Even in this age of faceless algorithims that guide investment decisions, there is strong evidence that racism still exists in mortgage lending. This is one of the deep roots of America’s racial wealth gap.
A new study from the National Community Reinvestment Coalition examines mortgage lending practices in St. Louis, Milwaukee, and Minneapolis. In the “hyper-segregated” St. Louis area, these findings stand out:
In the City of St. Louis itself, the racial composition of the neighborhood is a strong predictor of mortgage activity, becoming nearly as important as neighborhood income in its predictive capability. As the percentage of white residents increases, so does the amount of mortgage lending. Conversely, a higher proportion of African American residents correlates with fewer mortgage loan originations...
The City of St. Louis and its inner ring suburbs like Ferguson show strong indications of hypersegregation. There are many census tracts in which the population is 75-98 percent African American – concentrated clusters of segregated neighborhoods. Within these areas less than one percent of homes received a home purchase loan for the 2012-2014 period. This lack of lending is not fully explained by differences of income, meaning that credit is flowing more to neighborhoods with higher percentages of white residents with the same income profile.
Good information to keep in mind when considering what happened in Ferguson.
Neighborhoods where more residents are able to own their homes tend to be better neighborhoods by normal social and economic measures. Where people are unable to get loans to buy homes, the opposite may be true. If a white family can get a loan that a black family of the same income level can’t, that is discrimination, pure and simple. This sort of thing used to be standard practice. But now we like to imagine that we live in a society where anyone can do whatever they want if they just work hard.
One way or another, we need to push wealth down the food chain. People can’t be stepped on forever.