Detroit Housing Crisis: A Historical Perspective

When Dr. Karl D. Gregory read stories recently in the local newspapers about the city of Detroit overtaxing homeowners by roughly $600 million following its failure to accurately lower property values following the Great Recession, the retired economics professor could only shake his head.

A distinguished professor emeritus of economics at Oakland University in Rochester, Gregory knew such a catastrophe would impact black and brown Detroiters the most. And he shuddered at the thought of how difficult it would be for the city to make all of the victim’s whole without creating another financial crisis of its own.

“This particular crisis is going to be especially painful to resolve,” he said, “because historically the main source of black wealth in the U.S. is tied up in the equity in their homes.”

“And more than any group of Americans, black Americans took the biggest losses during the Great Recession because of losing their homes as a consequence of the mortgage crisis which helped triggered the recession,” Gregory said.

“Much of black wealth was wiped out as families were encouraged to take out loans even if they were not qualified,” he said. “The banks would repackage and sell the loans to others, eliminating the “risk” to the initial lender and transferring it to the uninformed purchaser of the loan packages. So when the inevitable happened people had their homes taken from them Mortgages defaulted and it wiped out a lot of wealth.”

“This is capitalism at its worst,” Gregory said.

The professor isn’t exaggerating. In fact, according to a July 2018 Michigan Public Radio report, homeownership rates for African-Americans declined nationwide in the wake of the Great Recession. However in Michigan, with a historically high level of black homeownership, the report noted the drop was steeper—from 51% in 2000 to just 40% in 2016.

“Wayne, Oakland and Macomb counties experienced the largest drops in the state. And African-American homeowners aged 45-64 were the hardest-hit, with homeownership rates falling 18%. Thus, African-American homeownership has fallen further in Michigan than in any other state since 2000,” it said.

So, in the minds of many people, the overtaxing scandal has come to symbolize for many African Americans and black Detroiters in particular, the

frustrating and maddening relationship between African Americans and the U.S. Economy.

Indeed, some of the best known and large major institutions and businesses today were founded based on profits from slavery and with loans using slaves as collateral.

“The current beneficiaries of these ill-gotten gains have also benefitted from hundreds of years from interest and capital gains earned at compounded rates,” Gregory said.

While it is understood almost intuitively by most black citizens that they live in the most successful economic system in the world, it is also understood just as reflexively that it was built largely upon the backs and violently enforced free labor of their ancestors. And yet, after more than 400 years in the country, African Americans remain consistently marginalized from that very same economy. And that includes during both good and bad times, even though black-owned businesses employed over a million people and generated over $104 billion in sales in 2016, according to the U.S. Census. And according to a February 2018 Nielsen report the black community accounted for a combined $1.2 trillion in consumer spending in 2017, an amount that is projected to reach $1.5 trillion by 2021.

So, as P.J. Lockhart, a writer for the online web magazine, Vox, noted in an August 2019 article entitled How slavery became America’s first big business, the evidence is clear that black Americans were foundational in creating the most successful economic system in the world: “The bodies of the enslaved served as America’s largest financial asset, and they were forced to maintain America’s most exported commodity. In 60 years, from 1801 to 1862, the amount of cotton picked daily by an enslaved person increased 400 percent. The profits from cotton propelled the US into a position as one of the leading economies in the world and made the South its most prosperous region. The ownership of enslaved people increased wealth for Southern planters so much that by the dawn of the Civil War, the Mississippi River Valley had more millionaires per capita than any other region.” How slavery became America’s first big business.”

The question then is as we enter the 21st century why is does the black community continue to flounder in the American economy despite having collectively more than $1 trillion in money to spend?

Gregory, the retired economics professor said structural racism, widespread discrimination in lending, redlining, employment discrimination and the lack of educational opportunities perpetuate the inequities by hindering far too

many African Americans ability to access capital or even save enough money to pass along generational wealth.

“The severe over taxation of poor and middle class black and brown homeowners is the perfect metaphor for this tragic phenomenon,” he said.

Making matter worse is that, he is not at all certain the residents will be properly compensated.

“In spite of the problems it may create for the city budget, it will be extremely painful if affected Detroit residents are not compensated for the loss,” Gregory said.

“How to do so is an analytical challenge, because many victims have moved out of Detroit or been forced out by gentrification,” he said glumly. “Where there is a will, there should be a way. But is there the will?”

By: Whitney Gresham

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