Months into the new decade, a devastating global pandemic exposed and exacerbated striking economic inequality along racial lines. While many Black and low-income families have seen their health and livelihoods at increased risk, wealthier and disproportionately white families and communities have been better able to weather the economic fallout—a stark reflection of racial wealth inequality. Addressing the racial wealth gap driven in part by housing disparities is crucial to stemming the tide of economic havoc afflicting Black and low-income communities and safeguarding against future health and economic crises.

Wealth consists of a person or family’s assets, such as a home and savings, minus what is owed, like a mortgage and outstanding debt. Not only do Black families have one-tenth the wealth of white families, but white families’ wealth has steadily risen since 1996. In contrast, Black families have seen their wealth stagnate, with major losses during the 2008 recession.

Wealth inequality harms Black communities in the present and jeopardizes their futures. Racial wealth disparities explain, in part, why Black people are more likely to be sicker, hungrier, ill-housed, work in lower paying jobs and have less security in retirement than their white counterparts. Black entrepreneurs struggle from the start with lower access to capital to launch their businesses; and for those who seek to do business in their communities, customers undervalue their businesses relative to businesses in predominantly white neighborhoods. Black graduates have less wealth than whites who never graduated from high school and are held back by more debt than their white peers. Even Black families who amass some wealth face uncertainty in the next generation; 70% of Black middle class children will likely fall below middle-class status by the time they reach adulthood.

As much as wealth inequality harms Black people, it undermines society at large. A McKinsey report estimates that the Black-white wealth gap will cost the U.S. economy $1.5 trillion or 6% of GDP by 2028 due to lost consumption and investment. Wealth inequality has weakened the middle class and advanced unequal access to the political process, threatening the health of our democracy.

Uncovering the drivers of racial wealth inequality requires examining a major source of wealth creation: homeownership. The path to homeownership in this country is one that has been closed off to Black people by policy and practice at different points throughout our nation’s history.

Dating back to the end of slavery in the Reconstruction era, Black people were afforded the opportunity to acquire resources for their own economic advancement. In January 1865, the federal government granted 400,000 acres of land confiscated during the Civil War to former slaves to sustain and cultivate as free people. But by the fall of 1865, incumbent President Andrew Johnson diverted the proposed land to former slaveholders, denying Black families a starting point to economic mobility. What followed for many Black people were decades of racial terror, where state-sponsored discrimination and social violence were used as tools to disrupt and undermine wealth-building in Black communities. 

While the New Deal policies of the 1920s and 1930s created new pathways to homeownership and generational wealth building, Black Americans were largely excluded from these opportunities. The federal government insured home loans but refused to back loans for homes in predominantly Black neighborhoods, deeming them as inherently high risk. Consequently, practices like redlining and restrictive covenants stymied credit access for many in majority Black neighborhoods, devalued Black communities and incentivized realtors not to sell to Black people. Such policies precluded otherwise eligible Black families from homeownership and engendered racially segregated neighborhoods, which remain a fixture of our social landscape today.

Obstacles to homeownership still abound for many Black families as our policy and financial institutions continue to fuel racial wealth inequality through structural barriers. These barriers include credit constraints and discrimination, predatory lending practices, housing pressures and insufficient responses to economic downturns. In contrast, white families continue to augment their wealth, accessing resources made exclusive to them throughout our nation’s history.

Closing the racial wealth gap will require sustained and systemic action—not the gambits of the past—once used to undermine Black wealth-building, but action that invests in advancing prosperity for Black families and communities. A crucial first step involves eliminating current obstacles to Black homeownership by reducing credit constraints and creating down payment grants that enable Black families to have initial equity in their homes. Other priorities include strengthening anti-discrimination protections in lending to ensure Black families are not exposed to the kind of predatory lending practices used by a number of banks leading up to the Great Recession.

Policy action is also needed to make homeownership more accessible for Black families. While the federal tax code provides financial incentives for home buying, a report by the Georgetown Center on Poverty and Inequality highlights how such tax provisions overwhelmingly benefit wealthier, predominantly white households. We can reform tax provisions like the Mortgage Interest Deduction to help more homeowners of color cover the costs of maintaining their homes.

But no policy will be successful without bolstering economic security for Black families and stemming patterns of wealth-stripping in Black communities. Increasing the supply of affordable housing is crucial to supporting the stability needed for Black renters to begin building wealth and prepare for a future as homeowners. We can also expand credits like the Earned Income and Child Tax Credits to better support families struggling to meet housing and other needs. In neighborhoods where disinvestment was de facto, we can institute housing revitalization grants to help generate and keep wealth and opportunity flowing into Black communities.

The success of these actions ultimately rests on their being rooted in the perspectives and experiences of Black people. Doing so starts with supporting and empowering more Black economic thought leaders. Black economists constitute just 3.1% of PhD economists, and to our collective detriment, their voices are hardly prioritized in economic policymaking. At the start of the Great Recession, Black economists sounded the alarm on Black unemployment and housing woes, but their warnings fell on deaf ears.  Former Fed Chair Janet Yellen subsequently acknowledged that had the Federal Reserve listened to these concerns, the economy may have been shielded from even greater damage during the fallout in 2008. Now, as our nation grapples with a far deeper economic crisis, the voices and insights of Black economic thinkers must not be ignored again.

History shows that racial wealth inequality is deeply embedded in our national story. The economic outlook of Black people has been and remains tied to our nation’s broader outlook. To create a more prosperous and secure future requires confronting the challenge of racial wealth inequality head on with an unrelenting commitment to equity.

The best way to rise from poverty into the middle class is to acquire a home.  But this has proven to be extremely challenging since the Great Recession of 2008, even for people with good credit and incomes to cover loan payments. For African Americans, home ownership is at a 40-year low.

Historically, mortgage loans for home purchases have contributed immensely to wealth-building for African Americans. Those days, though, are vanishing, and little progress is being made in the fight to protect all Americans from risk and discrimination.

In this piece, I focus on several new patterns of discrimination and summarize reforms needed to help people of color obtain loans to buy homes and build small businesses.

Homeownership

For decades, three agencies backed by the federal government—Fannie Mae,  Freddie Mac and the Federal Housing Administration—helped working class whites and people of color become homeowners.

These agencies are critically important for African Americans working towards home ownership, but all three remain in limbo under the Trump Administration. Without a clear direction, or the ability to do what they have done for decades, these agencies can no longer ensure that average Americans working their way up the economic ladder are able to build equity and wealth through home ownership.

Worse, the U.S. Senate, led by Sen. Mitch McConnell, passed S. 2155, a bill that makes banks less accountable and transparent.  President Trump has also dramatically weakened the Consumer Financial Protection Bureau (CFPB), the only public agency exclusively designed to protect average Americans from financial abuse.

The Dodd-Frank finance and banking rules passed by Congress after the 2008 financial crisis required all banks and credit unions to report detailed racial, ethnic and gender data that could identify differences in how banks treated different loan applicants. This year, the Senate passed a bill that exempts 85% of banks and credit unions from reporting this data. In other words, they rolled back the clock and removed a critical tool for regulators, journalists and consumer advocacy groups like the National Community Reinvestment Coalition (NCRC) that monitor whether or not banks discriminate against African Americans, Hispanics, women and others.

Unfortunately, housing discrimination remains an ongoing challenge in our country.  A recent report from the Center for Investigative Reporting found banks discriminated against minorities in 61 U.S. cities. The Center gathered this information from mortgage data submitted by banks to the federal government.

But this pattern of discrimination by banks doesn’t make much sense. People of color will soon make up the majority of families in the U.S. A Harvard Joint Center for Housing report found that by 2025, 75 percent of new household formations will be people of color. That number jumps to about 85 percent by 2030. If banks don’t meet their needs, alternative lenders with higher interest rates will jump into the game and lend to people of color. Traditional banks will be left behind and people of color will have to pay more for their loans.

The Community Reinvestment Act (CRA), passed by Congress in 1977, requires banks to help meet the credit needs of the communities they serve, including low- and moderate-income neighborhoods.

NCRC has long called for strengthening the CRA to ensure that banks don’t engage in redlining, when a bank declines a loan application based on a household’s zip code, rather than the borrower’s credit-worthiness. Yet recent analysis by NCRC and the Center for Investigative Reporting found that discriminatory practices in lending remain a potent obstacle for people of color.

Without the Dodd-Frank data reporting requirements, working-class people will lose. Deterring discrimination will be harder as well as the accumulation of wealth by African Americans.

Small Business Lending

Discrimination is not limited to mortage lending.  People of color also have less access to small business loans, the biggest job creating generator in African-American communities.

Banks and lenders covered by CRA reported more than seven million business loans of less than $1 million each. That amounted to almost $258 billion in lending. However, only 33% of those loans went to small businesses reporting less than $1 million a year in revenue. In low-income neighborhoods, lending skews in favor of larger loans.

Recognizing this problem, the Dodd-Frank bill required the CFPB to establish a mechanism for banks to report performance in this area.  Under President Trump, the Administration chose to cancel efforts to require banks to report this data. 

Bank Branch Access

Yet another barrier to building wealth in communities of color is a lack of access to traditional financial institutions. An NCRC report titled Banking Deserts in America found that many banks have closed branches in areas with growing populations. Growing populations generally translate into growing deposits. So why close the branches

Our study found that 9,666 of 95,018 branches were lost between 2008 and 2017. Several metro areas lost 15 to 25 percent of their banks. Losses were especially acute in Baltimore, Chicago, Philadelphia, Las Vegas and Detroit.

In addition, the report found that rural America is being left behind. Huge swaths of the country have fewer and fewer bank branches and growing banking deserts with no banks within 10 miles of populated areas.

Because of their already diminished market access, rural areas are especially vulnerable to banking deserts and banking deserts disproportionately impacted minorities, with 25 percent of all rural closures in majority-minority census tracts

Discrimination Perserveres

Last year, NCRC conducted mystery shopper tests. Our tests found that bankers were three times more likely to offer follow-up appointments to white borrowers seeking small business loans than better-qualified Black borrowers. It’s painful to see signs of discrimination linger—and on such a scale—a half-century after the establishment of Civil Rights-era laws aimed to eradicate discrimination in all spheres of the economy and our society. It’s also painful to see both Republicans and Democrats join forces in a rare show of bipartisanship to support efforts that hide this true and troubling story of discrimination from the public.

These kinds of discrimination are stunting economic growth in African American neighborhoods and blocking small business owners from loans that would expand their businesses and create more jobs. Denying the tools of economic self-reliance and wealth to a significant portion of our population robs communities—and our nation. NCRC hopes the White House and Congress will follow through on campaign promises to help African Americans by continuing to require banks to report data about their home purchase loans.

On February 1, 1968, two African-American sanitation workers in Memphis, Echol Cole and Robert Walker, were crushed to death under their truck’s malfunctioning garbage compactor. Eleven days later, on February 12, their fellow African-American sanitation workers went on strike, calling attention to their low wages and poor working conditions, and catching the attention of Dr. Martin Luther King, Jr., who traveled to Memphis to support the workers and eventually paid for that decision with his life. Dr. King’s support of the sanitation workers of Memphis teaches us that civil rights and economic justice are intrinsically linked. Regardless of the rights we have in law, if we are economically disadvantaged, we are second-class citizens.

Progressives have eagerly coalesced around a $15 minimum wage and universal access to healthcare. However, they have been slow to understand that the biggest challenges facing people of color and working people today in America’s largest cities are gentrification and displacement. Working and middle class residents, by the hundreds of thousands, are being priced out neighborhoods they have called home for generations. From New York to Los Angeles, and cities in between, millions of people are paying the majority of their income in rent or mortgage payments.

In the same way that we understand that we cannot depend on the marketplace to provide universal, quality, affordable healthcare, it has become obvious that the real estate marketplace is not able or willing to provide shelter for everyone who needs it. The situation has gotten so bad in some cities that middle class employees, such as teachers and nurses, cannot afford to live in the very communities where they work. The implications of the housing crisis are obvious. Homelessness is rampant; young working people cannot afford to leave their parents homes; people are doubling and tripling up; and evictions are all too common.

The state of California is a textbook example of the devastating impact of gentrification. For example, in this day and age of cities claiming spaces for tech hubs, California is no stranger to the impact of this concentration of wealth and high-tech talent on native residents who live and work outside the borders of the tech industry. In 2013, protestors in Oakland and San Francisco attacked tech-company shuttle buses to shed light on growing inequality and the exorbitant rise in rent, highlighting broader economic divides. Despite California's riches, its surplus of highly skilled people, and flourishing industries—including the tech sector—it is the poorest state in the Union because of the cost of living—and the highest cost is the price of housing. For many, the California dream is turning into an income inequality nightmare.

Everyone complains about homelessness and gentrification but precious little is being done about it. Instead, we are being force fed warmed over supply side, Reaganite solutions. Only this time, it is so-called progressives who tell us that building a huge amount of luxury housing will generate large revenues that will magically trickle down to the poor and working class. That is not how gentrification works. When you build a luxury tower in a neighborhood, everything around it rises, including rent and services. In other words, no matter how many Ferraris you build, people who can only afford a Kia will never become Ferrari owners.

The financial crisis taught us that banks can't regulate themselves; the Affordable Care Act, which did nothing to control what drug companies and insurers could charge, did not provide universal affordable healthcare; and without rent regulation and laws that favor the building of low income housing the current crisis will continue to get worse.

Most tenants have no protection against exorbitant rent increases and little protection against evictions. The so-called affordable housing industrial complex exists for the benefit of developers and produces a tiny percentage of the housing that is needed. To make matters worse, liberal politicians are enacting policies that give incentives to luxury developers at the expense of communities, while smaller cities, rust belt towns, and the poorest red-lined communities in the inner cities have no investment at all.

Real estate and developer interests dominate the Democratic Party at the local and state level. It is next to impossible to get anything passed if the party is in opposition. The recent failure of a bill in the overwhelmingly Democratic California legislature that would simply have given the control of rent regulation back to the cities where it resided until 1995, demonstrates the inordinate influence of the real estate industry.

We need a revolution akin to the one launched by Dr. King in 1968. We cannot allow America’s big cities to become luxury ghettoes. There needs to be a linking of arms across all communities to demand a universal right to shelter. The undue influence of real estate must be balanced with a unified movement that effectively organizes to contain unmitigated greed and educate people on the most effective ways to fight back.

Fronting for big real estate should be as radioactive as sticking up for tobacco companies. There are connections that must be exposed. The identities of those who prioritize profit over people must be shared with the families and individuals crushed under the weight of unaffordable housing. Our nation needs a vision of diverse, equitable, sustainable, cities that meet the needs of everyone. Now is the moment before everyone is priced out or the next financial crisis hits.

By Cynthia H. Bowman, Chief Diversity and Inclusion Officer, Bank of America and D. Steve Boland, Head of Consumer Lending, Bank of America

In an ever-changing, fast-paced world, we are delivering financial solutions the way our clients expect, while also elevating and helping to address important societal challenges. 

At Bank of America, our purpose is to help make financial lives better for our clients and communities through the power of every connection. Our 209,000 employees work every day to understand the needs of our clients, to deliver the financial solutions our clients expect, and – importantly – to elevate and help address important societal challenges affecting the people and communities we serve.

Internally, we encourage our employees to have “Courageous Conversations” about sensitive and relevant topics, including race, gender dynamics, domestic violence, LGBTQ equality, and social justice. As African-American leaders of a large organization, we understand the significance of leading on these topics, and how these engagements can broaden and enhance our capabilities to deliver for our clients in a meaningful way. We have also engaged outside leaders on these important issues, including National Urban League President and CEO Marc Morial, creating a dynamic and informative exchange of ideas and experiences. With these conversations, internal leadership and employee networks, including our Black Professional Group, Bank of America strengthens inclusion and cultural awareness across the company. We strive to create a work environment that promotes greater appreciation for diverse ideas and engagement, empowering our people to better understand, value and serve our clients and communities.

It is through this lens that we are creating a tailored community-centered approach to serve the needs of our 67 million clients through our financial centers, mobile banking and digital capabilities, partnerships, and more. Our clients represent all walks of life – low- and moderate-income (LMI) and high net worth, rural and urban areas, and everything in between. To meet the needs of each segment, it is important to understand all of them.

No matter what stage or goal in life, our clients expect Bank of America to deliver financial wellness aligned with their life priorities. Many of our clients reevaluate their retirement planning decisions at the beginning of the year – creating an opportunity to discuss what’s most important so they can plan, budget, accumulate assets and save for what’s next. Others look for guidance on saving money for college, purchasing a home or car, or managing through credit challenges and opportunities.

Bank of America’s financial centers are located in key markets, providing access points – for all clients – to help make banking easier, offering ATMs and online banking kiosks, free Wi-Fi, a dedicated learning space, and interactive tools for the community. These features exemplify our Specialty Centers approach – creating tailored experiences for clients with different needs and adapting as clients experience life changes and growth. The technology, services, marketing materials, space configuration and furniture plan are uniquely designed to enhance our clients’ experience.

While our financial centers are an important part of how we deliver solutions, we understand that an increasing number of our clients want the convenience and flexibility to bank from their mobile devices. According to Pew Research Center1, 61 percent of black adults in the U.S. use their mobile phones to access online banking information, compared to 57 percent of white and 55 percent of Hispanic adults. Nearly 36 million of our clients are active digital users, at a rate of over 100 million account sign-ins per week. More than 24 million of those clients manage their banking needs using our mobile banking app. More than a quarter of our mobile banking users are LMI clients, and half of our lower-income clients use push alerts to actively manage their daily finances.

We are enabling our clients to do their banking from anywhere in a convenient and simplified way through our digital capabilities, including the Bank of America Digital Mortgage Experience™ and Zelleâ payments system. Clients can make payments, deposit checks, and open accounts right from their smartphones. Our clients can stay on track with their spending and credit while on the move by using our tools to access FICO scores, lock and unlock their Bank of America debit cards, and set up appointments with our specialists. Some of our clients have asked for special alerts, and with our mobile banking app, they can set up low-balance and fraud alerts, reach saving goals with our Spending and Budgeting tool, and get on-the-spot financial guidance through our Better Money Habits® program, including tips, tools and content in Spanish. And Bank of America Merrill Edge allows clients to seamlessly connect with their banking and investment management resources, including 24/7 online access, real-time transfers, and support from a licensed advisor. We educate our clients about how our digital and in-person capabilities can help them achieve their short- and long-term goals, providing the right solutions to navigate their individual path.

As clients progress in life and their banking needs evolve, our specialists are prepared to help them understand how best to use technology and other resources to improve their financial lives; they are also trained to help when clients need assistance beyond what can be provided by technological devices. 

At Bank of America, we work every day to deliver on our purpose to make financial lives better through innovative technology, trained specialists and convenience. And we are honored to partner with the Urban League and many others as we continue to explore issues facing our communities and work toward equality in status, rights and opportunities for all.

1 Racial and ethnic differences in how people use mobile technology, Pew Research Center (2015)