Liberty Matters

Systemic Racism in Housing and Crime: Fact or fiction?

It is fashionable to claim, as does one scholar, that “systemic racism pervades nearly every aspect of American life, from policing to health care to employment to housing.”[1] But the truth may be otherwise. In a Liberty Fund discussion on systemic racism in education and healthcare, the authors questioned whether systemic racism was as pervasive as some claim. The same is true in this current discussion of systemic racism in housing and crime. Regarding housing, in his essay “Systemic racism in the housing market,” Professor Richardson and I are in agreement that the driving force behind racism in housing is – or was – the Federal government with its New Deal agencies: the Home Owners Loan Corporation (HOLC) and the Federal Housing Administration (FHA).
Although the HOLC refinanced loans to Black homeowners, its legacy was to delineate neighborhoods by risk and to color code them. The riskiest areas were colored red, leading to the term redlining. The risky neighborhoods faced lower appraisals and lower new home construction. The FHA refused to guarantee new mortgage loans to Black borrowers which lessened the incidence of Black home ownership not only in Black neighborhoods but in all neighborhoods, as the FHA would not guarantee loans to Blacks regardless of the location of the home. Although the Federal government is no longer explicitly practicing discrimination, its prior actions no doubt had an adverse impact on Black homeownership.
Professor Richardson also shows how more recent government actions were implicitly racist through zoning laws at the local level and the Dodd Frank Banking Act at the national level. One interesting aspect of Dodd Frank was that the costs of implementation caused many poorer customers of banks to be dropped by their banks. One large bank stopped offering credit cards to approximately 15% of their customers mostly because they were deemed too risky. Certainly these were unintended consequences but the intriguing question is whether cities which become dominated by minorities continue the previous zoning practices or seek to rectify them.
The essays on crime by Professors DeGennaro and Kramer are similar. DeGennaro considers the effects of variables such as education, employment barriers, drugs, and the collapse of the nuclear family on Black crime incidence. Kramer writes about the impact of government welfare programs, occupational licenses, and access to credit. All are important and all play a role in the statistics. The essay by Professor Reilly questions the systemic racism narrative in policing by noting that the work of Fryer and his own work contradict the notion that Blacks are more harshly treated than Whites by police.
In a sense, we all are children of Thomas Sowell and as such should question the use of univariate statistics in analyzing these problems. For example, when the claims of racial discrimination in mortgage lending have been analyzed with multivariate analysis, the conclusions have been mixed at best. Most of the comparisons done here and elsewhere have just looked at raw disparities. For example, in housing the differential often cited in home ownership would be valid only if the two populations were identical except for race. This is certainly not the case. The same is true for crime but as DeGennaro and Kramer point out, this is not the case here either. Thus, one direction for future research will be to subject both housing and crime to analysis within similar cohorts and to apply multivariate analysis where appropriate.