A House Divided: Why Do Middle-Class Blacks Have Far Less Wealth Than Whites at the Same Income Level? the Answer Is in Real Estate and History
Sugrue, Thomas J., The Washington Monthly
In 1973, my parents sold their modest house on Detroit's West Side to Roosevelt Smith, a Vietnam War veteran and an assembly-line worker at Ford, and his wife, Virginia (not their real names). For the Smiths--African Americans and native Mississippians--the neighborhood was an appealing place to raise their two young children, and the price was within their means: $17,500. The neighborhood's three-bedroom colonials and Tudors, mostly built between the mid-1920s and the late '40s, were well maintained, the streets quiet and lined with stately trees. Nearby was a movie theater, a good grocery store, a local department store, and a decent shopping district. Like many first-time home buyers, the Smiths had every reason to expect that their house would be an appreciating investment.
For their part, my parents moved to a rapidly growing suburb that would soon be incorporated as Farmington Hills. Their new house, on a quiet, curvilinear street, was a significant step up from the Detroit place. It had four bedrooms, a two-car attached garage, and a large yard. It cost them $43,000. Within a few years, they had added a family room and expanded the small rear patio. Their subdivision, like most in Farmington Hills, was carefully zoned. The public schools were modern and well funded, with substantial revenues from the town's mostly middle- and upper-middle-class taxpayers. All of the creature comforts of the good suburban life were close at hand: shopping malls, swim clubs, movie theaters, good restaurants.
My parents lived in the Farmington house for a little over twenty years. When my father retired in the mid-1990s, the property had appreciated by about $100,000. They did not get rich from the proceeds of their home sale--indeed, after adjusting for inflation, the house was worth slightly less than they paid for it, not even counting interest costs and taxes. But it nonetheless allowed them to walk away with about $80,000.
For the Smiths it was a far different story. Detroit had been losing population since the 1950s, and especially after the 1967 riots there was massive "white flight" from the city. The neighborhood in which the Smiths invested went from mostly white to black within a few years, along with the rest of Detroit. For the city as a whole, those who remained were not as well off on average as those who left, meaning that even as the tax base shrank, the demand for city services went up, setting off a vicious death spiral. Soon, schools and infrastructure groaned with age, and the city's tax base shrank further as businesses relocated to suburban office parks and shopping centers. By the end of the '70s, the decline of the auto industry and manufacturing generally compounded Detroit's woes, as production shifted to Japan or the South in search of cheaper labor and fewer regulations.
As the downward cycle continued, investors and absentee landlords--fearful that their property values would decline as Detroit got poorer and blacker--let their properties run down. Rising crime led to a drop in pedestrian traffic both downtown and in neighborhood shopping districts, and also to increasing demand for additional police protection. As the cost of city services surged and the tax base shrank, Detroit came to have among the highest property tax rates in the nation, which was another reason for people to move out if they could.
Meanwhile, places like Farmington Hills, which were all white in the '70s and '80s, were direct beneficiaries of Detroit's decline. The seemingly insatiable demand for suburban real estate raised housing values; well-funded schools attracted families with children; local malls had few, if any, vacancies; and new shops and office parks seemed to spring up daily.
The same year that my father retired, I visited my childhood neighborhood, and drove past the Smiths' house. The lawn was lush, the shrubs well tended. They had built a garage. …