if someone has a fabulous, high-paying job today, they could lose that job tomorrow. Wealth, on the other hand, provides a financial buffer not only if someone loses their job, but also in the case of an economic downturn like the 2007-2009 Financial Crisis or the economic disruption of something like the pandemic.
Wealth also provides the opportunity for the creation of even more wealth, like the ability to start a new business venture, and it also allows families to finance their children’s education, prepare a nest egg for their retirement years, and often allows parents to leave their kids an inheritance – which passes wealth on to the next generation, where the cycle can continue. This is how wealth builds over time. Obviously, a well-paying job is helpful in building wealth because it allows people to save and/or invest, and healthy financial markets don’t hurt either. But more than anything else, homeownership is the most common way people build wealth.
And herein lies the problem.
A report from the National Association of Realtors showed that “over the last decade, the median-priced home has become worth about $190,000 more. As a result, the net worth of a typical homeowner is about 40 times the net worth of a renter.” However, “across racial/ethnic groups, the black homeownership rate continues to be well behind the rate of any other group. At the end of 2022, the homeownership rate for black Americans was 44.9 percent compared to 74.5 percent for white Americans…. the black homeownership rate hasn’t kept pace with increases in the other racial/ ethnic groups, making the gap even larger between white and black homeownership rates.”
Although housing is just one of many issues we need to address to close the racial wealth gap, it’s an excellent example of how the staggering inequality that exists in this country didn’t just miraculously happen out of the blue.
Take, for example, redlining – the discriminatory practice in the 1930s where the government and lenders mapped and denied mortgages in minority neighborhoods, primarily affecting black communities. Make no mistake, redlining cut far deeper than black people just not getting to own a house over ninety years ago. In truth, redlining was one of the very first bricks in the wall that makes it difficult for many black Americans to fully participate in American capitalism to this day.
Here's what happened: Beginning in the 1930s, as part of President Franklin Roosevelt’s New Deal, the Federal Housing Administration (FHA) created loan programs that lowered down payment requirements and extended the term of home loans from 5 to 30 years – all to make home ownership accessible to more Americans.
That sounds like a nice thing to do! Well, not so fast. To help banks decide who should get loans, the government-run Home Owners’ Loan Corporation created a system for appraising neighborhoods, a practice now commonly referred to as “redlining.” Essentially, the U.S. government created color-coded maps, assigning green for “good” neighborhoods and red for “bad” neighborhoods (literally drawing red lines around what they considered “bad” neighborhoods, hence the name).
Pretty much across the board, neighborhoods considered to be “black” were given the worst grade (D) and the classification of red, which deemed them “hazardous” places to underwrite mortgages. The official explanation given for this was that “colored infiltration” was “a definite adverse influence on neighborhood desirability.” Predictably, since people couldn’t get financing for homes in these neighborhoods, they declined quickly and substantially as businesses left, segregation and discrimination deepened, and predatory lending and slumlords thrived.
As a result, in large cities, black Americans were now confined almost exclusively to the “inner city” – where housing developments were often the only housing option – and soon freeways bypassed them altogether. Black Americans in rural areas fared no better as they were now relegated to the “wrong” side of town, or tracks as it were. The very (very) few black Americans who did obtain financing saw their property values plummet as most white Americans refused to buy in what was now firmly labeled “black” neighborhoods.
Redlining was devastating for black Americans. Between 1934 and 1962, the federal government backed $120 billion worth of home loans. Over 98 percent of the loans went to white people.
There were plenty of other bricks that helped build that wall, like the carnage that happened in the Greenwood district of Tulsa, Oklahoma – often called the “Black Wall Street” – on May 31, 1921. That fateful day, a white mob not only attacked black people and their homes, but also their businesses.
A report by the Oklahoma Commission to Study the Tulsa Race Riot of 1921 describes it this way: “As the whites moved north, they set fire to practically every building in the African American community, including a dozen churches, five hotels, 31 restaurants, four drug stores, eight doctor’s offices, more than two dozen grocery stores, and the black public library. By the time the violence ended, the city had been placed under martial law, thousands of Tulsans were being held under armed guard, and the state’s second-largest African American community had been burned to the ground.”
These types of atrocities started well before Tulsa. On September 22-24, 1906, during the Atlanta Race Riot of 1906, white mobs murdered numerous black men and women and destroyed many of their businesses. In the years leading to the riot, the black population had become increasingly educated and successful, building strong networks and communities along with thriving, competitive businesses. This shift in dynamics threatened many in the white elite class in Atlanta, and they responded by expanding Jim Crow segregation laws, which only served to heighten tensions even more.
The death and destruction in Atlanta in 1906 led W.E.B. Du Bois – a sociologist, historian and civil rights activist – to write his haunting A Litany of Atlanta:
A city lay in travail, God our Lord, and from her loins sprang twin Murder and Black Hate. Red was the midnight; clang, crack and cry of death and fury filled the air and trembled underneath the stars when church spires pointed silently to Thee. And all this was to sate the greed of greedy men who hide behind the veil of vengeance! Bewildered we are, and passion-tost, mad with the madness of a mobbed and mocked and murdered people.
In the East St. Louis Race War of 1917, a white mob brutally murdered black men and women when white workers at the Aluminum Ore Company went on strike and black workers were hired to replace them. Dhati Kennedy, the founder of the Committee for Historical Truth, told Smithsonian Magazine the story of his father, who lived through the massacre:
We spent a lifetime as children hearing these stories. It was clear to me my father was suffering from some form of what they call PTSD. He witnessed horrible things: people’s houses being set ablaze, people being shot when they tried to flee, some trying to swim to the other side of the Mississippi while being shot at by white mobs with rifles, others being dragged out of street cars and beaten and hanged from streetlamps.
Thousands of blacks were streaming across that bridge when what they called the ‘race war’ got into full swing. When that happened, the police shut down the bridge, and no one could escape. Some, in desperation, tried to swim and drowned.
Carlos F. Hurd, a reporter, wrote a first-hand account of the mayhem in the St. Louis Post-Dispatch: “The East St. Louis affair, as I saw it, was a man hunt, conducted on a sporting basis, though with anything but the fair play which is the principle of sport. There was a horribly cool deliberateness and a spirit of fun about it. ‘Get a n*****’ was the slogan, and it was varied by the recurrent cry, ‘Get another!’”
Another journalist, Hugh L. Wood, wrote in the St. Louis Republic:
A Negro weighing 300 pounds came out of the burning line of dwellings just north and east of the Southern fright home. ‘Get him!’ they cried. So, a man in the crowd clubbed his revolver and struck the Negro in the face with it. Another dashed an iron bolt between the Negro’s eyes. Still another stood near and battered him with a rock. Then the giant Negro tumbled to the ground. A girl stepped up and struck the bleeding man with her foot. The blood spurted onto her stockings and men laughed and grunted.
Unsurprisingly, in most all these instances, the victims were unable to recover and rebuild. The consequences of these unthinkable tragedies extend far beyond death, destruction, and property damage. These events literally smashed and burned the prosperity that black men and women had – against all odds and with zero advantages – worked so hard to build.
… and they also ignited the ultimate Butterfly Effect.
Over 160 years ago, an entire community of Americans was, as abolitionist and our personal hero Frederick Douglass described, turned loose from slavery into “destitution” the likes the world had never seen:
“The old roof was pulled down over their heads, before they could make for themselves a shelter. They were free; free to hunger, free to the winds and rains of heaven; free to the pitiless wrath of the enraged master’s hand. They were without roofs to cover them, or bread to eat, or land to cultivate…we gave them freedom and famine at the same time.”
Then, to add insult to injury, they were – for decades – robbed of the chance to generate wealth through opportunities like building businesses and homeownership.
….which led to some Americans in later generations being born out of the financial mainstream, making them “credit invisible” ….which prevented them from building credit and, as an extension, wealth ….which forced many of them into the predatory side of our dual credit market, saddling them with extremely expensive, unsafe money (i.e., predatory subprime loans, payday loans, illegal land contracts, etc.) ….which caused them to get stuck in a debt catch-22 that created chronic indebtedness ….which likely led to other long-term consequences like wage garnishment and restricted access to insurance, employment, housing and utilities.
But it doesn’t stop there. Pile on all the other bricks that life has handed some of these Americans along the way – inadequate education and health care, low or no employment, episodic poverty, and so much more – and that impermeable wall quickly becomes insurmountable.
When you look at it this way, it’s undeniable that the staggering inequity that exists in this country in practically every category didn’t just miraculously happen. From the jump, bad decisions by politicians – made both intentionally and unintentionally – ignited, fueled and perpetuated pervasive, deep-rooted division and inequality.
Debating whether this is true is a waste of time because numbers don’t lie. All one has to do is read the astonishingly unequal statistics scattered throughout this website – in everything from wealth to incomes to education to criminal justice – to know that these inequities not only exist, but they are not healing on their own.
