(social justice & wealth gap)
It's time to get down to the of the matter, cont'd
Researchers have found that “the increasing intensity, duration, and frequency of heat waves due to human-caused climate change puts historically underserved populations in a heightened state of precarity, as studies observe that vulnerable communities — especially those within urban areas in the United States — are disproportionately exposed to extreme heat...The results of the study reveal that “94 percent of studied areas display consistent city-scale patterns of elevated land surface temperatures in formerly redlined areas relative to their non-redlined neighbors by as much as 7 °C.” The researchers conclude that: “Historical housing policies may, in fact, be directly responsible for disproportionate exposure to current heat events.”
According to the U.S. Department of Justice itself, “One of the central objectives of the Fair Housing Act, when Congress enacted it in 1968, was to prohibit race discrimination in sales and rentals of housing. Nevertheless, more than 30 years later, race discrimination in housing continues to be a problem. The majority of the Justice Department’s pattern or practice cases involve claims of race discrimination. Sometimes, housing providers try to disguise their discrimination by giving false information about availability of housing, either saying that nothing was available or steering home-seekers to certain areas based on race. Individuals who receive such false information or misdirection may have no knowledge that they have been victims of discrimination.
The Department of Justice has brought many cases alleging this kind of discrimination based on race or color. In addition, the Department’s Fair Housing Testing Program seeks to uncover this kind of hidden discrimination and hold those responsible accountable. Most of the mortgage lending cases brought by the Department under the Fair Housing Act and Equal Credit Opportunity Act have alleged discrimination based on race or color. Some of the Department’s cases have also alleged that municipalities and other local government entities violated the Fair Housing Act when they denied permits or zoning changes for housing developments, or relegated them to predominantly minority neighborhoods, because the prospective residents were expected to be predominantly African Americans.”
The latest Department of Housing and Urban Development (HUD) discrimination study says this: “For much of the twentieth century, discrimination by private real estate agents and rental property owners helped establish and sustain stark patterns of housing and neighborhood inequality...Minority renters are told about and shown fewer homes and apartments than equally qualified Whites.
Black renters who contact agents about recently advertised housing units learn about 11.4 percent fewer available units than equally qualified whites and are shown 4.2 percent fewer units; Hispanic renters learn about 12.5 percent fewer available units than equally qualified whites and are shown 7.5 percent fewer units; and Asian renters learn about 9.8 percent fewer available units than equally qualified whites and are shown 6.6 percent fewer units.” HUD also says that “results reported probably understate the total level of discrimination that occurs in the marketplace.”
The Consumer Financial Protection Bureau (CFPB) released a Data Point that found “one in ten adults in the U.S., or about 26 million people, are ‘credit invisible.’ This means that 26 million consumers do not have a credit history with one of the nationwide credit reporting companies. An additional 19 million consumers have ‘unscorable’ credit files, which means that their file is thin and has an insufficient credit history (9.9 million) or they have stale files and lack any recent credit history (9.6 million).
In sum, there are 45 million consumers who may be denied access to credit because they do not have credit records that can be scored. Together, the unscorable and credit invisible consumers make up almost 20 percent of the entire U.S. adult population. Consumers who are credit invisible or unscorable generally do not have access to quality credit and may face a range of issues, from trying to obtain credit to leasing an apartment.”
A study from the National Fair Housing Alliance — a consortium of more than 200 private, non-profit fair housing organizations, state and local civil rights agencies, and individuals from throughout the United States — found that: “Our current credit-scoring systems have a disparate impact on people and communities of color. These systems are rooted in our long history of housing discrimination and the dual credit market that resulted from it. Moreover, many credit-scoring mechanisms include factors that do not just assess the risk characteristics of the borrower; they also reflect the riskiness of the environment in which a consumer is utilizing credit, as well as the riskiness of the types of products a consumer uses.”
The report concludes, “By 2042, the majority of people in this country will be people of color. Credit-scoring mechanisms are negatively affecting the largest growing segments of our country and economy. America cannot be successful if increasing numbers of our residents are isolated from the financial mainstream and are subjected to abusive and harmful lending practices. Credit scores have an increasing impact on our daily activities and determine everything from whether we can get a job, to whether we will be able to successfully own a home. The current credit-scoring systems work against the goal of moving qualified consumers into the financial mainstream because they are too much a reflection of our broken dual credit market. This paradigm must change.”
According to the Pew Charitable Trust, “Nearly 43 million U.S. households rented their homes in 2016 (the latest data available) including about 9 million households that were formed over the preceding decade, according to the Harvard Joint Center for Housing Studies. Demand for rental properties has increased across age and socio-economic groups since 2008. Recent research indicates that although some of those increases can be explained by population shifts, a significant portion is the result of declines in homeownership since the Great Recession.”
This imbalance is contributing to high rates of ‘rent burden,’ which we define here as spending 30 percent or more of pretax income on rent. Rent-burdened households have higher eviction rates, increased financial fragility, and wider use of social safety net programs, compared with other renters and homeowners. And as housing costs consume a growing share of household income, families must cut back in other areas.”
In 2015, 38 percent of all “renter households” were rent burdened, an increase of about 19 percent from 2001.
The share of renter households that were severely rent burdened — spending 50 percent or more of monthly income on rent — increased by 42 percent between 2001 and 2015, to 17 percent. Increasing rent burdens were driven in part by year-over-year growth in gross rent — contract price plus utilities — that far exceeded changes in pretax income, which means that after paying rent, many Americans have less money available for other needs than they did 20 years ago.
In 2015, 46 percent of African American-led renter households were rent burdened, compared with 34 percent of White households. Between 2001 and 2015, the gap between the share of White and African American households experiencing severe rent burden grew by 66 percent.
Senior-headed renter households are more likely than those headed by people in other age groups to be rent burdened. In 2015, about 50 percent of renter families headed by someone 65 or older were rent burdened, and more than a fifth were severely rent burdened.
Rent-burdened families are also financially insecure in many other ways:
1. Nearly two-thirds (64 percent) had less than $400 cash in the bank; most (84 percent) of such households are
African American-headed.
2. Half had less than $10 in savings across various liquid accounts, while half of homeowners had more than $7,000.
Fewer rent-burdened households transitioned from renting to owning in 2015 than in 2001. Households that were rent burdened for at least a year were less likely to buy a home than those that never experienced a rent burden.
The Pew Research Center released a report in January 2020 that addressed trends in income and wealth inequality. Here are key takeaways from the report:
Household incomes have grown only modestly in this century, and household wealth has not returned to its pre-recession level. Economic inequality, whether measured through the gaps in income or wealth between richer and poorer households, continues to widen.
The incomes of American households overall have trended up since 1970. But the overall trend masks two distinct episodes in the evolution of household incomes (the first lasting from 1970 to 2000 and the second from 2000 to 2018) and in how the gains were distributed. Most of the increase in household income was achieved in the period from 1970 to 2000. The shortfall in household income is attributable in part to two recessions since 2000. The first recession, lasting from March 2001 to November 2001, was relatively short-lived. Yet household incomes were slow to recover from the 2001 recession and it was not until 2007 that the median income was restored to about its level in 2000. But 2007 also marked the onset of the Great Recession, and that delivered another blow to household incomes. This time it took until 2015 for incomes to approach their pre-recession level. Indeed, the median household income in 2015 was no higher than its level in 2000, marking a 15-year period of stagnation, an episode of unprecedented duration in the past five decades.
The growth in income in recent decades has tilted to upper-income households. At the same time, the U.S. middle class, which once comprised the clear majority of Americans, is shrinking. Thus, a greater share of the nation’s aggregate income is now going to upper-income households and the share going to middle- and lower-income households is falling. The share of American adults who live in middle-income households has decreased from 61 percent in 1971 to 51 percent in 2019. This downsizing has proceeded slowly but surely since 1971, with each decade thereafter typically ending with a smaller share of adults living in middle-income households than at the beginning of the decade.
The period from the mid-1990s to the mid-2000s was beneficial for the wealth portfolios of American families overall. Housing prices more than doubled in this period, and stock values tripled. As a result, the median net worth of American families climbed from $94,700 in 1995 to $146,600 in 2007, a gain of 55 percent (figures are expressed in 2018 dollars). But the run up in housing prices proved to be a bubble that burst in 2006. Home prices plunged starting in 2006, triggering the Great Recession in 2007 and dragging stock prices into a steep fall as well. Consequently, the median net worth of families fell to $87,800 by 2013, a loss of 40 percent from the peak in 2007. As of 2016, the latest year for which data are available, the typical American family's net worth was still less than what it held in 1998.
The period from 1983 to 2001 was relatively prosperous for families in all income tiers, but one of rising inequality. The median wealth of middle-income families increased from $102,000 in 1983 to $144,600 in 2001, a gain of 42 percent. The net worth of lower-income families increased from $12,300 in 1983 to $20,600 in 2001, up 67 percent. Even so, the gains for both lower- and middle-income families were out-distanced by upper-income families, whose median wealth increased by 85 percent over the same period, from $344,100 in 1983 to $636,000 in 2001 (figures are expressed in 2018 dollars).
The wealth gap between upper-income and lower- and middle-income families has grown wider this century. Upper-income families were the only income tier able to build on their wealth from 2001 to 2016, adding 33 percent at the median. On the other hand, middle-income families saw their median net worth shrink by 20 percent and lower-income families experienced a loss of 45 percent. As of 2016, upper-income families had 7.4 times as much wealth as middle-income families and 75 times as much wealth as lower-income families. These ratios are up from 3.4 and 28 in 1983, respectively. The reason for this is that middle-income families are more dependent on home equity as a source of wealth than upper-income families, and the bursting of the housing bubble in 2006 had more of an impact on their net worth. Upper-income families, who derive a larger share of their wealth from financial market assets and business equity, were in a better position to benefit from a relatively quick recovery in the stock market once the recession ended.
On top of everything else, in an exhaustive study analyzing 118 million homes, researchers from Indiana University and the University of California, Berkeley found “widespread racial inequalities in the U.S. property tax burden.” The study found a “nationwide assessment gap which leads local governments to place a disproportionate fiscal burden on racial and ethnic minorities.” The researchers discovered “that holding jurisdictions and property tax rates fixed, Black and Hispanic residents nonetheless face a 10-13 percent higher tax burden for the same bundle of public services.”
“This assessment gap arises through two channels. First, property assessments are less sensitive to neighborhood attributes than market prices are. This generates racially correlated spatial variation in tax burden within jurisdiction. Second, appeals behavior and appeals outcomes differ by race.” Read the report here.
The Center for Municipal Fairness at the University of Chicago reviewed millions of sales records for properties across the nation and confirms that inequities in property assessments are both large and widespread: “Property taxes represent the single largest source of own-source revenue for America’s local governments. Cities, counties, school districts, and special districts raise roughly $500 billion per year in property taxes, roughly 70 percent of local taxes. Whether residents rent or own, property taxes impact everyone.”
“In many cities, however, property taxes are also inequitable: low-value properties face higher tax assessments, relative to their actual market values, than do high-value properties. This tax regressivity disproportionately burdens lower-income residents.”
Does all this even really matter? Yes. It matters a lot.
Harvard University and the National Bureau of Economic Research did a joint study: “The Moving to Opportunity (MTO) experiment offered randomly selected families living in high-poverty housing projects housing vouchers to move to lower-poverty neighborhoods. We find that moving to a lower-poverty neighborhood significantly improves college attendance rates and earnings for children who were young (below age 13) when their families moved. These children also live in better neighborhoods themselves as adults and are less likely to become single parents.
The treatment effects are substantial: children whose families take up an experimental voucher to move to a lower-poverty area when they are less than 13 years old have an annual income that is $3,477 (31 percent) higher on average relative to a mean of $11,270 in the control group in their mid-twenties.” Read the report here.
Even still, according to a study by the Center on Budget and Policy Priorities, “315,000 children in families using vouchers lived in extremely poor neighborhoods in 2017.”