Closing the Racial Wealth Gap

I stay in New York City because I believe in the promise of my city as a place of opportunity and upward mobility, even though the city does not live up to that promise. Closing the yawning gap between reality and possibility so that more Black, Latinx and other economically disadvantaged people can thrive here over the generations means changing how we think about poverty and opportunity. I advocate for a talent-retention community development approach, similar to how successful companies grow their talent base.

We need neighborhoods to grow more locally owned businesses as well as retain and create more property owners, as this builds more economically and socially resilient communities in less powerful — or what I call “low-status” — neighborhoods.

Put another way, we need to apply many of the same tools of capitalism that created white wealth in America — minus the slavery, of course — to create wealth where it’s needed most.

What is ‘low-status’?

I purposely use the term “low-status” instead of poor, low-income or disadvantaged to describe communities like the South Bronx. They generally are low-income, but “low-status” implies something larger at work, an assumption that those both inside and outside those communities believe that inequality is assumed, and act accordingly.

Here’s an example. In 2022, my company received this note (I’ve changed the names and some details to protect the writer’s identity, and edited for length):

Sammy was calling on me, a private-sector consultant and real estate developer, because none of the social services available had helped in any way.

I tried to help the patriarch — I located legal guidance, and because the perpetrators deceptively separated Black and Latinx families from their generational wealth, I even connected with The Bronx DA’s Office’s Economic Crimes Unit.

The H. family property is one of many acquired by the infamous Eddie Doran, one of several predatory speculators who gallingly portray themselves as “uplifting the downtrodden” — which is to say, Black and Latinx homeowners — by helping them avoid future litigation. Mr. H. passed away, in his home of nearly seven decades. The property is still in litigation.

This is not an isolated story. In cities where I work across the country, the reurbanization of America continues. From big-money players like Blackstone to the Eddie Dorans of the world, firms are purchasing homes for cash and targeting families in “distress” in order to scoop up their properties.

Helping build generational wealth, not facilitate exploitation and liquidation

New York City can lead in helping the Black and Latinx communities seed and nurture generational wealth, and just not sit by and watch it evaporate like so many before.

Although our capitalist system is built on the ideals of life, liberty, the pursuit of happiness and property ownership, the risks and rewards have not been applied evenly. For example, the barbaric institution of slavery benefited white Americans, while Black Wall Streets like Tulsa were savagely attacked without consequence.

Citigroup estimates the racial wealth gap has cost the U.S. $16 trillion in just the last 20 years alone, as systemic racism defined who benefited from America’s growth.

Real estate development in low-status communities is a part of all that. It usually takes on one of two paths. 

One is poverty maintenance. 

Programs funded by the government and philanthropy coalesce as a nonprofit industrial complex and are a major source of capital spending in low-status communities. You know the results when you see them — a tableau repeated in low-status communities all over the United States, where there is a concentration of subsidized affordable rental housing, health clinics, community centers and pharmacies. 

The wicked problem of poverty is considered an intractable dynamic that has no solution. Yet certain efforts will be implemented over and over again to manage it, and they often wind up reinforcing cycles rather than breaking them. 

Well-intentioned programs that are meant to benefit individuals are often successful at a task they set upon. However, taken as a corpus, the nonprofit industrial complex extracts talent as a marker of “success.” For example, programs designed for “gifted and talented” students expect them to understand that “success” means leaving their own hood. I know this because I was one of them. The net effect on communities is a severe talent retention gap. A talent retention strategy needs to stop measuring success by how far one gets away from their community. Instead it should communicate, through economic strategies, that you don’t have to move out of your neighborhood to live in a better one.

The other type of development neighborhoods like the South Bronx too often see is gentrification and displacement.

As urban populations grow, demand rises. But many politicians and activists resist greater density — limiting the supply of housing in the face of that rising demand. So prices go up.

Gentrification generally means outsiders coming in to change a community to suit their needs and desires. But people in low-status communities, including the talent we’re trying to retain, want nice things too — that’s why they leave to experience them.

Capitalism can continue to fuel poverty maintenance or gentrification and displacement, but neither strategy helps people to live in the kind of neighborhoods we all deserve.

A better way

What if we looked at low-status communities as though they were struggling companies? How could we turn them around and make talent retention work for neighborhoods?

Here are a few possibilities.

Municipalities hand out corporate retention packages because they believe the benefit of economic activity is worth the “price” of subsidy.

We can’t force talent to stay, but we can nudge them with lifestyle infrastructure — the types of places my company’s survey data told us they are seeking, like cafes, bars, restaurants, farmers markets and bookstores. These are the same things one reflexively associates with gentrification — the difference here being time.

If we wait for the market to be “ready” to support these things, it’s usually too late. If we change how we look at the people coming up in these communities, we can attempt to add positive lifestyles ahead of the “market.”

Another nudge would be broadening access to property and business ownership that keeps people vested in the neighborhood, like benefits and company stock options — so that when the community does well, more local owners see wealth increases, like the employee-shareholders of a hot startup.

How do we make sure those benefits get in the right hands and appreciate in value for them? If you’re accused of a crime and can’t afford legal fees, a public defender is assigned to you. We can follow a similar model for local property owners.

Before a real estate transaction goes forward in a low-status community, the seller should receive quality legal and financial counsel, so they are fully aware of the value of their land and how to maximize it through sensible refinancing to do things like building rentable vertical additions and accessory dwelling units or using the equity to put their kids through college or start a business. This way, they can afford more education, take in friends or family members going through a hard time, refinance for emergencies or to start businesses, and so on. These property owners could be classified by the U.S. Securities and Exchange Commission as a protected class to slow down continuing liquidation, in the same way they protect nonaccredited investors from entering into high-risk deals.

It is common for people who own property in low-status communities to be approached with fast cash offers from speculators. These can be very enticing for a person who has never seen any value expressed in their community. It’s all legal, but real estate and private equity are actually increasing wealth inequality by separating financially unsavvy people from their generational wealth potential, and our city suffers for it — privatizing profits and socializing the costs to the rest of us.

Meanwhile, developing new policy and programmatic levers to help low-income people own their homes will help economically stabilize their families and, by association, their communities. In contrast, maintaining the traditional lackluster trajectory of homeownership in low-status communities creates more landless renters and exacerbates the concentration of poverty, which statistically increases poverty’s ill effects, including higher rates of bad policing and incarceration and lower health and educational outcomes.

Some New Yorkers pay more in rent than they would on a mortgage, but most of us who need mortgages to buy property cannot compete with the speed at which predatory buyers show up with all-cash deals.

A possible solution is for philanthropies to buy properties at market value from those who choose to sell, and hold them — so that folks within those communities can have time to get financing and buy. That valuable cushion of time would at least give people a chance, and it’s a low-risk place to park capital endowments.

These are some examples of how we can stop lamenting inequality and start implementing a restorative economics approach to favor the outcomes we need as a city.

New York City loses talented people from low-status communities at its peril. I care too much to walk away and let it happen unabated.