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This is the fifth and final chapter in a series of research articles on racial inequities in US housing produced by the Chandan Economics Research Team. Other posts in this series can be found here: 1. Racial Inequities in Household Wealth. ; 2. Racial Inequities in Housing Affordability ; 3. Racial Inequities in Access to Credit ; 4. Racial Inequities in Housing and Environmental Quality.
A natural part of the discussion surrounding historical racial inequities in housing and wealth is what restorative policies could look like. In the fifth and final chapter of our 2023 series, we explore recent and ongoing policy efforts focused on reducing and redressing longstanding disparities.
Policies that influenced historic racial wealth disparities had a federal, state, and local scope—as do their potential remedies. While there is a myriad of potential market-based or regulatory solutions that could be used to confront the racial housing and wealth gap, in this piece, we summarize a few recent and ongoing policy efforts that have gained increased attention as of late.
Advancing Equity Through Federal Contracts
On February 16th, 2023, President Biden signed an executive order directing federal agencies to produce annual “Equity Action Plans” and requiring 50% of all federal contracting dollars to be awarded to small and disadvantaged businesses by 2025. The rule also prioritizes economic development in rural areas, where the human costs of poverty are often amplified.
While the executive action is limited to the confines of business conducted by the US government, it could create new competition for contracts and talent, pulling income-constrained Americans into and up the wealth ladder. The order could also set a benchmark for private businesses and non-profit organizations to measure their own racial equity goals against, facilitating more attention toward addressing longstanding disparities.
Strengthening Fair Housing Act Enforcement
On January 19th, The US Department of Housing and Urban Development (HUD) announced its new “Affirmatively Furthering Fair Housing” Rule (AFFH) aimed at promoting housing choice and fostering inclusive communities. The rule would bolster enforcement of the 1968 Fair Housing Act.
The decades-old law outlawed racially discriminatory practices at the state and local levels while requiring jurisdictions to take action to undo historic segregation patterns. However, politically controversial at the time, federal integration efforts were largely tabled for the better part of the following four decades while the federal guidelines that remained in place proved to be ineffective.
HUD's new 2023 AFFH builds off previous recommendations and efforts by enhancing the agency’s mechanisms for assisting and evaluating state and local compliance. Specifically, HUD looks to simplify the fair housing analysis required from localities while emphasizing goal setting and transparency.
Racial Equity Action Plans
At all levels of government, Racial Equity Action Plans (REAPs) have become more commonplace. A repository built in 2021 by the National League of Cities outlines the breadth of racial equity-oriented actions considered or implemented by local governments in the past decade. Still, as the US policymakers find a renewed sense of urgency to tackle inequity challenges following the 2020 George Floyd protests, more extensive and comprehensive proposals have begun to take shape.
In 2022, Washington DC made headlines by introducing the city's first REAP. The DC REAP sets forth a three-year roadmap of specific actions the municipality will take to address racial inequities. It includes proposals such as developing training materials for city agencies, measuring equity efforts in municipal budgets' key performance indicators, and engaging with community-based organizations on more specific objectives.
Community-Centric Pilot Programs
During Chandan Economics’ research on racial inequities in housing and wealth, we have emphasized the role that assets and access to credit have played in entrenching the racial gap in upward mobility. Beyond equity action plans, market-oriented incentives facilitating investment and ownership are crucial catalysts to closing the gap.
In Chicago, a pilot program focused on community wealth building has taken shape. The pilot, introduced in September 2022, commits $15 million toward creating opportunities concentrated on shared asset ownership, intending to address minority access to business ownership, home ownership, and commercial real estate.
Specifically, Chicago’s program prioritizes engaging with more cooperative models over shareholder-based ones. For example, businesses that receive the program's investment must be owned with disseminated control between employees rather than single or several owners. Housing that received funding must also be organized as cooperatives, while the fund will use land trusts and other community investment vehicles to inject investment into commercial real estate development. The program is likely to attract some detractors, given its free-market shortcomings. Still, it and others should encourage alternatives that would compete and improve upon earlier community wealth-building models.
Conclusion
Silver bullets rarely exist in the policy world, which remains true when grappling with longstanding racial inequities in the US economy. A combined-arms-like approach that blends market-based incentives alongside complementary federal, State, and local equity goals would yield the most effective outcomes for affected groups. The recent mobilization of public resources and private sector equity goals becoming more commonplace is a desirable step in the right direction.
As policymakers contend with growing economic snags such as inflation, affordable housing, and tight labor markets, prioritizing policy efforts will become more challenging. Still, as our research in this series has shown, the nation's most vulnerable groups often shoulder the heaviest costs of these challenges. Keeping an eye on equity in any new challenge will remain vital.
Other posts in the 2023 series can be found here: