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Writer's pictureNina Young

Understanding Americas Wealth Gap

People from all over the world wake up every morning with thoughts of having the American Dream. The American dream is a systematic process that will guarantee you a middle-class life. Go to college, come to work early, leave late, become a manager, get married and buy a house. Once you buy a home and obtain equity is the true American Dream. If obtaining the American Dream is that easy “Why is it a huge wealth gap between blacks and whites in this country?”.

During the late 1930’s Roosevelt came out with the new deal. This was a group of federal programs to help the poor that was suffering from the depression purchase homes. Prior to the new deal you would have to put up most of the money for a home then get a small loan that amortized for only a couple of years. The National Housing Act of 1934 introduced the 30-year mortgage. Now low-income families can afford homes. To make sure that they did not default on their loans they established The Homeowner Loan Corporation (HOLC). The HOLC created color coded central security maps, and this is where the term redlining comes from. Redlining made it impossible for Blacks to purchase or refinance their homes.

The green area represented areas of businessmen with no blacks or minorities, the blue area represented blue color workers with no minorities, yellow represented working-class whites in an area that was declining, and red represented Immigrants, poor whites, and Negros. This caused Landlords to abandon their properties, transportation did not operate in these areas, grocery stores left, and crime increased. On the other hand, white homeowners were able to enjoy the American dream FHA allowed homeowners to finance their homes and pull out their equity to make repairs.

The black homeowners were not able to take out loans because the lived in a red zone. The red zoning was racially bias. These zones would be considered a risk to lend on. Also, for the Federal Housing Association to lend to these white borrowers had to have a racially bias covenant in place. These areas had restrictive covenants on their property that prohibited whites to sale or transfer real property to blacks. They can only live in the property unless they were a servant. These racial bias covenant kept blacks in the slums. This caused lower property values, health issues, and an increase in crime. The schools are funded by the property taxes, so, when property values dropped the value of the education declined in black neighborhoods. This is where the term White Privileged comes from.

Since 1934 whites have been able to use their equity to create wealth. Blacks did not start getting mortgage loans until 1968 when redlining became illegal. If we look at the numbers the blacks did not start creating wealth through equity until 40 years later, This explains the unequal playing field that caused Americas wealth gap.


Written By: Nina S. Young

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