|A Fairwood subdivision monument sign in Bowie, MD. Source: trulia.com|
The Washington Post just started an illuminating series on the vanishing wealth of African American homeowners in Prince George’s County, Maryland, a suburban county just east of Washington, DC and the nation’s most affluent black majority county. The Post’s report is part of a three-part series detailing how Prince George’s County grew as the destination for professional and upwardly-mobile blacks at the start of the 21st century. However, their hopes were dashed as the housing bubble formed over the 2000s and burst in 2007-08. Other parts of the DC metro area have begun to recover, but Prince George’s County continues to lag, and many wonder what the future holds for it.
This has had a devastating impact on the growth of wealth among the black middle class, a group that’s been seeking to increase wealth using the same traditional path as other groups in our nation’s history — through homeownership. The article notes that more than two decades of wealth creation among African Americans was wiped out by the Great Recession, leaving them today with less than half the wealth they had in 2007. Similarly positioned white households saw their net worth decline by just 14 percent.
And that means Prince George’s County is not alone in this matter, but does stand out because it is an entire political jurisdiction rather than simply being a small part of one. Similar trends have been evident in parts of Nassau County outside of New York City, south and west Cook County outside of Chicago, much of north St. Louis County near St. Louis, and suburban Fulton and Dekalb counties outside of Atlanta, to name a few. In fact, it’s an issue that many metro areas that have large and suburbanizing black populations have been facing.
I’m no housing expert, but two things I saw in the series struck me as reasons for the lagging recovery, and making recovery particularly difficult in Prince George’s County and similar places. First, communities in Prince George’s County don’t enjoy the same demand as similar neighborhoods in other parts of the metro area, stunting the growth of home prices:
Many researchers say the biggest portion of the wealth gap results from the strikingly different experiences blacks and whites typically have with homeownership. Most whites live in largely white neighborhoods, where homes often prove to be a better investment because people of all races want to live there. Predominantly black communities tend to attract a narrower group of mainly black buyers, dampening demand and prices, they say.
In places such as Prince George’s County, where many people chose to live at least in part because of the comfort and familiarity they felt in a majority-black community, that meant their home brought them less wealth than if they had purchased elsewhere, economists say.
Second, it seems African American homebuyers, even when demonstrating high incomes, were
targeted for subprime mortgages far more often than other high-income households. Recounting the experience of the Fairwood subdivision in Prince George’s, here’s what the Post found:
Of the 1,441 loans made in Fairwood between 2006 and 2007, 416 were subprime, which are riskier loans that carry higher fees and interest rates that adjust frequently, according to federal home mortgage data.
In the lead-up to the crisis, borrowers in Prince George’s earning more than $200,000 per year received subprime loans 31 percent of the time, the highest rate in the nation for a county where 750 or more subprime loans were made.
This could easily be dismissed as the failings of homebuyers who made bad financial choices during the runup of home prices in the 2000s. Certainly there were many buyers who saw a long future of home price increases and wished to cash in. And those who make that argument would be partly correct.
But it’s also apparent that black homebuyers may be paying a disproportionate price for trying, and not succeeding, at playing the same game as others. Many white homeowners have been able to recoup some of their losses because demand is returning to earlier levels. It’s quite possible that unless there is a broader spectrum of homebuyers looking at places like Prince George’s County, that demand may never return enough to recoup the losses the current owners have suffered.
This is in part why I worry about the future ramifications of the diversification of America’s suburbs, particularly the development of African American suburban enclaves. Such enclaves have the potential to become disconnected from their core cities and job centers, and other places throughout the metro area. The demographic changes happening at all levels of our nation require thoughtful analysis. But as importantly, when looking at remedies that mitigate against disparate impacts, they require direct engagement — and I wonder if our nation is ready for that.
I’m interested in reading the conclusion of the series. I’m also interested in hearing what policymakers have to say about this.