NAR Regulatory Forum: What It Will Take to Close the Racial Wealth Gap
November 11, 2020
Addressing racial inequality does not have to lead to others becoming disadvantaged; it’s an advantage for everyone, panelists said at Tuesday’s Regulatory Issues Forum during the virtual 2020 REALTORS® Conference & Expo.
“The narrative needs to change,” said Mehrsa Baradaran, professor of law at University of California Irvine and author of “How the Other Half Banks” and “The Color of Money: Black Banks and the Racial Wealth Gap.” Fixing the problems associated with the racial wealth gap “does not mean disadvantaging some to advantage others. You don’t have to take from someone else to give to someone else. This helps everyone.”
Indeed, a 2019 report from McKinsey & Co., a management consulting firm, estimated that closing the racial wealth gap created and exacerbated by systemic racism could boost the U.S. GDP 4% to 6% by 2028. However, the report says, missing out on that growth could essentially cost every white American $2,900 to $4,300.
Homeownership plays a big part in building long-term wealth. But when a segment of the population has been denied opportunities or is otherwise disadvantaged in obtaining ownership, the result is a widening gap that can worsen through the generations. During Tuesday’s virtual session, Baradaran gave an overview of how the racial wealth gap has persisted and grown through the years, tracing it to laws that allowed redlining and a lack of mortgages in predominantly Black areas.
However, in addressing decades of systemic racism in housing, solutions must be “precise” and community-based in addressing the direct populations affected, said panelist Ryan Gorman, president and CEO of Coldwell Banker Real Estate LLC. The ways to tackle it can vary, from down payment assistance programs to the expanded use of credit unions for lending. Real estate professionals can play a role in raising awareness about existing or new programs.
“There will not be one silver bullet here, but a million different things,” Gorman said. “It needs to take place in every community, in city council meetings, zoning hearings, and discussions with builders, along with an understanding that we don’t need everything to be at a mass scale. It’s OK for some programs to only work in some places but still make a positive difference. REALTORS® know that because they make positive changes in families every day and make a huge impact on a micro scale. I think we need to apply that same philosophy here.”
Vince Malta, president of the National Association of REALTORS®, spoke of the past failings of the real estate industry over decades that allowed for deepening racial wealth and ownership gaps. But now, he says, the industry has the obligation to step up, right wrongs, and lead efforts in fighting for policies that strive for greater equality in housing.
“Housing segregation and discrimination have devastating effects on families and lead to disparities” in many areas of life, from school quality to health care and more, he said. “REALTORS® have an important part in remedying this and educating our members and the public. This is our lane, and this is the time for REALTORS® to step up and lead.”
NAR has adopted several initiatives in recent months to help spark greater change, such as by partnering with the U.S. Chamber of Commerce in launching an Equality of Opportunity Initiative. The program, which has earned the support of more than 400 organizations nationwide, is assembling business and policy leaders to advance economic inclusion and highlight potential data-driven solutions to address inequality. Also, NAR has teamed with the National Association of Real Estate Brokers and the Urban Institute to study and address the low rate of African American homeownership. Last week, NAR announced the debut of a new online simulation training tool—set to launch Nov. 18 at fairhaven.realtor—to help REALTORS® better understand discrimination in real estate transactions. (Read more about it: Confront Discrimination in NAR’s New Simulation Training) NAR also has compiled a list of books, videos, and podcast recommendations to help REALTORS® learn more about residential segregation and fair housing issues.
“It’s difficult to understand what is fair if you don’t know what the actual problem is,” Gorman said. “I think when we immerse ourselves in the history, I think the message will resonate differently when potential solutions are proposed, particularly when precise solutions are proposed. We need to understand how we got here so the path forward doesn’t feel unfair, but instead feels like righting a wrong.”