Opinion | Your Home’s Value Is Based on Racism

So if a Black person like John buys a home in the diverse neighborhood he prefers, his home is likely to not appreciate in value as much as a home in a white neighborhood. But if he becomes a homeowner in a predominantly white neighborhood, making a good financial investment, social penalties can follow: Will a neighbor call the police as he enters his own home? Will he have to alert the police that his Black sons belong in the neighborhood and shouldn’t be treated as suspicious? Whatever they choose, Black people risk being penalized by white preferences.

“There are no other Black people that live on my street,” John said. But he also acknowledged that the appreciation of the house has been phenomenal. “In terms of long-term value, I would absolutely choose this neighborhood again,” he said. But his vision of raising his sons in “the village of Black community life” looks very different now.

Enter tax policy to add insult to injury. The typical white family has eight times the wealth of the typical Black family, a racial wealth gap that’s fueled by tax subsidies for homeownership.

Between 1940 and 1950 a majority of white Americans became homeowners by riding a wave of anti-Black policies — public and private — that prevented Black families from buying in certain neighborhoods and from taking advantage of F.H.A.-insured loans. By the end of the 1950s, 98 percent of homes built with F.H.A. support after World War II were occupied by white Americans. Black taxpayer dollars were supporting a federal government that was denying them equal treatment.

At the same time that America was solidifying its status as a nation of white homeowners, the post-World War II defense industry was mobilizing and in need of workers. To enable those workers to sell their homes with tax-free gains and move to where the jobs were, the real estate lobby went to work. By 1951, a new tax provision allowed homeowners to avoid paying taxes on gains when they sold their homes, if they purchased a new home of equal or higher value.

Today, if you sell your home at a gain, you can receive up to $500,000 of gain tax-free. If, however, you sell your home at a loss, you get no tax break. (Contrast that with the way the tax law allows losses to be deductible when you sell stock.) John’s $144,000 loss did him no good in terms of taxes. However, if he and his wife sell their Candler Park home, they’ll receive a significant tax-free gain.

So even though it is now illegal to discriminate against Black home buyers, tax subsidies that reward homeowners who sell their homes at a gain and punish those who sell their homes at a loss still disproportionately benefit white homeowners and their preferences — helping far too few Black homeowners along the way. White homeowners win while Black homeowners — particularly those who want Black neighbors — lose.