The Illusion of Meritocracy in Housing, Part 2 | A Long Repentance Post #7 | New Humanity Institute: Sangwon Yang & Mako Nagasawa


The Purpose of A Long Repentance Blog Series

People talk about issues of race and justice in the United States as issues of ‘justice and injustice.’  Sometimes we launch into debates about ‘the proper role of government.’  But is that the original framework from which these issues were asked and debated?

The purpose of the blog post series called A Long Repentance: Exploring Christian Mistakes About Race, Politics, and Justice in the United States is to remind our readers that these issues began as Christian heresies.  They were at variance from Christian beliefs prior to colonialism.  Since Christians enacted and institutionalized what we believe to be heretical ideas, they were very destructive and harmful, then as now.  And we bear a unique responsibility for them.  As a result, we believe we must engage in a long repentance.  We must continue to resist the very heresies that we put into motion.  Thus the title of this blog series, A Long Repentance.  The journey is long and challenging.  It may be impossible to see the end.  But along the way, it is also inspiring and sometimes breathtaking.

We also encourage you to explore this booklet, A Long Repentance: A Study Guide, for further reflections and discussion questions.

In Post #2 and Post #5, we explored how white American Protestants promoted the heretical view of Genesis 1 taught by John Locke, that the productive can take land/property from the unproductive.   Also setting themselves up for deep anxiety, they also tended maintained that the social system they set up was fair and ‘meritocratic’ – as opposed to blatantly racist.  They tended to believe that their ‘individual success’ was the result of their ‘personal hard work’ in the ‘private market.’  White Americans even hid from themselves the fact that they used massive government intervention to set up a deeply unequal and racialized social system that continues to this day.  In Post #6 and this post, we explore the housing market.


A Head Start of Billions of Dollars

Brian told Michaela a bit more about his grandfather and grandmother, and how disappointed they were to see so many other servicemen qualifying for a home loan. “After the War,” he resumed, “The Veterans Administration (VA) adopted the same standards as the FHA.  So the federal government subsidized white flight into the new suburbs, especially for white GI’s returning home from World War II.  Would you say that’s meritocratic?”

Michaela’s grandparents had once mentioned the term “white flight” in connection with their own move into Levittown, NY.

Real estate developer William Levitt built “Levittowns” in the post-War period.  These were either housing developments or entire suburbs.  Michaela could see that William Levitt was not engaging in a free-market venture.  The FHA endorsed his plans and guaranteed bank loans

“for nearly the full cost of their proposed subdivisions.  By 1948, most housing nationwide was being constructed with this government financing.”[1]

Levitt said, in front of Congress in 1957,

“We are 100 percent dependent on Government.”[2]

This private-public partnership built white suburbs, shutting out black people, including black veterans.  Those black veterans deserved that opportunity just as much as any white veteran[3] – and more so, since black soldiers fought for a country which fought against them, before and after the war.

“Best known is Levittown, NY – 17,000 homes for veterans, sold initially for about twice national median family income (less than $125,000 in today’s dollars).  Affordable to working class families of any race, federal policy restricted them to whites.”[4]

“Did you know,” asked Brian, “That black families received only 2% of those federally subsidized loans from 1945 – 1959?  It gave white families a $120 billion head start.”[5]  He handed Michaela a book.  The title said it all:  When Affirmative Action Was White: An Untold Story of Racial Inequality in Twentieth-Century America.[6]  It actually tightened white control over neighborhoods that were once diverse, and made them more white.[7]  The FHA and VA finally stopped this discrimination in finance and lending in 1966.  But other problems continued.  And most importantly, the groundwork of residential segregation had been laid.  So many white folks accumulated wealth through homeownership, tax deductions, and asset appreciation.  It was the biggest affirmative action program in American history, and it was for white people.”

“Okay, I can see that,” Michaela agreed.  “My grandparents paid for my dad and my aunt to go to college by taking out a loan from the bank against the equity in their home.  And the ‘equity’ wasn’t just the money they had paid towards their mortgage.  Their house value had doubled during that time, so they were able to count that.  How does that compare with your family?”

Brian answered, “My grandparents were renters.  Part of the reason is that in the 1940’s and 50’s, all four of my grandparents were concerned they would be lynched – victims of domestic terrorism – in the South.  My grandparents all moved to Northern cities in the Great Migration.[8]  During that era, bankers, real estate agents, and renters knew they could charge black people higher rents and interest rates.  When my grandparents had children, they had no extra money to send them to college.  My dad went to community college for two years because it was more affordable.  He got some general classes out of the way.  While he worked.  Then he went to a state school, with no scholarship.  While he worked.  He also took out loans.  Similar story with my mom.  And they had no house to receive from my grandparents as an inheritance.”

The Million Dollar Difference

Brian and Michaela compared other differences between renting and owning.

Michaela recounted, “When my dad and aunt went to college, my grandparents rented rooms to other family members.  Or just helped them with a place to stay for a while, like when my grandmother’s sister needed to get away from her husband for a while because he was an alcoholic.  Then, when my mom and dad got married, they were able to live in a room in my grandparents’ house for a few years.  They saved money until they could afford their own place.”

Brian continued, “Not only that:  Your grandparents, and then your parents, probably saved thousands of dollars in taxes, whereas my grandparents could not.”

“How’s that?” asked Michaela.

“Your grandparents could deduct mortgage interest from their taxes, while my grandparents, who rented apartments, had to pay their taxes in full.  Your grandparents saved thousands of dollars in taxes, maybe between $500 – $1000 per year.[9]  In general, the wealthier people are, they more they save on tax deductions on mortgage interest.

‘To see how this works, consider two families with equal incomes of $100,000.  One family owns its house and pays $2,000 in interest on its mortgage each month, or $24,000 annually.  The other pays $2,000 a month to rent an apartment.  The family that owns its home can deduct $24,000 from its taxable income and pay taxes as if it only earned $76,000.  The renter family is taxed on all $100,000 of its income.  The homeowners pay about $6,000 less in taxes a year.’[10]

“So your grandparents and parents,” continued Brian, “were also able to save thousands of dollars in taxes over the course of years.  And when you needed a car, or a computer, or whatever, that makes a difference.”

“Did your parents buy you a car when you got a driver’s license?” Michaela asked.

“No,” said Brian.  “Not until I started working on my own could I buy a car.  And my family and I didn’t have thousands of dollars of extra cash.  I took out a car loan.”

“Paying more interest?” asked Michaela.

“Exactly,” said Brian.  “That puts us further behind.  If your family buys a car for $12,000 or a minivan at $25,000 by writing a check, that’s all you pay.  But my family would probably have to spend almost $3,000 more than that.  Because if my family buys the same minivan at $25,000 by taking out a car loan, for 48 months at a 4.5% interest rate, which is about average, then we will have monthly payments of $466.08 and a total cost of $27,965.”[11]

“So the advantage compounds,” observed Michaela.

“Quickly,” said Brian.  “That house saved your family thousands of dollars.  And it was worth hundreds of thousands of dollars.  It gave them peace of mind.  It buffered major life problems.  It paid for your dad and aunt to go to college.  It was leverage for your parents to buy their own house.  When your grandparents pass away, they could give it to you and your cousins as an inheritance.  That single house could easily be making a million dollar difference in the life of your family, compared to mine.  Generations later, wealth leveraged by homeownership is still the number one reason why white people have so much wealth, and black people do not.[12]  We’re not just talking about the income gap, but the wealth gap.  The number one factor in building wealth is not getting a college degree.[13]  It’s not raising kids in a two-income married household.[14]  It’s not working more or spending less.[15]  It’s the leverage that white families had through this affirmative action program for white homeownership.”[16]

They looked at a recent headline.  “White High School Dropouts Are Wealthier Than Black or Latino College Graduates.”[17]


Brian asked, “If we really lived in a ‘meritocracy,’ would this even be possible?”


[1] Richard Rothstein, The Color of Law: A Forgotten History of How Our Government Segregated America (New York: W.W. Norton & Company, 2017), p.71

[2] Rothstein, p.72; cf. Matthew Chambers, Carlos Garriga, and Don E. Schlagenhauf, “The New Deal, the GI Bill, and the Postwar Housing,” Federal Reserve Bank of St. Louis, February 14, 2012; is one attempt at economically quantifying the impact of various government actions

[3] Rothstein, p.82 – 83;

[4] Richard Rothstein, “How Redlining Led to Rioting,” Washington Spectator, July 15, 2015;

[5] Thomas W. Hanchett, “The Other ‘Subsidized Housing’: Federal Aid to Suburbanization 1940s-1960s”, edited by John F. Bauman, Roger Biles and Kristin M. Szylvian, From Tenements to the Taylor Homes: In Search of an Urban Housing Policy in Twentieth Century America (University Park, PA: Pennsylvania State University Press, 2000), p.163 – 179

[6] Ira Katznelson, When Affirmative Action Was White: An Untold Story of Racial Inequality in Twentieth-Century America (New York: W.W. Nelson & Co, 2005); cf. Hilary Herbold, “Never a Level Playing Field: Blacks and the GI Bill,” The Journal of Blacks in Higher Education, Winter 1994.

[7] Rothstein, chs.2 – 3

[8] We explore the significance of the Great Migration in later blog posts.  The Equal Justice Initiative documents 4075 racial terror lynchings in the American South, from 1877 – 1950; source:; Isabel Wilkerson, “The Long-Lasting Legacy of the Great Migration,” Smithsonian Magazine, September 2016; writes, “When the migration began, 90 percent of all African-Americans were living in the South. By the time it was over, in the 1970s, 47 percent of all African-Americans were living in the North and West.”

[9] Anthony Randazzo and Dean Stansel, “Mortgage Interest Deduction Saves Middle Class Taxpayers All Of $51/Month,” Fortune, December 18, 2013; explain, “Middle-class homeowners saved an average of $615 on their taxes in 2012 thanks to the mortgage interest deduction. That’s actually down from an average savings of $989 in 2010.”

[10] Seth Hanlon, “The Mortgage Interest Deduction,” Center for American Progress, January 26, 2011; also points out, “Households with incomes between $40,000 and $75,000 receive, on average, $523 from the mortgage interest deduction. Households with incomes above $250,000 receive $5,459, or more than 10 times as much”.  Tax Policy Center, Urban Institute and Brookings Institution, explain, “The deductions and exclusions available to homeowners are worth more to taxpayers in higher tax brackets than to those in lower brackets. For example, deducting $2,000 for property taxes paid saves a taxpayer in the 39.6 percent top tax bracket $792, but saves a taxpayer in the 15 percent bracket only $300. Additionally, even though they only represent about 20 percent of all tax units, those with more than $100,000 in income receive over 85 percent of the mortgage interest deduction tax benefits. That difference results largely from three factors: compared with lower-income homeowners, those with higher incomes face higher marginal tax rates, typically pay more mortgage interest and property tax, and are more likely to itemize deductions on their tax returns.” (emphasis ours)

[11] Value Penguin, “Average Auto Loan Interest Rates: 2018 Facts & Figures,” Value Penguin, date unknown;  “When paid over the course of 84 months in $347.50 monthly payments, this same loan at the same interest rate costs a total of $29,190 — more than $1,200 pricier than at 48 months.”  See also Paul Kiel, “Small Debt is Destroying Black Lives: Institutional Racism and the Wealth Gap America Still Refuses to Acknowledge,” Salon, January 9, 2016;

[12] E.g. In Boston, “Close to 80% of whites own a home, whereas only one-third of U.S. blacks… are homeowners” according to Ana Patricia Munoz,, “The Color of Wealth in Boston,” Federal Reserve Bank of Boston, March 25, 2015;; Laura Shin, “The Racial Wealth Gap: Why A Typical White Household Has 16 Times The Wealth Of A Black One,” Forbes, March 26, 2015;; Chuck Collins, “The Wealthy Kids Are Alright,” The American Prospect, May 28, 2013;;

[13] Amy Traub, Catherine Ruetschlin, Laura Sullivan, Tatjana Meschede, Lars Dietrich, and Thomas Shapiro, “The Racial Wealth Gap: Why Policy Matters,” Demos and the Brandeis University Institute for Assets and Social Policy, June 21, 2016; find that equalizing college graduation rates between whites and people of color would close the wealth gap by 1 percent for blacks and 3 percent for Latinos.  S. Michael Gaddis, “Discrimination in the Credential Society: An Audit Study of Race and College Selectivity in the Labor Market,” Oxford Academic Social Forces Journal, Volume 93, Issue 4, June 2015; finds blacks who graduated from elite universities have the same chance in the job market as whites who graduated from less selective schools. In addition, black graduates are offered lower starting salary and less prestigious starting jobs.

[14] 15.2 million children living in poverty also live in married, two-parent families. 16.7 million live with one parent.  See NBC News, “Family Income – Not Married Parents – More Apt to Impact Kids’ Well-Being,” NBC News, February 27, 2015;  Amy Traub, Laura Sullivan, Tatjana Meschede, and Tom Shapiro, “The Asset Value of Whiteness: Understanding the Racial Wealth Gap,” Demos and Institute of Assets and Social Policy at Brandeis University, 2017;, p.7 – 8 find, “According to data from the Survey of Consumer Finances, the median white single parent has 2.2 times more wealth than the median black two-parent household and 1.9 times more wealth than the median Latino two-parent household.”  See also Emily Badger, “Children With Married Parents Are Better Off — But Marriage Isn’t the Reason Why,” Washington Post, September 8, 2014; summarizing Kimberly Howard and Richard V. Reeves, “The Marriage Effect: Money or Parenting?”, Brookings Institute, September 4, 2014;

[15] Noah Smith, “How to Reduce the Black-White Wealth Gap,” Bloomberg, April 23, 2018; features very good household data, though his proposal needs further consideration and is certainly not the only form of reparations being considered

[16] Amy Traub, Laura Sullivan, Tatjana Meschede, and Tom Shapiro, “The Asset Value of Whiteness: Understanding the Racial Wealth Gap,” Demos and Institute of Assets and Social Policy at Brandeis University, 2017;; Peter Coy, “The Big Reason Whites Are Richer Than Blacks in America,” Bloomberg Businessweek, February 8, 2017;

[17] Danielle Kurtzleben, “White High School Dropouts Are Wealthier Than Black or Latino College Graduates,” Vox, September 24, 2014;

Time and space did not permit us to discuss the disproportionate impact of the financial crisis of 2008 – 2009 on black and Latino families.  See Laura Gottesdiener, A Dream Foreclosed: Black America and the Fight for a Place to Call Home (2013) and interview by Amy Goodman, “A Dream Foreclosed: As Obama Touts Economic Recovery, New Book Reveals Racist Roots of Housing Crisis,” Democracy Now, August 6, 2013.


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