Racial covenants, legal clauses written into property deeds to prevent certain racial or ethnic groups from purchasing, leasing, or occupying a property, have left a lasting impact on homeownership and wealth accumulation in the United States.
These discriminatory practices, widely used in the 20th century, disproportionately affected Black Americans, Indigenous communities, Asian Americans, and other marginalized groups.
These covenants were embedded in property deeds, and they were designed to prevent minority groups from owning or occupying homes in predominantly white neighborhoods.
These policies shaped patterns of segregation and economic inequality that have lasting impacts to this day.
Historical Context
Racial covenants gained popularity in the early 1900s. They were bolstered by court rulings and adopted by many real estate practices. Developers, real estate agents, and homeowner associations utilized these clauses to prevent non-white individuals from accessing neighborhoods, creating exclusive white-only communities.
These covenants also received significant support from government institutions and the real estate industry. The Federal Housing Administration (FHA) recommended the inclusion of racial covenants in home deeds as part of its underwriting policies, effectively embedding segregation into housing markets across the country.
Real estate organizations, such as the National Association of Real Estate Boards, also played a crucial role by incorporating these covenants into their ethical codes and engaging in racial steering, guiding clients into or away from certain neighborhoods based on race.
Even though racial covenants were outlawed by the Supreme Court in 1948 and illegal under the Fair Housing Act of 1968, their legacy continues to influence housing markets and community segregation.
The racial wealth gap remains significant. In 2019, white families in the United States had a median wealth of $188,200, while Latino families had a median wealth of $36,100, and Black families had a median wealth of $17,600. Homeownership, which is a primary source of wealth accumulation, has been systematically denied to communities of color, perpetuating this wealth gap.
Impact on Families of Color
For Black Americans, racial covenants were a significant barrier to homeownership, which is one of the most effective ways to build intergenerational wealth.
Many historically redlined neighborhoods remained underfunded, with depreciated property values and fewer resources. Additionally, predatory lending practices in the late 20th and early 21st centuries disproportionately targeted Black families, compounding systemic inequities.
As of 2017, the homeownership rate among white, non-Hispanic Americans was 72.7%, while for Black Americans it was just 42.1%.
While much of the focus has been on Black Americans, racial covenants also excluded other groups, including Asian Americans, Latino communities, and Indigenous peoples. For example:
- Asian Americans: Racial covenants often explicitly barred individuals of Asian descent, particularly in areas like California. Many Chinese, Japanese, and Filipino immigrants faced significant housing discrimination, pushing them into segregated neighborhoods with fewer economic opportunities.
- Latinx Communities: In the Southwest and parts of California, racial covenants restricted Mexican Americans from purchasing homes in white-dominated areas. As a result, Latinx families were often confined to lower-income neighborhoods with limited access to essential services.
- Indigenous Peoples: Indigenous communities, already displaced and marginalized due to federal policies, faced additional barriers to homeownership through racial covenants and exclusionary zoning practices.
Long-Term Effects
The exclusion of marginalized groups from homeownership opportunities has had a ripple effect across generations.
Homeownership is a primary means of building wealth in the United States, and racial covenants systematically denied this opportunity to millions of families.
The wealth gap between white households and households of color remains stark: in 2022, the median wealth of white households was nearly eight times that of Black households and five times that of Latino households.
Even today, neighborhoods that were once governed by racial covenants often remain predominantly white and affluent, while historically excluded areas struggle with disinvestment.
Moving Forward
In recent years, there have been efforts to confront the enduring impact of racial covenants. Cities and states have undertaken initiatives to identify and remove discriminatory language from property deeds.
Policy interventions aimed at increasing homeownership among marginalized communities are essential to closing the racial wealth gap. These include down payment assistance programs, affordable housing initiatives, and reforms to lending practices.
The legacy of racial covenants is a stark reminder of how systemic racism has shaped the American housing market. Understanding this history is crucial to dismantling its lingering effects and creating a more equitable future.
Addressing these inequities requires not only acknowledging their impact but also committing to policies that promote fair and inclusive homeownership opportunities for all.
Green Mountain Habitat for Humanity recognizes these historical factors in the housing market and actively works to bring more affordable housing to Vermont families. By acknowledging the history, we can move forward and help make a difference in local families’ lives.
To learn more about our mission, visit vermonthabitat.org.
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