How black homebuyers are hurt — by government policies and high crime

Black Americans would have been better off renting than buying a house is the headline of an Atlantic piece. The focus is near-term, on the comparative effects on wealth accumulation for blacks and whites who bought a house in the years just before the collapse of housing prices in 2007-08. Naturally, those with low or zero down payments were hurt worse: their equity went underwater — became negative — almost immediately. Those who made down payments of 20 percent or more were better off.

But the Atlantic piece misses two important larger points. The first is that the government and Fannie Mae/Freddie Mac policies of encouraging minority home ownership, pressed as hard by George W. Bush's administration as by Bill Clinton's, meant that many blacks obtained financing with low or no down payments. This was also true of Hispanics, and may have affected many more of them, because of the large number of low/no-down payment mortgages issued to Hispanics in states that had been experienced heavy immigrant growth and rapidly rising house prices — California, Nevada, Arizona, Florida. These were, not coincidentally, the states with the foreclosure rates in 2007-10. The larger point is that policies intended to help blacks and Hispanics were always at risk of hurting them, and did so.

The other larger point is just glancingly noted in the Atlantic piece, which says that one reason black homebuyers in the years just before 2007-08 fared worse than their white counterparts was "the prospects of the neighborhoods they are buying into" and "neighborhood location." I take this as gingerly shorthand for the very high likelihood that the neighborhoods where blacks were buying tended to have, on average, higher crime rates than those where whites were buying.

Crime rates tend to depress housing values, down toward zero — which is where they reached in very large parts of my native city of Detroit. Over the last half-century in America, crime has been a wealth confiscation tax on black people. Conscientious black Americans who saved up for down payments and paid their mortgage every month found that they had an asset that was worth very little — less than if they had put their savings in an interest-bearing account. This is one of the tragedies of our times, and the politicians who are seeking to undo the policies which vastly reduced crime rates are, I suppose unknowingly, threatening to impose this wealth confiscation tax again.

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