The Collapse of Black Wealth

Jesse Lenz

When Joe Parker was a young, newly married public-school administrator who wanted to buy a home in 1974, he didn’t even think about leaving Prince George’s County, Maryland. It was where he and his parents had grown up. But when Parker first tried to bid on a house in a new development in Mitchellville, a small farming community that was sprouting ranch and split-level homes on old plantation lands, the real-estate agent demurred, claiming there were other buyers. In truth, the development had been built to lure white, middle-class families to the county, which sits just east of Washington, D.C. Parker never told the agent that he served on a new county commission to enforce laws forbidding housing discrimination. He just persisted, he says, until he and his wife were able to bid. “My wife kept saying, ‘Why don’t you tell him?’” Parker recalls, but he refused to pull rank. “I said no, because what does the next black man do?”

The next black families did arrive. Throughout the 1980s, 1990s, and 2000s, most of the professionals who bought homes in Prince George’s County came from Washington’s black middle class. Laws that expanded minority homeownership, combined with a booming mortgage market, brought more and more black residents out to the suburbs. When Parker bought his home in the ’70s, African Americans made up about 14 percent of the population in Prince George’s County; by 2010, the share of black families would be almost 65 percent. Across the country, in the final decades of the 20th century, minorities were moving into suburbs in unprecedented numbers. But Prince George’s County was distinct: It was one of the few places—like Southfield, Michigan, outside of Detroit; Warrensville Heights, Ohio, outside of Cleveland; and DeKalb County, Georgia, outside of Atlanta—that grew wealthier as it became blacker. Median income in Prince George’s outpaced the national median from the 1970 census forward. 

Prince George’s County today is a collection of cities, small towns, and bedroom communities with a population of about 870,000. Home-improvement stores and shopping centers pepper broad boulevards; McMansion-filled subdivisions end in cul-de-sacs. With a median income of $71,260, it’s wealthier than the state as a whole. There are Outback Steakhouses and Whole Foods markets. There are fall festivals, international festivals, and food festivals. There are pumpkin patches and Christmas-tree farms. Bowie, in the northern part of the county, is home to Bowie State University, a liberal-arts college that once trained black teachers as the Maryland Normal and Industrial School at Bowie. Joe Parker, now retired from the school system, serves as a neighborhood captain to welcome families into the development he bought into almost 40 years ago and is a neighborhood historian. His three sons still live in Prince George’s County. It’s home. 

Prince George’s County became emblematic of a long-delayed advance toward equality: the growth of black wealth in America. For three centuries, structural racism had prevented black families from building wealth. School systems, hiring practices, red-lining, and discriminatory lending practices all combined to deny the opportunities that white Americans, whether immigrant or native born, saw as their birthright. In the South, especially, there were more direct means of holding back black economic advancement: Violence was often directed toward black men and women who owned businesses or farms and toward those who fought for their right to work for fair wages. But in the 1980s, helped by laws that encouraged homeownership among minorities, African American families were at last able not only to earn higher incomes but to buy homes and build wealth.

Just from 1995 to 2004, black homeownership rates nationwide rose 6.5 percentage points, reaching a height of 49 percent in 2005. But those gains were almost entirely erased as the Great Recession began in 2008, with black homeownership rates dipping to 45 percent last year and continuing to fall. Nowhere is that more dramatically illustrated than in the stretch of suburbia that straddles the Beltway. At the height of the crisis, in 2009, the foreclosure rate in Prince George’s County was 4.19 percent, compared to 1.87 percent in Maryland and 2.21 percent in the nation as a whole.

Even families who aren’t losing their homes have seen values drop, making it more difficult to get loans to finance their children’s education or their retirement. Mosi Harrington, the former executive director of the Housing Initiative Partnership, a Maryland nonprofit that helps people hold on to their homes, says declining home prices are particularly problematic for African Americans because they have inherited less than their white counterparts. “In your minority communities, wealth is not very deep,” she says. “There’s no family wealth to fall back on in hard times.” Most middle-class families hold all of their wealth in their homes, and that’s especially true for the median black family—the amount they hold in stocks is zero. That means the housing crisis has wiped out an entire generation of black wealth.

In general, African American families have few resources to tap for big-ticket items like college that are necessary for their children to remain middle-class. The gap between middle--class families and the top 1 percent is huge regardless of race, but the racial gaps are even larger. According to the Economic Policy Institute’s State of Working America report, black households had a median net wealth of just $4,900 in 2010, compared with $97,000 for white households. A third of black households had zero or negative wealth. 

“There’s been a lot of attention brought to how much income inequality we’ve seen in this country, thanks to Occupy Wall Street,” says Heidi Shierholz, an economist with the Economic Policy Institute. “I think people kind of have a handle on the dramatic income inequality we have. But wealth inequality swamps anything we see in income equality.”

The story of Prince George’s County is, in many ways, the economic history of black Americans writ large. While its post–civil rights boom was a heartening sign of the slow but hopeful rise of a durable black middle class, its sharp downturn during the Great Recession is one more sign that the arc of history has yet to bend in the direction of economic equality or justice. 

 

The first black families in Prince George’s County were slaves and indentured servants brought there by Southern planters who had settled in the swampy lowland, primarily to grow tobacco. The county, named for the Prince of Denmark who was married to England’s Queen Anne, is about 500 square miles in the middle of what was then a colony, which was itself between what would become the Union and the Confederacy. Maryland passed its first laws to define slaves in the 1660s. A few black men bought their freedom by fighting in the Revolutionary War, but the vast majority of blacks in the state and in Prince George’s County remained slaves through the antebellum period: In 1850, there were more than 11,000 slaves, the highest of any Maryland county, 1,138 freed blacks, and only 8,901 whites.

Maryland slaves weren’t freed by the Emancipation Proclamation in 1863—it applied only to states in open rebellion, and Maryland didn’t secede during the Civil War. They had to wait until a new state constitution went into effect in 1865. Some were then able to buy land in Prince George’s County. Josiah Adams, who was born in 1817 most likely as a slave, pieced together, from 1871 to 1883, parcels of county land, amassing 48 acres by the time of his death in 1884. He passed that land on to his descendants, who lived in the area through the 1950s. Most of the African Americans who stayed in Prince George’s remained as tenant farmers, tied to the farms where they had been slaves, meaning they were still financially, if not legally, bound to white landowners. 

 The first few decades of the 1900s brought a wave of middle-class African Americans who were able to buy homes on lands carved out specifically to create black communities. The first two black towns, North Brentwood and Fairmount Heights, were incorporated in the 1930s. They became suburban homes for graduates of the Tuskegee Institute who came to work in federal agencies and other regional industries. In nearby D.C., Howard University, established in 1867, brought black educators to the county. More black families moved into these towns and started small businesses to serve the growing communities. Joe Parker’s parents had grown up in the farming areas around the wealthy town of Upper Marlboro but moved to Fairmount Heights and operated a tavern and delicatessen in the 1930s. In 1950, the county’s black population was 22,652 out of 194,182. 

The county wasn’t free of the violence that plagued black families throughout the South and Midwest, either. Locals can still point to a bridge in Upper Marlboro where lynchings were carried out. Until the 1970s, Prince George’s County remained a tight hierarchy with whites at the top, which meant that black families were relegated to buying homes in areas only where the white majority allowed them to do so. That prevented black families from buying homes in the priciest neighborhoods, like Bowie, and also set a cap on the housing stock that would be available for new black homebuyers. 

When civil-rights laws in the 1960s opened up new opportunities for African Americans, Prince George’s County had a critical mass of black professionals and business owners on which to build. Parker and his peers fought to increase the number of African Americans in county-level government and to enforce federal and state laws to open access to homeownership opportunities. “I felt this was home,” he says. “With all the problems here,” he remembers thinking, “this place needs me here to help right the ship.”

When middle-class Washington blacks began looking to the suburbs, especially after the 1968 riots, Prince George’s County was a logical destination. The stable government jobs, both at the federal level and in municipalities around the region, kept pumping in middle-class black families. They were helped by the Community Reinvestment Act of 1977, which prohibited lending discrimination among low-income communities and communities of color. The county also remained affordable, especially relative to richer D.C. suburbs in Virginia and elsewhere in Maryland.

For the first time since slavery, the county in 1990 became majority black. Because black professionals were mostly displacing rural and working-class whites, Prince George’s also became the wealthiest majority-black county in the nation. The rise of black suburbs like Prince George’s County was largely seen as a self-directed, community-affirming choice, rather than a result of segregation. While there was some resistance from white residents, some white flight to other suburbs, and some reluctance to enter the county by commercial developers, such tension played less of a role in Prince George’s than it did in other communities around the country. “One of the things that happened is, because of earlier waves, as more people came, there was a critical mass,” says Bill Sermons, research director with the Center for Responsible Lending, who grew up in the county after his family moved there in the 1980s. “You didn’t have part of the story you had in other urban communities across the country,” where black families would disperse and try to integrate white communities alone.

In 1993, President Bill Clinton strengthened the Community Reinvestment Act. The number of black families who owned their own homes rose from 42 percent to 46 percent nationwide. But near the end of his second term, in 1999, he signed another law that would have a profound, long-lasting effect on Prince George’s County. The Gramm-Leach-Bliley Act allowed lending banks and investment banks to operate under one roof. The credit market boomed, and new lending products proliferated. While the families living in Prince George’s County may not have been discriminated against in their personal lives, they were still not free of discrimination when it came to buying homes. Black families were disproportionately receiving mortgages and home-equity loans best described by a word that wouldn’t enter the lexicon for another decade: “subprime.” 

Predatory brokers flooded markets like Prince George’s County. “You had a lot of people there who were prime targets,” Sermons says. “You had networks of brokers and others who were targeting communities and working through churches and doing other kinds of things to find the kind of people they could put into these mortgages.” 

The families hardest hit were those who bought at the height of the 2000 housing boom and lost their incomes during the Great Recession that followed. But it isn’t just the families who face foreclosure—429 so far in 2012 alone—that were affected by the collapse. First-time homebuyers had taken out mortgages for expensive homes, and many families, who saw the values of the homes they’d owned for decades skyrocket, borrowed against their houses. All those homes bought or refinanced at the height of the bubble, when home prices were unrealistically high, means that families who still have their jobs and enough income to ride out the crisis have nonetheless seen a huge drop in the wealth that they had worked their whole lives to build. 

Today in Prince George’s County, “the typical client has a mortgage of $300,000, and their house is worth $150,000,” says Mary Hunter, a counselor with the Housing Initiative Partnership. “That’s a huge problem, the fact that so many homes are underwater. There’s no real solution. So many people here are underwater.”

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