Racial Gap: Homes in Black Neighborhoods Are Worth This Much Less Than in White Ones

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Much has been made of the American Dream: how homeownership can help lift hard-working folks into the country’s middle class. But that dream just isn’t worth nearly as much in minority neighborhoods.

Homes in predominantly black neighborhoods are worth only about half as much as comparable properties in white neighborhoods, according to a recent report from Gallup and the Brookings Institution, a think tank. Brookings and Gallup looked at neighborhoods where at least 50% of residents were black. These were then compared with neighborhoods whose populations were less than 1% black.

In black communities, homes are undervalued by an average of $48,000 per home, according to the report—and that’s comparing them with white neighborhoods that have similar amenities. That’s a significant amount, considering the median home list price is $295,000, according to the most recent realtor.com® data.

“This is due to the history of racial discrimination and segregation that still lingers in cities around the country,” says Jonathan Rothwell, senior economist at Gallup. “Homeowners in those areas are missing out on equity and wealth, which they could use to improve their lives and pass money onto their children to start businesses.”

Or those homeowners could use their equity to purchase larger or nicer homes, he says.

This issue affects quite a few Americans.

Only about 10% of neighborhoods in U.S. metropolitan areas are majority black. But 37% of black Americans live in these metros, which include cities and the suburbs and exurbs surrounding them.

And while the study compares neighborhoods that are similar aside from their racial makeup, on the whole, predominantly black neighborhoods often don’t have the top public schools, libraries, parks, and other amenities of white neighborhoods. Instead, residents of majority-black communities must often deal with higher crime rates and longer commute times.

These areas may also have less access to good jobs and public transit, see fewer investments in infrastructure, development and parks, and may struggle with higher unemployment rates, says Realtor® Michael LaFargue of Coldwell Banker Residential in Chicago. He primarily works in the city’s black neighborhoods. Plus, recessions can hit these communities harder.

“When markets go down, home values in black neighborhoods go down faster,” he says. “And when markets go up, home values in black neighborhoods take longer to recover.”

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