Racism and the Economy: Focus on Housing Transcript - March 1, 2021


Raphael Bostic: Welcome to the fourth installment of the Federal Reserve Bank's Racism and the Economy series. I'm Raphael Bostic, president of the Federal Reserve Bank of Atlanta. In case you're joining us for the first time, I'll give you a little background on the series. We launched the series last fall to talk about how systemic racism has economic consequences for individuals and for the country. And then to lift up tangible actions that can change policy and improve practice to make a positive difference in people's lives. We've already talked about employment and education in previous sessions, which you can view on the series webpages. Today, we will focus on housing. In my opening remarks, I'm going to answer two questions; why housing? And why the Fed?

Regarding the first question, a first point is that housing is very important economically. Where you live, your housing, determines so many outcomes. Things like what school system you go to and what jobs are accessible, as well as other factors that affect the person's quality of life, like health and safety. If you don't live in an area where you have access to these building blocks, your ability to develop, contribute, and thrive economically is significantly constrained. A second answer to the why housing question for this series is that racism has played a continuous role in the history of housing in the United States. As Richard Rothstein writes in his recent history, The Color of Law, this took many forms.

Early public housing was segregated, many local governments imposed racially segregated zoning, real estate covenants ensured that a deed could not be transferred to an owner of another race. The government explicitly refused to back mortgages for people of color. Governments actively resisted the integration of residential communities. White residents sought to preserve segregated neighborhoods, sometimes through persecution and violence, sometimes by simply moving elsewhere. And as a final example, real estate speculators often facilitated these moves through deliberate blockbusting. While fair housing laws and enforcement have eliminated some forms of racial discrimination in housing, the impacts of this history are still felt.

And as you will hear today, certain practices allow past inequities to endure and even intensify. Today's patterns of segregation and disinvestment in communities are often not chance occurrences, or due to broad-based resident racial bias, instead they are too often a direct result of systemic racism in housing. In short, I think you couldn't have a series on racism and the economy and not include housing as a topic. Now for the second question, why the Fed? I'll highlight two reasons, though there are almost certainly others. First, as I noted, housing is important and when it doesn't work for everyone, then individual opportunities are constrained, and the aggregate economy will perform worse than it could. This speaks directly to the Fed's full employment mandate.

And second, the Fed's policies touch housing in many ways. Our target interest rate influences the prices set by mortgage lenders. We supervise the lending activities of the banks we regulate to ensure their mortgage practices are not discriminatory. We have a long history of conducting research that seeks to understand housing market frictions to influence better housing policy. In short, the Fed has been paying attention to housing for a long time and will continue to do so moving forward. It's natural for us to be in this conversation. Now let's get to the program, housing is abroad issue, and so today we are going to focus on a narrower set of interrelated issues.

Our focus today is on the ways in which racism and racial exclusion have limited housing opportunities and wealth building for communities of color. We focus more today on home ownership than renting, though we understand that renters who are Black, Indigenous, and people of color, represent a large group and that they face significant challenges. We will engage in a conversation with leaders from policy, practice, advocacy, and academia to discuss how we can eliminate racial disparities in housing opportunity. Where possible, we'd like to include you in the conversation. To get in on it with your friends, thoughts, reactions, and questions, tweet to us with the hashtag #RacismandtheEconomy. And that's one word, or you can email us at racismandtheeconomy@bos.frb.org.

And I'll thank our Boston colleagues in advance for handling that part of today's webinar. So now I'd like to welcome two experts to our virtual stage for our conversation. Andre Perry joins us from the Metropolitan Policy Program at the Brookings Institution. And Keeanga-Yamahtta Taylor comes from the department of African American Studies at Princeton University. You can read the bios online so we can jump straight into the conversation. Andre and Keeanga, thank you for joining us.

Keynote conversation

Keeanga-Yamahtta Taylor: Thanks for having me.

Andre Perry: Hey, thanks for having us.

Bostic: Well, it's really good to have you here and I'll start with you, Professor Taylor. Now, you write about how strategies to include Black people, and other people of color, in financial and housing markets that they had previously been excluded from in the 1960s has failed. Can you tell us what went wrong and why?

Taylor: Yeah. And let me do this starting back even earlier. November 1925, the social scientist and cultural icon W.E.B. Dubois wrote an article for the NAACP publication called The Crisis. It was an article in defense of a young Black doctor named Ossian Sweet, Sweet's wife, and nine other Black defendants that were facing trial for the murder of a white man. The shooting that took that man's life commenced in the midst of a riot created by Sweet's white neighbors, in a concerted effort to force Sweet from a home he had recently purchased in an all-white neighborhood in Detroit. The NAACP had become involved in that case as part of a much broader campaign against segregation in the North.

They found, in 1926, they named urban segregation outside of the north as its most important campaign. And the three characteristics that tied that together were restricted covenants, that you mentioned earlier, racial zoning ordinances that tried to dictate where Black people could live, and physical attacks and mob violence used to drive out Black families from white neighborhoods and to intimidate them from moving into other areas. In Dubois' article, he was less interested in the pervasive denunciations of racial prejudice that white progressives of that day, the liberals of their time, decried. Instead, he looked slightly deeper into the business of racism and the mechanics within the real estate industry that were wielded in ways to manipulate the emergent housing market.

Those kinds of actions, from back in the 1920s, that were then codified into public policy in the 1930s, reinforced by decisions made by the Supreme Court, are not just ancient history. But they're really actions that were taken, that continue to shape the world that we live in today. And so while mob violence, restricted covenants, and racial zoning may be a part of our history, their imprint remains on the so-called built environment. The absence of investment encouraged by private-sector institutions and public policymakers have strangled Black communities of investment in resources, thereby manufacturing good neighborhoods for some and bad neighborhoods for others. These perceptions of good and bad are insolubly linked to perceptions of race as a result.

Indeed, these perceptions have migrated from real estate to popular conceptions of who are good and bad people in the American imaginary. The notions of ordinary Black people as criminal, lazy, undeserving, carefree, and destructive cannot be decoupled from widely held public beliefs about the conditions of Black neighborhoods and Black communities. And while there has been a lot of focus on the role of the state and government in this, what I'm looking at is the ways that the relationship between the private sector, between the real estate industry, coupled with public agencies, have created these situations by linking racial discriminatory practices in the private sector to public policy.

And so I think that as long as the federal government continues to yoke its public policies that are intended to expand housing opportunities to a sector that, from its inception, has both conjured and maintained racist practices to build value into the market, we will continue to see these practices and problems persist because, in and of itself, it undermines the ability of the federal government to fully regulate and police its relationship with these private partners.

Bostic: There was a whole lot in there. You talked about the business of racism, that perceptions have been bad. I want to return to both of those, but let me first turn to Dr. Perry because some of his work actually speaks to some of the things you're talking about, in terms of appraisal and the notion of value and those aspects. So Dr. Perry, you've actually really looked at quantifying the gap and the perceived value of homes, the majority white versus equivalent homes in majority Black neighborhoods. Can you talk a little bit about what you found and then also talk about this in the context of what Professor Taylor talked about as the business of racism?

Perry: Yeah. First and foremost, I want to thank you and the entire Federal Reserve team for putting this together. It's an important conversation to have. And I'm also a big fan of Keeanga's work, she's done tremendous work on this very issue. So it's an honor to be here. I did, along with my colleagues, David Harshbarger and Jonathan Rothwell, we looked at home prices in Black majority neighborhoods and compared them to white neighborhoods, where the share of the Black population was less than a percent. And most people know that home prices in Black neighborhoods are less, but most people will blame for those lower home prices on things that Keeanga mentioned, on character flaws or moral misgivings. And they'll say things like education, crime are the cause for lower prices. But those are things you can control for in a study.

So that's what we did. We looked at home prices, but we controlled for education, crime, walkability, all those fancy Zillow metrics. And what we found is homes in Black majority neighborhoods are underpriced by 23 percent, about $48,000 per home. Cumulatively, that's about $156 billion in lost equity. Now that equity, and this is somewhat getting to the business of it, we know that schools essentially are financed through assessed values of homes. We know that infrastructure and policing and those critical services but understand that $156 billion would have financed more than 4 million Black-owned businesses, based on the average amount Blacks use to start up their firms. It would have paid for more than 8 million four-year degrees, based on the average amount of a four-year public education. It would have replaced the pipes in Flint, Michigan, 3,000 times over. It would have covered all of Hurricane Katrina damage. And it's twice the annual burden of the opioid crisis.

Now I bring up that last point of the opioid crisis because these data are real for me. I talk about this in my book Know Your Price, that my father died, essentially, in prison. He entered because he was a heroin addict. And in my writings, I followed where he lived. I looked at the housing conditions. And it is absolutely clear, if he lived in areas in which the housing or the market rate or the white rate, he would have had better schools, greater opportunity to start a business, greater opportunity to go to college. His life would have been different, and yes, he made poor choices, but it is no question that discrimination in the housing market was an accomplice in his death. And today, those numbers I put for you today, that is 2017 numbers. 2017. $156 billion.

And so when we ask that question, what can the Federal Reserve do? I just want to give another interpretation of my data. That the pricing of homes in Black neighborhood. It's almost as if people see twice as much crime than there actually is. That there's worse education than there actually is. So when we talk about appraisal, this is not just an issue with the appraisers, this is an issue of the perception of Black people coming out in the wash in this data. And this is pervasive in real estate agent behavior, lending behavior, all throughout the market. And so for me, when you talk about how it is central to everything that we do, it's connected to education, infrastructure, policing, all these different things. But it's also been used as a weapon to deliberately devalue and hurt Black people. And there is actually, I'm missing one important part, it's been part of a growth model for whiteness in this country. People have advanced their communities because of these harmful practices throughout the market.

Bostic: Well, there's a lot there as well. And first I want to say, Dr. Perry, sorry for your loss, and one of the things and one of the reasons why we are having this series is because a lot of the underlying causes are systemic. And in that regard, they're largely invisible to much of the population, but they're not invisible in their impacts. And so we're really trying to lift this up, to make people at least aware that there are, possibly—and in this case I think it's obvious—that there are things going on.

We need to be thinking about that and be paying attention to it. Both of you talked a bit about perception and the idea that perception drives decisions much more than what's actually happening on the street. That's interesting. How is it that that's able to persist and sustain? What things might we be able to do to make sure that those sorts of perceptions don't continuously seep into the practice of valuation and flows of capital for housing. Dr. Perry, you can go first [crosstalk].

Perry: I'll start. For me, one of the quickest ways, but it's been hard for America to do this, to change perception is to invest in Black people. When you look at the devaluation and the loss of equity and capital on Black communities, Black people, you ultimately have to repair that damage in order, one, to build trust with those communities. And two, to elevate the wealth status of folks. We know that wealth is a predictor for everything, from health, education, where you work, where you live, all those different things. And for me, the thing we have to do first and foremost is restore the value that's been extracted by racism. To end the real pain that's occurring.

But investment also changes perception. I study under assets in the main, meaning, if you just add water, it will grow. One of the reasons why people harbor these negative stereotypes is because they have not seen the quality and the growth because of a lack of investment, not because of these stereotypes. And so for me, it starts with investment. The same way we got out of the Great Depression by investing in white people, in whiteness, we can get out of the current recession and several other incidents if we invest in Black people.

Taylor: Yeah. I mean, I agree with that, in part because these perceptions don't just reside in the housing market. They're not just created unto the housing market itself. So if we think about the construction of value, that is a social phenomenon. We know that there is no such thing as intrinsic value. It is something that is socially constructed, based on our perceptions, desires, what we see around us. And so the multitude of issues that impact African American communities, because of patterns of disinvestment driven by the private sector, reinforced through public policy, have created these perceptions without any deeper analysis or explanation for why there might be poor housing, housing in greater distress in Black communities. Or under-resourced public institutions in Black communities. Or jobs deserts or food deserts.

People don't look for greater explanation for that. They look at Black communities as these broken, socially dysfunctional places, poor and working-class Black communities in that way, because there is no greater context within which we view these things. And so I think it means that there are many aspects, socially, that have to be attended to in order to begin to change that. But in the meantime, I think a big part of this discussion has to do with regulation. And it has to do with enforcing the existing laws that exist on the books, in regard to protection of civil rights. Because regardless of how your perception is shaped or developed, you do not have the right to discriminate against people in this country on the basis of race and ethnicity.

And yet we know that it is pervasive, not just among individuals, but within these industries. And part of the reason for that, I think, is because there has been a pattern over a long period of time that regulations, rules and regulations regarding civil rights and housing discrimination, will not be rigorously enforced. There will not be crushing fines. There will not be behavior-altering punishments that force people to use other measurements when constructing value. So I think that there has to be robust enforcement of existing civil rights laws that is coupled with investment in working-class and poor Black communities.

Perry: And I just wanted to just add one thing very quickly is that, I used to do a lot of work, I still do, in education. And it's amazing that so many Americans simply don't know anything about redlining, Reconstruction, all these different major historical moments. And so when they're looking at Black communities or Black outcomes, they fill that ignorance with conspiracy theories and all these things that are irrelevant to the condition. And so we do need an educational component, not just in K-12 schools, but just like what you're doing now, that everyday citizens simply don't know the extent to discrimination has had on the material resources for Black people and Black communities.

Bostic: And I only half-jokingly say that since I wrote my essay last summer on the moral and economic imperative of racism, I have become a historian and actually had to talk a lot about just the practices and the history, because too many people are totally unaware of this. And I think that's actually one of the insidious aspects of our systemic problem, that a lot of the things that have put the system in place are just totally invisible. And we don't actually talk about it explicitly, which makes it hard for us to think about what a solution looks like. Professor Taylor, before I let go of the enforcement issue, I did want to go back. So why do you think that we don't have such rigorous enforcement, where you have levels of punishment that will induce behavior change? What's behind that?

Taylor: In some the research that I did for my book Race for Profit, one of the explanations, and this didn't make it into the book—the book is a revision of my dissertation, and my dissertation research I focused in on Chicago—and one of the reasons that was stated in the Chicago office of the FHA and HUD, which had tremendous amounts of corruption in the 1970s, one of the reasons why the existing laws weren't enforced was because of what both HUD officials and people in the mortgage banking business described as a sleeping bed relationship between the two. Which is to say, that people within, who were working for the FHA and HUD, wanted jobs in the private industry. People in the private industry would leave and come into the public sector.

Everyone knew each other, to some degree or another, and there was a reluctance to rigorously enforce rules, partly because of those relationships. I think another aspect of it, that is the focus of my book, is the complicated nature of what happens when the federal government has outsourced almost all of its housing production to the private sector. And in that case, in that situation, it really imperils the ability for the public, for the federal government to, I think, police its private partner when it is so completely dependent on it for the production of housing. And so I think it's ... somewhere between those two have created a real reluctance and this idea that this is really the private sector's job.

So that even in 1968, when the Fair Housing Act is passed, the Civil Rights Division of HUD is created, which is tasked with the responsibility of enforcing anti-discrimination laws. It is given a $6 million budget. Five million of that goes to staffing, leaving $1 million for 120 people to investigate all claims of housing discrimination in the United States. So even at its inception, this was never conceptualized as a robust aspect of what HUD would be doing. And I think that that's a part of the explanation of why we continue to rehash these problems over and over again.

Bostic: I would just add one more thing on that, which is where you guys started, which is the perception and the idea that many of the problems that we see in these communities are of the people who live in the communities. And that there aren't things being done to them, so there's really not that much that we have to worry about enforcing in the first place. I think there is some of that, that overlays on this as well, which [crosstalk].

Perry: Can I add to that? And that thinking is also just a form of an abdication of investing in Black communities. Because there's also this perception that if you invest in Black communities, you're taking away from white communities. And there's this scarcity model, that people really have in their head, that if we give to Black people, somehow we're going to take away from whites. And the reality is, when you invest in those underappreciated assets, when you invest in people in ways we haven't before, the proverbial pie grows. And we have more revenue, we have more resources, we have greater safety, we have more innovators. But, I mean, people have abdicated their responsibility for providing what the basic necessities for communities to grow.

Taylor: Let me just also say that, I think that, yes, there's a lot of popular ignorance, and through no one's particular fault. I mean no one is going around teaching about redlining and these histories. That is true. I do think within the industry, it's a little bit of a shield. I mean, we have almost annual reports, exposés, about deep, embedded racist practices happening in banking. There's a periodic report about the resumption of redlining, there are newspaper exposés, there is all of this information about what is happening, that doesn't actually prompt action.

And it doesn't compel us to ask why is it that newspapers, newspaper organizations, are often put in these positions of carrying out these investigations and not the actual state? So ignorance is a feature, in some respects, but I think within the industry, this is not a function of ignorance. This is a function of a business model that people have found to be successful and resist rooting out. Because we have been talking about this, exposing this, talking about the roots of this, for nearly 100 years. And some things have changed, absolutely, but many things have not.

Bostic: Well, we're just about at time so I'm going to summarize a couple of things, because this has raised some really important issues. I think back to a Boston Fed study in 1990, where bankers really didn't think there was going to be a gap. They actually believed that their policies and practices were neutral. I think they were surprised, in some regards, or to some extent, that it didn't play out that way. And it led to a deeper examination of what was going on and why. Some of the research I've done has shown that there are parts of the distribution in mortgage lending, for example, where the decision is pretty clear. But it's when you get to the gray area where people have to make judgements, then value comes in. Then those other things come in that are very important. And I would also say, it's an incredibly multilayered and complex system. There are many decision makers. Appraisers, for example, often are working on their own, they have personal relationships with lenders. And all of that has to be monitored in a way that makes this quite difficult. I'll just close with two thoughts, so one is that, just listening to both of you, the idea that history matters for today is incredibly important.

And I'm an economist by training. And when I think about the field of economics, we often take today's situation as given conditions. That they're just exogenous and they just are. And I think that has led to less reflection on this than possible, and probably less attention than possible. And the last thing I would say on this is that, I've been mulling over for the last several months the idea that wealth is the marker. And if you have wealth, you're going to have access to a lot of things in terms of opportunity and small business creation and all those sorts of things. And African Americans, and many minorities in this country, have been actively prevented from getting that to that wealth.

So there's a wealth penalty that we're going to have to figure out how to deal with and how to not penalize people today because their predecessors, their ancestors, were not able to get wealth. I think that's an issue that we're going to continue to wrestle with and I'm hopeful that we get some answers to that as we go through today. So Keeanga and Andre, thank you very much. I know you're going to be back later on, for the second half of today's program, I really enjoyed this, and I look forward to hearing your remarks later on. But for now, I will turn it over to Amy Scott of American Public Media's Marketplace. Amy?

Proposal presentations

Amy Scott: Thank you so much, President Bostic, and also thanks to Dr. Taylor and Dr. Perry. You've given us so much to think about today. For the next section, we're going to hear some specific policy proposals for addressing systemic racism in housing. Each presenter is going to have about five minutes to share their proposal and then we'll bring in some more experts in housing, finance, and community development to respond. If those of you in the audience have questions for any of the panelists, you can tweet them using the hashtag racism in the economy. I'll try to get to one or two of those questions later in the program. To keep things rolling today, I'm going to keep introductions brief. So feel free to check out our speaker bios on the event webpage at minneapolisfed.org. We're going to start with the proposal from California senator Scott Wiener, who's going to talk about eliminating single-family zoning to expand the housing supply. Welcome, Senator.

Scott Wiener: Thank you so much for having me and thank you to everyone for being here today and for talking about housing, which is so critically important. So I think, when we talk about single-family zoning, which historically has just been, and continues to be, incredibly damaging, it's important to understand exactly what we're talking about. Sometimes this gets portrayed as being against single-family homes or getting rid of single-family homes, when that is absolutely not what it's about. Single-family zoning should really be called single-family mandatory zoning, because what single-family zoning is, is it provides that the only type of housing that it is legal to build is a single-family home, one unit of housing for a parcel. It is illegal, prohibited, to build anything else—a duplex, a triplex, six-unit apartment building. Only single-family homes. And so when we talk about ending single-family zoning, it's really about legalizing other forms of housing.

To say that, yes, if you want to build a single-family home, great. But if you want to build an apartment building, great, we can have all of it. And that's how it used to be. It used to be that you could build various kinds of housing and you look at a lot of different cities, for example, you'll see that there are apartment buildings in what we view as single-family neighborhoods, because they were built long ago, before that went into effect. And if you look at why single-family zoning, in other words, mandating that only single-family homes can be built, the history of it, it's a pretty nasty history. The idea of single-family mandated zoning was amended about 100 years ago, and it was invented right after the US Supreme Court struck down racial zoning. Because you had cities that were zoning areas only for white people. The US Supreme Court, thankfully, struck that down as an equal protection violation.

And then shortly after that, cities that were wanting to continue having housing segregation, enacted single-family zoning, banning apartment buildings. Because if you can't explicitly keep people of color and lower income people out of a community, you can do it by saying that unless you can afford a single-family home, often on a large parcel of land, then you can't live here. And in fact, it was very explicit when it was created that it was meant to keep quote-unquote "undesirable people," including people of color, out of those communities. And single-family home zoning grew over time, and it really grew in the '60s and '70s, into the '80s, and it's had a number of impacts. First, it does perpetuate segregation, income, and race. And although there are communities that are zoned single family that have large communities of color in them, particularly in California, which is what I know best, it's the exception, not the rule. And so it does perpetuate segregation.

Second, it puts a hard cap on the supply of housing in terms of affordability. In California, we're short millions of homes, that is true in other parts of the country as well. And when you say that, as we're growing in population, you can only build one unit of housing per parcel, that creates a math problem in terms of the supply of housing. Because you are inherently saying we're going to dramatically limit how much housing can be built, even though you could comfortably and appropriately build two, three, four, six, eight, however many units, on this parcel. We're limiting you to one home on that parcel. Back in the day, when we were a little smaller country, a little more sparsely populated, that was okay. It probably didn't cause any kinds of supply issues.

It's causing massive supply issues now, particularly when we see that ban on apartment buildings, through single-family zoning, happening in our major metropolitan areas. Where you have, in California, the large majority of land is zoned only for single family. We have cities like San Jose, where I think 70 to 80 percent of the land is zoned only single family. This is the part of Silicon Valley. Big slots of LA, only single family. Almost half of San Francisco, tiny little San Francisco, almost half only single family. So we're limiting supply and we are limiting it, often, in exactly the areas where there's the most economic opportunity, in the Silicon Valley, in San Francisco, LA—these areas with high economic opportunity. And we are dramatically restricting the amount of housing, the amount of families and people who can live in that area.

And then finally, single-family mandated zoning, banning apartment buildings, dramatically restricting the amount of housing, is pro climate change because we're often doing this, taking this restrictive step, in areas that are job rich and transit rich. And so we see areas in California where you have subway stations, major transit-rich areas, lots of jobs, and only single-family homes are allowed in those areas. And so you are, by doing that, reducing the number of people who can live near jobs and transit, and either not drive or drive shorter distances, and you are forcing them to live further and further and further out with huge commutes, increasing carbon emissions and so forth. And so because of single-family zoning, increased housing segregation, dramatically restricted supply of housing, thus making housing more expensive, makes climate change worse. It should be eliminated, not eliminating single-family homes, but allowing both single family and apartment buildings to peacefully coexist so we can have a brighter housing future.

Scott: Okay. Thank you, Senator Wiener. We're going to talk more about how eliminating mandatory single-housing zoning would alleviate systemic racism, specifically. But we're going to move on to hear from Junia Howell, who is an assistant professor at the University of Pittsburgh. And her proposal is to address racism in the appraisal process. Welcome.

Junia Howell: Thank you, thank you for having me. Ever since European settler colonialists began occupying our nation, property, by which I mean both land and enslaved humans, was assessed using property—excuse me, racialized property evaluation. Racialist property evaluation is when property is valued based on its usefulness to white populations and white ways of life. So when Indigenous communities inhabited the land, it was seen as practically worthless, they perceived it as inefficient, thus justifying white settlers' conception that only giving very small, if any compensation for the land, was justified. But they quickly reassessed the value of this land when it was given to white dominion. Similarly, enslaved humans were literally valued based on their usefulness for white businesses. Black and Indigenous activists and resistance pushed back on these notions and started to crumble whites' acceptance of enslavement, genocide, and displacement.

But racialized property evaluations have persisted, and in fact were further institutionalized with the National Housing Act of 1934. For a bit of context, in the early 1900s, appraising was an informal, not very uniform, not institutionalized, profession. But when the stock market crashed and the economic recession led to a huge housing crisis, President Roosevelt promised to reform all of housing. A key piece of this was providing federally insured loans, yet in order to provide these loans, he wanted there to be a way to appraise or assess the value of the properties. So in partnership with industry actors, along with the Home Owners Loan Corporation, they created appraisal standards. These standards that were institutionalized through the Underwriting Manual of 1936, along with the HOLC redlining maps, formally created a system where white communities were valued the most.

These processes persisted until a series of lawsuits and legal action banned the explicit use of race to justify home values. Yet they never addressed the fundamental mechanisms put in place for the last century, that actually kept the racialized process going. Thus, in many ways, it's not surprising that over the last four decades, as Dr. Perry mentioned, we've not only seen the appraisal gap continue, but we've actually seen it increase. If you hold constant property values, excuse me, property characteristics, neighborhood amenities, as well as real estate demand, the racial element of this has increased by fivefold in the last four decades. And there are three primary mechanisms driving this inequality. First are appraisers' own racialized evaluations. Second is the very method used for appraising. And third is the federally created economic incentives.

So first, those appraiser assumptions that can be racialized: appraisers actually have a wide range of discretion when they appraise a home, both in how they assess the amenities as well as pulling comps for comparable sales. Research has demonstrated that this discretionary power allows their own racialized decisions to insert and affect appraised values. To address these inequalities, I propose three changes. First, for the federal government to require federally insured mortgages to use the new and emerging technological tools that are systemizing the way that things like square feet, number of bedrooms, floor plans are being evaluated. Second, to automize the defining of both neighborhood boundaries and amenities, so that they're based off real-time data and not racial assumptions. And third, when using this comparable sales approach, that the uniform appraisal data set would be used to both select and address comp prices to minimize the racial assumptions that are currently in the process.

These three changes will start to really decrease a lot of the racial inequality we see. But in many ways, they wouldn't deal with a much broader problem, which is the very method itself. So I've briefly referenced the sales comparison approach, later I'm more than happy to go into answers, or excuse me, into more detail about what that is and how it entails racial inequality. But right now, I'm just going to focus on how it needs to be changed.

I argue that housing, much like other necessary utilities like water and electricity, need to be valued on how much they cost.

That is how much natural resources, human labor, and public infrastructure it takes to both build and maintain these housing. Additionally, new regulatory processes need to be put in place to ensure that we are de-racializing the process and allow communities to have a voice when they are observing violations. Again, changing the method and the racial assumptions will go a long ways toward supporting racial equity. But third, and finally, we need to also address the federally created economic incentives. Initiatives to address this would include reparations that would address the housing discrimination in policies that we have been talking about for the last hour: incentivizing progressive interest rates that give lower rates to people with less wealth and really revisiting and revising the entire mortgage back security system, which currently both drives up housing prices and racial inequality. These proposed changes, together, would start building a more equitable housing market that would stop using a racialized property evaluation to uphold both white power and white wealth.

Thank you.

Scott: All right, thank you, Dr. Howell. Our last proposal comes from Robin Rue Simmons, alderman of Evanston, Illinois. And she's going to talk about a first-of-its-kind reparations program in her city that she helped spearhead. Thanks for joining us.

Robin Rue Simmons: Thank you, really happy to be here. In November of 2019, we passed Resolution 126-R-19, which is reparations for Black Evanstonians. Our local for reparations is found in our historic anti-Black housing policy—not only redlining, but other racial restrictive zoning that blocked where Black residents live outside of the West End of the Fifth Ward. This reduced our Black population and concentrated the Black population in the Fifth Ward, and of course that stripped away our wealth. The Fifth Ward was also our historically redlined neighborhood, and although we passed and enforced Fair Housing in 1969 in our city, the impact of anti-Black racism remains. Our neighborhood today has our most concentrated Black community, most poverty, least community amenities, no neighborhood school. The only neighborhood without a neighborhood school. Little economic vitality and so on.

We do all forms of diversity inclusion work in our city, we lead with an equity lens, and we celebrate our diversity. We're welcoming. We passed and improved our Inclusionary Housing Policy, we have expanded our affordable housing initiatives, collaborated with housing experts and partners, and still our racial divides remain. In our city, it's $46,000 different between Black and white Evanston, $46,000 household income difference. Thirteen years' life expectancy difference. We have an unfortunate disparity in home ownership rates. Our achievement gap is not in line with the things that we say that we value, and our education gap, our information divide, and so on. So in 2019, with our community leading through a public community process, our policy restricted the first $10 million of our recreational cannabis sales tax to fund reparations for Black Evanston residents, in response with the specific harm in our city, which was in housing.

In committee, we have passed our first housing remedy policy. And I should go back to our marijuana arrests. There was evidence of over-policing. We are now, only 16 percent of the population in Evanston, we had been in the mid-20s, and we're now at 16 percent of the population in Evanston. An exodus of the Black community is happening due to lack of affordability and a sense of place. And we have 71 percent of our marijuana arrests were in the Black community. So there was evidence of over-policing and intentional damages in the Black community due to the marijuana industry. So in our committee, we have passed our first of what we believe will be many reparative justice policies in the area of housing, since that's our local case for reparations.

It is a $25,000 direct benefit to qualified Evanston residents. To qualify, you need to have lived in Evanston between 1919 and 1969. That's the time period in which we have documented anti-Black housing practices and policies on our books in Evanston. Or be a direct descendant of someone that lived there during that time. So I qualify, I am five generations of Black Evanston residents in my family. I qualify through my elders. We understand that the benefit alone will not be enough. I'm excited to hear more discussion about the appraisal industry and the banking industry. We're working hard to find a financial partner that can help provide fair mortgage products, and other financial products, so that this benefit really is maximized to build well.

In addition to the $25,000 direct benefit, two eligible Evanston residents can qualify per household, so that's an opportunity for $50,000 in wealth immediately generated through housing equity. Whether it is for acquisition, if it's a first-time home buyer, the program also qualifies for those that own a home already. They can buy down their mortgage, they can make improvements to their home that'll build well. So we understand that partners are going to be important, but because we have so much opportunity to bring repair and redress to our residents in Evanston, we're starting here. This is the first tangible step that we're taking for reparations in the space of housing for our Black community in Evanston.

And we are inviting partners, hopefully a financial institution specifically, that could help us build out this particular initiative, and we have more to come. This is only allocated in the first $400,000 of $10 million. The good news is our community has bought into the work that we're doing, and they have been contributing to the fund. So the fund is increasing. We're inviting more partners as well. And we hope that what we're doing is a nudge to other institutions to do something similar in line with the damages and the injury that they enforced against the Black community.

Thank you for having me.

Scott: Thank you, Alderman Simmons. So we're going to bring in three more guests now to respond to what you've just heard. A reminder, full bios are on the event web page, and feel free to tweet any questions or comments on what you hear using the hashtag #racismandtheeconomy. Joining me now are Priscilla Almodovar, president and CEO of Enterprise Community Partners, the National Affordable Housing nonprofit; Bambie Hayes-Brown, CEO of Georgia Advancing Communities Together, a network of housing and community development agencies in the state; and William Rogers Jr., president and CEO of Truist Financial Corporation. Welcome to all of you.

So I'm going to start by asking each of you to take just a few minutes to respond to anything that caught your attention in these proposals. And let's start with you, Ms. Almodovar.

Priscilla Almodovar: Yeah, please. Thank you, Amy, and thank you to the Federal Reserve for adding housing to this very important conversation. Since if we truly want to advance racial equity, we do believe we have to start with housing. So my first observation, Amy, that I'll make, applies to all the proposals. And it's really the lack of focus on renters. And I know this is about home ownership, but it's important to note that, today, the gap between Black and white households, the home ownership gap, is 30 percent. and that's because Black households, 80 percent of them, tend to be renters. So it's important to acknowledge that that's our pipeline, to develop these home owners. So to understand the renter population. And I think each of these proposals can add the renter perspective.

So for example, to the senator in California, I would say I think it's great, upzoning and density, totally applaud your proposal. I would say that you could also define the end case, so you don't want California to end up with a bunch of condos, so perhaps calling out renters, rental units being a part of the upzoning and density that you're trying to accomplish. Similarly, to the alderman, I think it's fantastic that your proposal calls for financial education. Renters could be part of that because, again, they're the future pipeline of home ownership. So I think that's important, too.

And for appraisals, let's make sure that having rental units in a neighborhood is not considered a negative to the characteristics. So again, I think it's important for all of us, as we think of the spectrum of housing, that we also remember that rental units are important, too. Another observation I will make, more as calling out as something that I think is truly important, and I think the Evanston proposal does very well, is that if we are going to be intentional about addressing racial equity, we have to address the past. And you can only do that if you're intentional. So I think the Evanston proposal does that very well, by calling out who the applicants can be. I think the appraisal proposal does that well, as well, by asking for a reset of how loans are made by the federal government.

And I do think that in California, I think how do you incorporate people who have already been displaced? And how do you take that into account into your zoning as well? Another, just very quick observation, and really comments that were made by Dr. Perry and others is, housing doesn't exist in a vacuum. So I really applaud the comments about value. And value—it's not just the housing. It's the community and it's the schools that are around it, the job opportunities, the transit. So in terms of appraisals, I thought that proposal did a very nice job addressing the importance of neighborhood characteristics.

I also thought, in terms of zoning, acknowledging that for equitable growth, we need to talk to these other systems if we truly want to advance racial equity and life's outcomes. And then lastly, and I think this is the Federal Reserve's real role here, is access to capital. At the end of the day, all of these proposals are about investing in people, whether it's through down payment assistance or otherwise, and investing in these communities. It costs money to build housing and to keep the price points at the right point. So I think the Federal Reserve, through its advocacy, through the Community Reinvestment Act, plays a very large role in access to capital.

Scott: How about you, Dr. Hayes-Brown? I know you have a background in both rural and urban housing, which gives you a different perspective. I'd love to know what stood out to you.

Bambie Hayes-Brown: Yes, indeed. Thank you so much for the invite and for this robust event. In addition to my urban and rural experience, I am a person of lived experience with housing instability. And that's one of the things that I have noticed throughout the proposals is, oftentimes as my colleagues at Albany State University says, "People will research about us without us." So we have to make sure that we have those individuals who have those lived experiences, who have experienced racism, and who have been directly affected by these policies, at the table. Oftentimes we will call on our academic and research institutions to do all these wonderful studies, to tell us things that those of us who have lived experience in these spaces already know.

So first I'll start with zoning. Great ideas, especially in the urban areas when you're talking about upzoning, set asides, and all of those things. But there's a B part to that conversation. What about the people? You can set aside units all day long, but if those property managers and those owners who are the frontline people working with those renters, if they're requiring a 700 credit score, if they're requiring three times the rent, security deposit, first month's rent, last month's rent, risk fee, annual rent increases. You're still either not getting people into homes or you're pricing them outside of the homes.

Also as it relates to zoning, we need to look at pollution and industrial racism. I think that is missing from this conversation. There have been high instances in the past, and even in the present, with some situation that's going on in South DeKalb County, where you have these industrial institutions that are locating in these Black neighborhoods. So now you have devalued neighborhoods, unhealthy people, and people are dying due to environmental racism. As it relates to appraisals, you can ride around in any town, urban or rural, and just tell a difference by going on the side of the tracks, or once you cross over the street, what side of town you're on.

And it's great that I've heard these conversations about standardizing appraisal requirements, but you can't legislate racism. And until we began to address the internal bias of racism within our appraisers, within our loan officers, and within our institutions, then we're doing a lot of talk. So one of the things that we can do is require internal racial bias training at the onset when appraisals and loan officers get their licenses. And I do have this disclaimer, I do hold a real estate brokers license. And just like real estate brokers and salespersons, we have to renew our license, and we have to take so many continuing education classes.

All of those continuing education classes need to include internal bias training. And also we need to increase enforcement and training of discriminatory acts that are racist. And then we also have to look at how these properties have been devalued and then my counterparts will come in with investors. And oftentimes they are white investors that will come into the neighborhoods, rehab the homes, and then flip them. And then these legacy Black residents can no longer afford to pay their taxes.

As far as reparations, I am a strong proponent of reparations, direct investment to Black and Brown people. What stood out to me the most, and I am a firm proponent of home ownership, but let's look at... I go back to the housing market crash of 2006 to 2008, where Black people lost the greatest amount of wealth in their generation was through the devaluation of home ownership. And oftentimes, especially our senior citizens, our Black senior citizens, they have owned these homes for generations, they're paid off, but sometimes they fall into disrepair. So we have to decriminalize code enforcement. So we can't always look at providing someone with a penalty and jail time because they cannot afford to maintain their homes. Let's give them that direct investment that they can put into their homes.

And one takeaway that I can say that the Federal Reserve can do is use your influence. You have a seat at the table and sometimes that may mean giving up your seat at the table to put those people who have been directly affected by these policies so that people can hear directly from us. Too oftentimes, we have people that will take peoples and the lived experience of people, they will take their information and they'll monetize it and so the backs of Black people have been monetized by white people for decades. So just acknowledging that sometimes you may not have all the answers. So don't just get the answers from the people that are being affected and then monetize it—give up your seat at the table or expand your table where you can sit at the table together.

Thank you.

Proposer and respondent panel discussion

Scott: All right. Well, we've got a banker at the table, Bill Rogers. A lot to answer for, Bill. We won't put it all on you, but what did you hear in the three proposals that stood out to you as something your industry can address?

Rogers: Sure. Thank you, and thank you, President Bostic, for convening this really distinguished panel. I mean, this has really been great to be a part of. President Bostic obviously is uniquely qualified to lead this discussion both from an academic perspective as well as his own personal engagement into the panelists and presenters.

It really brought up the question, is the answer local, regional, or national? And the answer is yes, it's all of those things. We have to participate at a local level, a regional level, a national level. There is not a one-size-fits-all. There's not a one answer, and it requires participation at all levels. Truist is a bank, so thanks for bringing that up in this group and I think we do have a really important role to play. Our purpose is to inspire and build better lives and communities.

That's what we get up every day thinking about and many of the communities we serve—think Charlotte, Atlanta, maybe, as really two primary examples—they have the lowest social mobility of any city in the country. Housing equity is a huge part of that Atlanta's educational equity and job equity and the other points, but housing equity as a huge part of that. So this is just a really, really critical discussion.

Thinking about some of the proposals, maybe I'll just try to go on over it a little bit and thinking about Senator Wiener's proposal. Obviously, zoning is one of those things. That's a local issue and a regional issue, but the ability to respond to zoning from a banking perspective ... We're very supportive of ... We've been big, big proponents of affordable housing.

We've been strong advocates in the tax credit space, and I think we're fundamental believers. I think this is really what Senator Wiener was saying as well, is that if the numerator is affordable housing and the denominator is housing, the answer is to grow the denominator and the numerator. I think you can do both of those and I think that's critical in the whole housing discussion. Alderman Simmons' proposal for housing assistance... I would encourage you to look for financing partners. I think you'll find many of them. I mean, we've worked with a lot of local communities on proposals and on rental assistance and really true down payment assistance. I think those are critical roles that get played in local communities. I think you'll find good financial partners to support those. As it relates to the justice component of that, in order to level the scale, you have to unlevel the scale to get true justice.

I think her proposals are very intriguing in creating that level playing field and changing the playing field to create really true justice. I'm very supportive. Dr. Howell's work is well known to us in the industry and I think is really making a difference. As you know, the GAC sort of guide the housing part and AR have just had a proposal out for feedback. Dr. Howell's powerful work has really been a part of this discussion. So those of us that are in the industry, our sleeves rolled up... Very, very familiar with her work. I think it can really make a difference and I think many of her proposals are right in the center of the plate on changing the dynamic of the appraisal community.

I will say—and I think, Dr. Hayes-Brown, you mentioned this as well—my little note of caution, though, is let's not have unintended consequences with the appraisal process because we don't want the standards to become too loose. We saw what the impact of that was in 2006 to 2008. Those communities that we want to most help is the most negatively impacted by that. So I think, Doctor, I would agree with that. Maybe the only other thing I'd throw into the discussion, and Dr. Hayes-Brown, you brought this up too, I think FICO score is another part of this discussion. So it's not just appraisal. I think there's a whole educational component and building up FICO scores and communities, in addition to the appraisal part, that's another part of the equity piece. So I'm really pleased to be here. I've got a page full of notes listening today and look forward to being part of the solution.

Scott: I have several pages full of notes myself. We're about five minutes away from bringing back the presenters to respond to your responses. But we got a question from the audience I wanted to throw out to each of you. The question is, "Racism in housing is not limited to Black people in communities. Can you talk a bit more broadly about inclusion as it relates to people of other races and ethnicities?" Any of you want to address that?

Hayes-Brown: Yes, I will take a stab at it. That is a great question, and it's not just limited to Black people. As I have traveled throughout the state of Georgia, I have seen racism against our Latinx brothers and sisters, against members of the Indigenous population in Georgia. So we need to be definitely inclusive and look at how these policies do affect people of color, but we still must acknowledge that historically it has been Black people and being explicit and understanding that it has been Black people who have been most negatively affected by these racial policies.

Scott: Thank you. Anyone else?

Almodovar: I would agree. As a Latina myself, I completely agree that all of the issues we've talked about today apply to the Latinx community, apply to the Asian, Indigenous. It's historical. When you look at jobs, the economy, it's Black and Brown people who are impacted. When you look at educational outcomes, health. So the conversation today has been focused on Black in particular, but it does apply to any low-income individual in the country today. It's meant to be inclusive for sure. And all of these policies that we've talked about will benefit everyone. So again, I think it is meant to be very inclusive.

Rogers: I think that's the most important thing. And that was said earlier by Drs. Taylor and Perry. It does benefit everyone. And I think that's the part that everyone's got to understand and be comfortable with. This is a clear rising tide opportunity for our country.

Almodovar: Indeed.

Scott: The idea of growing the pie.

Almodovar: Indeed.

Scott: All right. Well, we're going to bring our policy presenters back into the discussion and open it up a little bit. I'd love to start, Robin Rue Simmons, with you. The idea that reparations, in the case of Evanston, focus on home ownership. Why home ownership in particular and what's in it for renters, since you think there could be more inclusion of renters in that equation?

Simmons: Thank you for the question. So our initiative will have... It's a 10-year initiative. So this was the first programming that we have introduced, but home ownership first, because one, we have an exodus of the Black community. Home ownership is the most likely path to building wealth for any family. We know that, and $25,000 or $50[,000] for two qualifying family members is certainly going to build wealth. That $25,000 in equity or $50,000 can be used towards education or launching a business or it's for a senior to age in place. It can be used immediately for many seniors. I think it was mentioned by a doctor, Bambie Hayes, the deferred maintenance and the cost of our housing [inaudible] here in Evanston is old drafty homes. It would allow for property standard violations, as well as other, aesthetic improvements that will increase the value.

So we're starting with home ownership. It was mentioned by Priscilla—financial education is a part of our program as well. We understand that that's going to be important, not only financial education, but those financial products that we have not had access to. Fair lending and fair consumer banking accounts, where we've had check cashing places and currency exchanges in our neighborhood. So it's going to take a portfolio of services. It's going to take every partner and institution in the community, but housing is our first initiative, and we hope that at least that financial education piece will strengthen the financial health of those that are renting to prepare them for future home ownership, if that is their choice. If not, we hope that there will be other programs that will support the more broad community.

Scott: So that assistance can go towards maintaining home ownership as well as achieving home ownership?

Simmons: Absolutely. So it is available for first-time home buyers, as well as existing buyers. We're looking now at how we might prioritize or tier giving our senior residents that lived here during the period of injury priority access to this initiative. We've seen in our community, we generally have multi-generations of Black families that live here. That will be passed down, and it will create legacy for other families, not only for those seniors to age in place, but for their families, younger families to come and have stable housing. There's a lot of intergenerational living here in Evanston. It's not uncommon at all, but it would do a lot to stabilize a family. Like Dr. Hayes-Brown, I too have the lived experience of housing instability, having lived in 11 places between birth and 17 years old in the same community and knowing how that impacts your experience in a community from the classroom and beyond. So that's our goal. We understand that it's the first tangible step, but we are prepared to start doing the work now in Evanston.

Scott: All right, Dr. Howell, a little bit more about appraisals. You know, we've seen that bias can be baked into automated systems and algorithms. To the extent that you see technology being a part of this, how do you ensure that the technology itself isn't perpetuating these patterns?

Howell: Yeah, absolutely. Thank you for that question. I mean, it's an excellent one and one that I've thought about a lot, because there is lots of research looking not only at in the housing market, but across all sorts of different automized processes, right? We know race, racial bias, racism, all sorts of things get baked into these systems. And for me, that is why it's really important to not just be doing this [inaudible] and some of the processes that would help the individual bias, but actually deal with the broader methodological bias, the broader element of racialized property evaluation that I spoke about earlier. So for me, that entails really drastically rethinking how we approach the cost and, sorry, creating that value, right? So Dr. Taylor mentioned that these values are all created. So how do we create that and how do we collectively create that in a way that's more equitable?

So in doing that, the current systems are building in that same racialized structure that has been there for a hundred years. That's why they have a lot of that same racialized bias, because they are pulling comps. They're evaluating neighborhoods where they're negatively looking at things like renting, negatively looking at poverty, devaluing Black, Indigenous, and Brown communities. All of those kinds of things are built in there. So if we say we are going to actually make a dramatic step and really rethink how property is viewed in ways that do not tie it to place and do not tie it to the racial composition and the socioeconomic composition of that place, then we can reinvent and rethink about some of these things like automating technologies. That said, they're not perfect, and that's why they always need to be coupled with regulation. They always need to be an iterative process, where we are evaluating and thinking about how we might be working towards a more racially just system.

Scott: Okay. And finally, to Senator Wiener about zoning. First, I wanted to ask you, your policy is the one that least addresses race head-on specifically. I'm wondering what needs to be in place to ensure that just building more housing actually addresses systemic racism.

Wiener: Yeah. Well, I was asked to talk today about eliminating single-family zoning, which is obviously—it's a broader policy prescription that has various benefits. We know why single-family zoning was invented in the first place and it's having that same impact today. I think we need to be really clear, and I think we saw a little bit of that today, and it's just the way the world works, that when you have an idea about—e have this huge, massive problem, and here's one idea to address a piece of it, and then you get a lot of what-about-ism. How about these other 20 things that have to happen? And that's just normal because we want to achieve all of those other 20 or 20,000 things. No one policy prescription is going to end structural racism and housing, right?

Single-family zoning has many benefits, and I sort of outlined them. I do believe that over time, when you relax those restrictions in zoning, you will see more inclusivity around housing. I agree with Priscilla that we absolutely should not forget about renting. Renting and owning both serve incredibly important purposes because not everyone can access ownership. I agree with the Doctor, and others, that we want to try to expand those opportunities to own, but if people choose not to own or can't own, we want to make sure that they have stability in renting and they don't have to move around 15 times or 11 times by the age of 17. And yet we have so few protections for renters in the vast majority of this country that people are forced to move around, and that has huge disparities in terms of race and income, in terms of who is being forced out of their rentals.

So I think it's putting—and it's great that we're talking about a lot of different ideas today, because it's going to take a whole bunch of approaches and I would never get up here and say that eliminating single-family zoning is going to end structural racism in housing. It will only do that when accompanied by all these other measures, like better protections for renters, like reparations and all of the various forms that reparations can take, like helping people rent stably and also have access to ownership, like truly ending redlining. All of these things have to operate together. But I think that it becomes very, very hard to achieve true inclusivity in housing when we're saying that the only homes that you can build are big single-family homes, on huge lots in these high-cost areas that it's sort of like a foundational piece of granting, allowing access, whether it's for ownership or for renting.

Scott: I am wondering though, if there are specific protections that need to accompany a change in zoning to prevent displacement and to—

Wiener: Absolutely. Absolutely.

Scott: —to further fair housing.

Wiener: Yeah. And I—

Scott: I just wanted to give an example. I covered a community in Denver that was a historic Latinx, really Chicano community, Mexican-American community, where relatively affordable single-family homes were being razed to build massive luxury duplexes, which each side of the duplex cost a lot more than the house that was there before. And so just adding density didn't exactly address the underlying problem of a lack of affordable housing, and it in fact led to the displacement of a lot of people.

Wiener: Yeah. And just to repeat what I said before, I would never, and have never claimed that, just change density and the whole problems are solved. So I think sometimes when for those of us advocating for zoning reform and ending exclusionary zoning, the response is, well, what about all of these other issues? So of course, changing zoning by itself is not going to solve the problems. You have to accompany it with other policies. One of those policies, which I include in all of the housing legislation that I do that change the zoning, is strong anti-displacement protections. We don't want sound housing to get knocked down, to replace it with denser housing. It's about adding to what's already there. Because I agree if you have people living in, whether it's in apartment buildings or single-family homes, we want to put more housing in communities, but again, we want it to be additive, not replacing who's there.

So I always put strong anti-demolition protections and you gauge it by, has there been someone living in that home in the last seven years or thereabouts? Like a long-enough period of time where you would not create an incentive to buy up existing homes, tear them down to build more densely? That's why density changes also don't happen quickly, right? You change the rules so that over time gradually you see those changes, so that we're not creating incentives to just mow down neighborhoods. San Francisco did that, in the 1950s and '60s, when the Fillmore district was obliterated, a thriving Black community was obliterated and south of Market, a thriving Filipino community. Fortunately, that ended, but we should never ever allow that to be repeated.

Scott: We have another audience question. This one is for Bill Rogers. The question is, "How do banks get engaged in the appraisal standards and practices that are biased against people of color in sales and lending transactions?"

Rogers: Yeah, I mean, the real way we can engage is work with the policymakers. You know, because these are—remember, most of the housing comes through the GACs and the appraisal rules are actually fairly set. We all have to follow as part of an organized process. That's why I was complimenting the work because what we have to do is roll up and engage our policymakers and declare that it's not working and it's not working for all of us. So it's really part of a policymaking process.

Scott: So we just have a few more minutes. I wanted to ask each of you to very quickly, like 30 seconds or less, tell us something that those of us in the audience can do or should do to try to understand, learn about, or actually change some of what we've talked about today. We've got a lot of powerful people in the greater audience. So I don't know who wants to start. I'll go sort of how I see you on the screen. Priscilla Almodovar, could you start?

Almodovar: I will just start by saying, first of all, thank you to the Fed, and to say housing is foundational to advancing racial equity and it ties to every other system, and housing has to be connected to all the adjacencies. So if you work in education, health care, jobs, you have to work with housing partners, because it's all about where you live. We all need a place to put our heads down at night in a pillow and live in places of opportunity. So it's about place and that's my only plug for housing. So again, thank you to the Federal Reserve for adding housing to the conversation.

Scott: How about you, Bambie Hayes-Brown?

Hayes-Brown: Yes, definitely want to echo Priscilla. Thank you, Federal Reserve for having this housing discussion. My takeaway is for everyone to get involved, get involved in your communities, get involved locally on the state level and on the federal level and advocate, advocate, advocate. Advocacy is 365, seven days a week, 24 hours a day, as those of us do in the field. So definitely get involved with your local zoning boards, get involved on the state level during advocacy, during your legislative session, attend those committee hearings, a lot of them are virtual now. Also write in, contact your federal legislators. Let's make that we hold our elected officials accountable.

Scott: All right. Junia Howell.

Howell: Yes. Echoing what has already been said, thank you so much. And housing is really central. So my quick note would be, just like Dr. Taylor said earlier, we socially construct value. So no matter if you are a citizen, if you're working for an organization, if you're working for a bank, if you work for the Fed, if you're a policymaker yourself—I think we all need to think about how we value housing and how we've tied in interconnected wealth accumulation with a central need. As long as we keep those tied and make our values based on these racialized assumptions and the assumptions of accumulating wealth, we will continue to have an affordable housing crisis. We will continue to see this racial inequality.

Scott: Bill Rogers.

Rogers: Thank you. I think it's as simple as just act. We've discussed this today a lot. There is no one answer. It's a multifaceted opportunity for us. So to act. I live by a creed of take care of your corner. Some people's corners are really big, some people's corners are literally their next corner. So I think just for all of us is to act.

Scott: Okay, Senator Scott Wiener.

Wiener: Two things. Join your neighborhood association and be active in it, because when we looked at some of the roots of some of our housing problems, you have neighborhood associations that aren't always fully representative of the communities that they operate in. They tend to be whiter, they tend to be more home owner, less renter, a little older, fewer young people. It's so important to have the full representation of the community active in neighborhood associations because they get listened to at City Hall when they say, "Oh, the neighborhood group in this neighborhood opposes this affordable housing."

Well, is that neighborhood association really representative? So that's one thing. The other is, for people running for office, whether it's local, state, or federal, ask them what their housing platform is and insist that they be specific. I think a lot of times candidates don't always have housing platforms or they're just platitudes. The great thing is in the presidential election of last year, in the Democratic primary, pretty much every major candidate had a housing platform. You look at Cory Booker and Joaquin Castro and Elizabeth Warren and Bernie Sanders, they all had really detailed, progressive housing platforms. I hadn't seen that in a presidential election before. I think that was reflecting what a crisis we're in, but it's a game changer and we just need to hold people accountable to have good housing platforms that they will act on.

Scott: All right. And the last word goes to Alderman Robin Rue Simmons.

Simmons: I would challenge everyone to just focus on solutions. Start where you are with what you have, do what you are able to do at your table, and make sure that you're challenging those that aren't at this table. We're preaching to the choir right here. We all value this. This is a priority for us, but in those rooms where this is an unpopular conversation, lift it up there also. And then lastly, I'm going to second Dr. Hayes-Brown and invite folks with the lived experience to the decision-making table. It is very important that you are not only coming from a policy perspective or academic space, but one that has that experience and maybe can overcome that and can add value and progress to the discussion and help with implementation.

So start where you're at, the front line is where you are, and also make sure that you advocate and contact your local elected, local offices are really nimble, they're able to implement work quickly. Make sure that you don't forget your local elected leaders as you are advocating, your elected officials generally. And thank you again for having me.

Scott: All right. Thank you all so much. We're going to toss it now to Neel Kashkari, president of the Federal Reserve Bank of Minneapolis for the next portion of the program.

Moderated conversation with keynote speakers

Neel Kashkari: Thank you, Amy. That was a great discussion, really rich conversation with some very interesting and thoughtful proposals. I want to invite Dr. Perry and Dr. Taylor to come back and join me for this next session. They did a great job kicking off this conversation this afternoon with my colleague Raphael Bostic. I want to turn to Dr. Perry and Dr. Taylor and ask you, what did you hear? What is your reaction to the proposals? You heard the discussion. Maybe we could start with Dr. Taylor. Would love to get your thoughts, and then we'll turn it over to Dr. Perry.

Taylor: Sure. I have a couple of thoughts. I think the folks who talked about reparations is particularly important. And I think that as long as—and this gets to what I write about in my book, about what I describe as predatory inclusion, which is really using the ways that the real estate and banking industries have historically and I would argue continue to use the unequal conditions caused by past discrimination, reframed now as risk to treat Black consumers differently, essentially opening up the housing market to African Americans on bad terms, not on equal terms. I think that this is really about how do we get our country or fighting to get our country to acknowledge this history in order to repair the spatial, political, economic, and social damage that the history of racial and residential segregation has created. Because then a truly free and fair and equitable market can't be built upon the kind of corrupted and fragile foundation that has been created by decades of intentional discriminatory disinvestment. And so to that, I think that the one thing that I would say specifically, Bill Rogers brought up in response to Dr. Hayes-Brown's discussion about appraising and really targeting that the 2008 crisis in creating a link between loose or more liberal appraising in that crisis. And I really reject that logic. Black people, Black families in 2005, 2006, 2007 were targeted by banks. This was not a question of a loosening of the rules and regulations that somehow we ended up with Black people being targeted with subprime loans. Black families were targeted with what some banks described as ghetto loans for mud people.

And then when the investigations and stories about why the subprime lending crisis was centered in Black communities, we realized that this was pervasive across the industry, targeting Black people so that in Chicago, Black families that had six-figure incomes were more likely to receive a predatory loan than white families making $35,000 a year.

And so I say that, because we can't actually get beyond this crisis if we fail to come to grips with how we got here in the first place. And so we need to take that seriously, which brings me back to the issues of regulation and punishment. Because part of the reason, the consequence of that banks given minimal fines, $5 million fines, fines that for banks are essential slaps on the risk, have no impact in altering the behavior that created the conditions for that kind of corruption and theft of Black communities in the first place. So all of these ideas are very good, but it's not only a will to act and a commitment to act, but when institutions act poorly, there has to be some consequence to that. And that has always been the weak link historically ,when legislation has been implemented to try to change these practices. Thank you.

Kashkari: Thank you. Very powerful. Dr. Perry, would love to get your perspective.

Perry: Yeah. I'm just going to add to that in this regard that I don't care what kind of you have, if you're not going to try to deliberately protect Black and Brown people that attempt, that race-neutral attempt can be a failure. I mean, look, we know we need greater density to ensure some degree of affordability, but we've seen time and time again, multifamily developments displace Black people. And so that part and parcel is the dilemma with a lot of these proposals. We have to look at race and racism and in an environment that we've said, we cannot in terms of affirmative action law. So I don't see a way around working out these sorts of work-arounds to get to this point. At some level, we've got to address those who've been harmed by discrimination.

And this is the thing, this is why I do appreciate the reparations proposal, because we don't like to think about it, but everybody actually loves reparations, believe it or not. When you look at a few weeks after being socially distanced, you had the business community demand a response from the federal government, demand to say we need support. Now, what does it look like when you've been socially distanced for generations? What does that kind of repair look like? And so at some point, we do need regulation. I am completely agreeing with Dr. Taylor on it, we need regulation punishment.

In addition, we do need some form of stimulus. You can call it reparations, you could call it whatever, but you need some form of stimulus. And by the way, we've done it after the Great Depression for white folk, we have had some form of reparations for native Americans, Japanese. In turn, we've even had reparation for 911 victims, too.

But when it comes to Black people, that's when we say, "Oh, no, not reparations." And so we can call it what it, whatever, stimulus, relief, reparations, I don't care, but we do need regulations, punishments, stimulus. And I will say, we do need new mortgage products, new credit scoring systems, new devices that weren't built from a segregated environment. And so there is a business opportunity here to do something different, but I really find it hard to see progress if you don't have some form of explicit repair for Black communities and in different situations, Brown communities as well.

Kashkari: Well, thank you both. I really wish we had another hour because I would love to just talk to you about the history of this, as you all said so brilliantly. You have to understand the history of this to understand where we are and where we are going from here. But I want to thank you both for your wonderful comments. And all of our presenters so far, it's been a terrific discussion.

I'm going to invite Mr. Tane Danger, who's going to be hosting us for our next discussion with me and a couple of my colleagues. Tane, I'm going to turn it over to you.

Reflections on the event

Tane Danger: All right. Thank you so much, everybody. My name is Tane Danger. I am absolutely thrilled. The final part of today is very special. We're going to actually bring on three of the Federal Reserve presidents that we have with us. I'm sure it is not only my dream to have a happy hour conversation with three Federal Reserve presidents, particularly on something this important. So you've already met two of our presidents, who are going to rejoin us for this part. So please, one more time, welcome back to the virtual stage Presidents Raphael Bostic and Neel Kashkari. And then joining them is the Federal Reserve Bank president from Cleveland—please, a big round of applause for Loretta Mester. Thank you so much for being here, all three of you.

And there's so much to try and review. And I have a lot of questions, including a bunch that have been coming in through social media, but let me just sort of start with this. Is there sort of a thing in all that we have heard over the last hour and a half that is really resonating with you? Is bouncing around still inside your brain and you're trying to sort of grapple with? And President Bostic, maybe I'll start with you.

Bostic: Well, thank you Tane. There was a lot there, and this is one where I was really—actually, I felt a little, a bit optimistic about the appraiser tools in the sense that the pathway to solution seemed straightforward. And it seems like Fannie and Freddie might be getting behind it—I think that's really positive. The thing I was really impressed by as well is some of the creativity, so the idea of perhaps having progressive interest rates so that if you have less wealth, maybe we give you a shot given that your family history may have prevented you from accruing wealth in a significant way, and that's interesting. It's particularly interesting because we know that the biggest barrier to home ownership is the down payment. It is actually the absence of wealth that creates a difficulty to get into to home ownership. That was interesting.

And I'm still noodling on this question about enforcement, and how do we think about really creating the same sort of respect for fair housing and for antidiscrimination approaches that people have, for you don't do bank robberies the same way. People are even cautious now, depends on which freeways you're on, but about speeding on a highway, right? There are boundaries and limits that people collectively understand that don't seem to grip our community quite the same way.

Danger: Yeah. President Mester, I would start with you as well. Is there something from this last hour and a half that's really still resonating with you?

Loretta Mester: Well, I agree with a lot of the panel [inaudible] said there isn't going to be one solution, it's really going to be multifaceted. It's going to be government, it's going to be private sector. It's going to be communities. And I think that's something to keep in mind, that there isn't pick one policy versus another, it's sort of what that portfolio is going to look like. So a lot of the ideas resonated with me as ways of thinking about it.

There's some research that is done at the Cleveland Fed that actually looked at the wealth gap. I know we spent a lot of time talking about housing and the importance of housing in that wealth gap. And it's really about, what drives that? And it's really that the earnings gap is actually a much more important factor in driving that wealth gap.

So the reparations, I think we do on sort of the grounds of fairness and accountability for past egregious conduct on the part of the country. But if we really want to attack the wealth gap, then I think focusing on the earnings gap. And that also then brings back housing, because if you have housing stability, you're much more likely to have access to college, you're much more likely to have better schooling to get you to college. And so it's sort of a circular thing—better housing means better access to schooling, which means better income from the labor market, which then allows you to buy better house. I think it's not an either-or here, it's multiples.

Danger: That makes perfect sense. And there's things that both of you have brought up, I want to come back to. But quickly, President Kashkari, in the opening video, you did a good job outlining what I think a lot of people probably came in with, a notion, "Oh, a lot of this is for Congress or is for some other branch." You've worn different hats in your career—are there elements of what we heard today that really resonate with you as a president of a Federal Reserve Bank in particular?

Kashkari: There are. I mean, I think as my colleagues have said, this is a multifaceted problem. And there's some things I think the Fed could be directly involved in and other things just through our convening power, communications roles—we can also play a role. Each of the three proposals as I listened to them and as I read them in advance, they complement each other. Just to give you an example, when I was reading the proposals around appraisals, imagine if Black homes and Black neighborhoods all of a sudden were valued fairly, and all of the values went up—that would be great for those home owners. That would also make them less affordable for people who wanted to get into those homes.

And so the idea of valuing Black-owned properties fairly is really important, but it needs to be complemented by more supply. As the senator from California was saying, the only way we're going to make housing more affordable for anyone or for everyone is if we can have a lot more supply coming in. And then the issue of reparations—I thought Dr. Perry hit the nail on the head at the end of his comments there, when you look at the history of our country—I'm an amateur history junkie, and now that my eyes have been opened to it, I've seen so many places in American history where the government has essentially given a grant or a handout or a subsidy and throughout history, most of those subsidies were for whites only. And if you add that all up—I haven't added it up—but if you add that up, we're talking about real money. And so I actually think each of those proposals complements the other proposals and actually would actually put together as a very powerful package if you could put them together.

Danger: Okay. So if this were a game show, which if I could decide it would be, it would be called something like "Can the Fed Do That?" And that's sort of a batch of the questions that we're getting online, which we're back to the things that I've heard as well. And President Kashkari, you already alluded to there's elements of this that you all have potentially direct levers on. There's also convening ability, but I mean, just going through some of these proposals, if you think about something like zoning or other means of trying to increase the supply of housing as an initial step, I mean, for folks who are watching, who aren't maybe enmeshed in Federal Reserve policy and powers, where can you impact that? Is that somewhere that you have a role to play? President Kashkari to start.

Kashkari: I think so. I mean, I've just taken zoning. So we in the Minneapolis Fed are partnering with the City of Minneapolis, which has put forward a new zoning plan, the 2040 Plan. And we are their analytical partner to analyze and evaluate the effect of that plan. Zoning is really a state, regional, and a local phenomenon, so the 12 Federal Reserve Banks that are spread around the country covering the 12 Federal Reserve districts, I think we each could play a role in illuminating and bringing to light these zoning issues to local leaders, to state leaders because they're the ones directly controlling it. So we may not set zoning policy at the Federal Reserve Banks, but we have relationships with a lot of local leaders who do set zoning policy. And I think we can help them understand how their own decisions can actually affect affordability for their own constituents.

Danger: Yeah, I don't, but President Bostic or Mester, is there anything that either of you would like to add about that piece or other areas that we talked about earlier in terms of where you actually feel like, yes, I can plug in here? This makes sense to me as a Federal Reserve chair?

Mester: Tane, a lot of the things that we're doing through our community development work pertains particularly to housing markets and the quality of the housing stock. So in Cleveland, we have a pretty big problem with lead in the housing stock, so the quality of the housing is, was deteriorating. So we convened all the partners in the city in 2016 to come together, with an interest in sort of solving this problem. And legislation was passed in 2019 to require certification of the housing. So we didn't pass the legislation as a Fed, but we were the ones who convened the parties that could do the work to get to that policy solution. So there's examples like that I can point to in terms of—it's not zoning per se, but it's actually making sure that the housing quality that's available is up to snuff.

Bostic: I would also jump in to say, we've also done the same sorts of things. So some of the earliest work on evictions that changed the understanding of what's happening in communities in the Southeast originated with researchers that were affiliated with the Atlanta Fed. So that research function is really important. Neel talked about doing analytics, and that's another area that we provide a lot of support for. I would have to other things. So promoting things that work and making sure that policymakers on the ground that are facing challenges know what other examples there are out there because oftentimes they don't have a chance to do those sorts of things.

And then the fourth thing that I would say is to advise, right? So coming out of this crisis, with the COVID crisis, we have had dozens of state, local, and federal policymakers come to us and say, "Here's what we're worried about. What do you know? What types of things have you seen that work? And how can you help us make those things work in our local communities?" Those are all roles that we can plan. I would also say one of the advantages of us is that our institution will be the same, regardless of what the outcome is. We don't get richer by promoting a particular approach, and so that gives us a credibility. And I think in an entry to have conversations that policymakers might not be as willing to have with particular companies or advocates or others.

Danger: These are wonderful. And I feel like we heard such a powerful case from Professor Taylor about the need also for there to be sticks involved in some of as well, that the regulation piece and the enforcement piece, I think she made a huge case, just lacking in a lot of these things, which then going back to your metaphor, President Bostic, that people speed on the highway, that people take advantage of communities. Is there an enforcement role for the Fed to have in any of this? And I'm just throwing it open at this point for whoever's most excited.

Bostic: So I would say yes, and we definitely do that. I think one of the things that I'm thinking more about because of this, and this is one of the reasons why I'm glad we're doing this series because we're hearing lots of ideas that don't always come across my desk is, what are the subtle ways or the more subtle ways that perhaps we haven't paid as much attention to? And are there ways for us to get to that? I'm actually engaged with our banking institutions to really get them to be sensitive and aware of the parts of the financial markets that don't work as well for lower-income and minority borrowers. There's no surprise, there's not a secret that there are a lot of payday lenders and a lot of high-cost lending products that flow into minority communities. You heard the professors talk about that earlier today. We need to make sure that there's continuous effort to develop products that increase the competition and lower the costs of getting access to capital and credit. And that's another piece to the relationship and the conversation that we can facilitate.

Danger: President Kashkari, it looked like you were about to jump in there?

Kashkari: I thought Raphael nailed it.

Danger: Okay. Raphael did it great. Okay. Here's the really big question that, I will be honest, that I think came up over and over again throughout this last hour and is a really hard question. If we have had centuries of policies that have explicitly targeted people of color in negative ways, can we undo that harm with policies that don't explicitly target those exact same communities? And this goes to exactly what Dr. Perry was talking about, trying to do this in sort of a colorblind way. And honestly, I don't know the answer, and I'm curious what you three think of, is that possible? Or do you have to have interventions that are specifically targeted at those communities? Which then raises a lot of other questions?

Kashkari: Well, for me—I'll start if that's okay—I mean, I'll go back to what I said earlier about the more American history that I read, and I read a lot of it, the more I find examples where the government did grants—whether it's 140 acres in the homesteading, and then they promised 40 acres in [inaudible] for every free slave, they didn't actually follow through on that. But there've been many programs where there were grants given to whites only, and the FHA after World War II, they gave subsidized loans to returning white soldiers.

So if you add up all these things and you say to one group, "Well, here, we're going to give you this grant and then we're going to tell this other group just work hard and catch up." I don't see how that's possible. I don't see how it's possible to actually level the playing field when the playing field was made unlevel by the government giving a handout to one group and not the other. So this is a very complicated question, but the more history I read, the more skeptical I am that you can simply say work hard and you're going to catch up. I don't know how that's possible.

Danger: President Mester, is there something that we need to say that we need to do? I mean, I cannot totally understand why this is a challenging piece for someone in a federal position, and yet we've heard over and over again? Can you level that playing field without pushing it in one particular place where it has been depressed for so long?

Mester: Yeah. So the reparations part, I agree with Neel, and the proposals are reasonable about how do you value that? And they differ across proposal of course what the value is. But to really address this issue, you're going to need to do a lot more in terms of getting rid of the systemically racist policies and systems that are out there that perpetuate it. So what I started with was, if you just rebased everybody and gave everybody the same wealth, but did nothing to address the earnings gap, in 50 years you'd be back to where you are today. That's what the research said. So you've got to do more than that.

And that second part, I think, can be much broader. It's about disadvantaged communities, right? Whether they're poor communities or low- and moderate-income communities, the work that we're doing to redo the Community Reinvestment Act Implementation, I think that holds potential, right? To getting investment in some of these disadvantaged communities. But I give Neel and Raphael a lot of credit for doing this series, a multiple series, because I think education is going to be part of this as making people understand what the history is of how we got here. And then I think more people buy into, how do we solve the problem?

Danger: Okay. That way you set me up perfectly for what I was hoping to close with, and this is the last question that I get with you all, which is, as you said, President Mester, this involves multiple facets, all of society, hopefully working on this. And I'm very happy and grateful that the Fed is thinking about this. I think the flip side of that is sometimes when things are everybody's problem, they are nobody's problem. And so my final question to you all is, how can we judge whether or not you all have done what you need to do, right? What are the measures that we should be looking at and asking 5, 10 years from now, whether you evolve, may progress the tools that you have on these problems and issues?

Bostic: Well, I'll go first. And I'll say for me, our metric of success is, to what extent are we continually and consistently lifting up actions and policies and practices that work, and commit to trying to get things that work applied in the field? Many of the things that you've heard people talk about are not our decisions, but the best that we can do in many of those regards is to make sure that the people who have those decisions have the full amount of information, whether it be the amount of harm that has happened historically, whether it be the way that the institutions have been tilted in favor of some over others, or if it's that there are real opportunities that are not being taken advantage of. I think it's our responsibility and it's our burden, really, to carry this and to continue to carry it on a consistent and sustained basis. Because this took decades to occur, it's going to take quite some time for it to reverse itself.

Danger: That is a brilliant note. I want to say, thank you to all three of you and to the Federal Reserve for putting this whole thing together. Right now, though, I am being instructed, it's time to turn it back over to President Neel Kashkari for a bit of a closing. So thank you all so much. And President Kashkari, I'll turn it to you

Closing remarks

Kashkari: Thank you, Tane. Thank you to my colleagues, Loretta, and Raphael, and all of our wonderful speakers. And of course, to our brilliant audience, we've got thousands of people who are watching it now, live, thousands more watching. Thank you for joining us. This is the fourth installment of our Federal Reserve series on racism and the economy. We have several more to come. Each one has been a really rich discussion, where I personally have learned a lot. And as I said, I wish this housing discussion could have gone on for an hour or two longer.

The next one we're going to be having is really going to be powerful. April 13th, it's racism in the economics profession. So this is something the Federal Reserve actually can directly influence because we are the biggest consumer of PhD economists in America. We're the biggest employer of them. And as a consumer of the economics profession, we should be able to have some influence on how they're doing and what their culture is and what their norms are, so—April 13. Then in early June, we're going to have a session on racism in entrepreneurship. Thank you again for joining us. We hope you will join us for those future sessions. And thank you again to our wonderful speakers. That's all we have this afternoon. Take care.