November 13, 2005

Blacks hurt by gap in home values

BY CHERYL L. REED AND MONIFA THOMAS Staff Reporters

Her two-bedroom bungalow in Avalon Park, a middle-class, black neighborhood on the South Side, has nearly doubled in value since she bought it 15 years ago. But Laverne Haynes is certain of this: If her neighborhood was largely white, her home would be worth much more.

"Whites don't consider our property values as high because of what they think goes on in our neighborhoods," said Haynes, a receptionist downtown. "They think we have high crime rates and drugs or that we don't take care of our property."

Haynes and many other black homeowners have long suspected that home values in black neighborhoods don't appreciate as fast as they do in white neighborhoods. Now, new research shows that not only do African-American homeowners typically get less when they sell their homes, but the disparity is feeding a growing wealth gap between blacks and whites.

TALE OF 2 NEIGHBORHOODS
Despite similar incomes, whites in Portage Park on the Northwest Side have access to far more wealth. Their homes sell for nearly 126 percent more than homes in largely black Avalon Park.

ARE YOU MIDDLE CLASS?
Generally middle class is considered household income two to six times the poverty rate, depending on household size.

SINGLE
$19,290 to $57,870 (Poverty: $9,645)

TWO PEOPLE
$24,668 to $74,004 (Poverty: $12,334)

THREE PEOPLE
$30,134 to $90,402 (Poverty: $15,067)

FOUR PEOPLE
$38,614 to $115,842 (Poverty: $19,307)

FIVE PEOPLE
$45,662 to $136,986 (Poverty: $22,831)

SIX PEOPLE
$51,576 to $154,728 (Poverty: $25,788)

"There's a segregation tax that operates on home values," said Thomas Shapiro, a professor at Brandeis University's Heller School for Social Policy and Management who has researched the black-white wealth gap. "Middle-class, African-American homeowners feel it's just another way they've gotten shafted."

Being middle class is a far more fragile experience for blacks than it is for whites, according to interviews with Shapiro, other experts and dozens of black and white homeowners in Chicago and the suburbs. There are more hurdles to get there and stay there, and less support, a growing field of research is finding.

Consider: Shapiro found nationally, over 30 years, houses in predominantly black neighborhoods appreciate $28,000 less than similar houses in predominantly white neighborhoods. In cities as segregated as Chicago, the disparity can be much worse.

As a result, black families accumulate less wealth from their homes, so they have less to invest and, ultimately, less to pass on to their children than white families do. On average, whites inherit $10,000 from their families, while blacks inherit $900, according to Shapiro's research. So, even though African Americans are narrowing the gaps between whites and black in income and education, African Americans' home values and other assets now amount to 10 cents for every $1 that whites own, the U.S. census shows.

'Nice little nest egg planted for them'

"So you get a piling of advantages and a piling of disadvantages," Shapiro said. "The legacy of race in the United States is something as simple as who has had the opportunity to accumulate wealth."

Many white Americans have had generations to amass wealth and pass it on. Black Americans, though, have achieved middle-class status en masse only in recent decades. Many blacks are trying to build wealth while also providing for family members in need.

"Some of my white colleagues at 26, 27 years old have boats and summer houses," said Michael Lewis, 49, a laborer with the Chicago Department of Transportation who has lived most of his life in Avalon Park. "They have a nice little nest egg planted for them. A lot of us didn't have those. We never seem to get ahead. We just manage to survive."

Haynes' and Lewis' neighborhood offers a good example of how the value of blacks' homes tend to lag behind whites'. Avalon Park is 97 percent black and had a median household income of $44,344 in the 2000 census. Last year, the average single-family home that sold in the South Side neighborhood went for $136,000, Chicago Realtors Association sales data shows.

Across the city, in the Northwest Side Portage Park neighborhood, the median income is nearly identical to that in Avalon Park, but the neighborhood is 70 percent non-Hispanic white. The average house there sold for $308,000 last year -- even though the neighborhood had twice as many reported crimes as Avalon Park, according to Chicago Police Department statistics.

So, despite bringing home similar incomes, whites in Portage Park have access to far more wealth: They are selling their homes for nearly 126 percent more than homes in largely black Avalon Park.

"The benefits for living in a black neighborhood are almost completely cultural, whereas the drawbacks are almost completely economic," said Mary Patillo, a Northwestern University sociologist who has spent years studying Chicago's black middle class. "There's some choice about where to live. But that choice has been determined over years of discrimination."

Makes him more determined

Decades after civil rights laws were enacted and affirmative-action initiatives became commonplace, racially segregated neighborhoods continue to hurt blacks' pocketbooks. Yet some black homeowners prefer the comfort they find living in a black neighborhood.

That was the case for Tracy Pruitt, 31, a management consultant who recently bought a condo in the Woodlawn neighborhood near the University of Chicago.

"I consider the South Side where the black people live," said Pruitt who grew up in California but moved to the Chicago area to attend Northwestern's Kellogg School of Business.

"I moved here because I thought it was going to be a good investment and because it was a black neighborhood," Pruitt said.

Even though his parents were middle class, Pruitt is certain they will have nothing to pass on to him. That lack of nest egg makes Pruitt even more determined to accumulate wealth.

"I hope to do this again -- pick a sketchy neighborhood and buy in and wait for the neighborhood to turn," he said.

For those who have grown up in Chicago, the South Side has the added lure of where many family members reside and where African-American churches are a bedrock. It also offers more cultural amenities, like salons and barbershops that cater to black clients and grocery stores that carry collard greens and plantains.

Clemon Clay bought his four-bedroom house in Avalon Park 35 years ago after a friend told him about the neighborhood. Now 77, the retired postal worker has no plans to sell. But if he did, he figures he'd get at least $50,000 less than if his home were in a white neighborhood.

"You have to chalk it up to the way things are," said Clay. "I'm not going to worry about what I could have gotten."

Ted Cook lives in Matteson. "You've got to deal with something no matter where you live," said Cook, 39. "Being black, you're going to have some kind of cross to bear."

Another factor is pay disparity

The gap in what homes sell for in black vs. white neighborhoods poses a particular problem in Chicago, deemed the most segregated city in the nation by the University of Michigan's Institute for Social Research. Chicago's predominantly African-American neighborhoods are more densely black than its largely white neighborhoods are white. There are 22 neighborhoods -- mostly clustered on the South Side -- that are at least 90 percent black. Only two city neighborhoods -- Edison Park on the Far Northwest Side and Mount Greenwood on the South Side -- are at least 90 percent non-Hispanic, white.

According to a Chicago Urban League study this year, more than 80 percent of blacks in Chicago would have to move for the city to achieve residential parity. And in the suburbs, more than half of African Americans are clustered in just 17 of the 265 municipalities in the six-county area. Overall, the Chicago metropolitan area is the fifth-most segregated in the nation.

Another factor that feeds the racial wealth gap squeezing the black middle class: African Americans make 78 cents for every dollar white workers earn. The disparity narrows among those who have graduated from college, with blacks making about 90 cents for every dollar whites make. But 32 percent of whites have college degrees; only 17 percent of blacks do. African Americans interviewed for this series said the gap is obvious. Some whites, though, don't see it.

"I don't think the racial differences are that big of a problem," said JoAnn Sparacino, 41, of Portage Park, who is white and works part-time as a clerk in a delicatessen. She said she and her husband, a seasonal truck driver, often struggle to provide for their four teenagers. "Everyone has the same issues," she said.

But Sparacino, whose father is a retired Chicago firefighter, has a safety net many blacks don't have: She can turn to her parents for help. Recently, the Sparacinos were behind on their mortgage and faced the possibility of losing their home. Sparacino's parents helped out, lending them what they needed.

"They wouldn't let us lose our home," Sparacino said.

Middle-class blacks are less likely to have such a safety net. They are more likely to have grown up in poor or working-class households than middle-class whites. Often, blacks in professional-level jobs come from families of postal workers, teachers and factory workers. Experts say today's black middle class is most likely the first generation to attend college and the first generation to invest in the stock market.

As a result, they are less likely to be able to lean on their families for college expenses or buying a house.

"They are beginning behind the eight ball," Northwestern's Patillo said. "It's not just that you didn't get any money from your parents, but you are crawling out of debt to become middle-class."

"For the most part, the black middle class is not intergenerationally middle-class," said Melissa Harris Lacewell, an assistant professor of political science at the University of Chicago's Center for the Study of Race, Politics and Culture. "It is one, maybe two generations out of poverty. The black middle class is actually a poorer middle class than its white counterpart."

Blacks also are more likely to miss out on the economic benefits of marriage because African Americans are the race least likely to marry, and blacks have significantly higher divorce rates than whites.

In many cases, blacks who've achieved middle-class status are the success stories of their extended families, more highly educated and having achieved more than other family members. As such, many are expected to help financially support parents and other relatives -- a burden they accept but that strains their ability to save and, eventually, to leave more wealth to their children.

'It's why I always pinch pennies'

They are a "sandwich generation" with greater pressures to provide for their parents as well as their own children, said Mellody Hobson, president of the Chicago firm Ariel Capital Management, a situation that she said hurts their ability to save, invest and get ahead financially.

"We have more strains on our precious resources because we're more likely to be taking care of aging parents and adult children," Hobson said.

Despite such pressures, Jimmie Murray is determined to set aside enough to help his children.

"One of our goals is to get where we can pass on some inheritance to our kids," said Murray, 43, of Evanston, who is black and grew up in Chicago.

He and his three siblings were raised solely by his mother, a factory worker. He is the first in his family to attend college, which he did after serving in the military.

Now a project manager for an information technology company, Murray and his wife, Tricia, a school psychologist, make an upper-middle-class income. But when they bought their first home eight years ago -- the duplex in Evanston where they still live -- they couldn't turn to their parents for help with the down payment.

"It's always in the back of my head where I came from," said Murray, who has two children. "It's why I always pinch pennies. We pay cash for everything. The only debt we have is this house. You never know what could happen. You never want to struggle again."

Among his extended family, Murray said he's viewed as the big success. So family members come to him when faced with an economic crisis, a phenomenon so common that academics have a name for it -- leveling.

"It causes him a great amount of stress," Tricia Murray said of her husband's family's requests for money. "He loses sleep. He carries a burden for his family. He feels responsible for his siblings, his mother, all of his nephews and nieces."

Murray looks at it this way: "They looked at me and relied on me to be the savior of the family. And sometimes I don't want to be the savior. But I do what I have to do."

Contributing: Art Golab