Are We Headed For a New Segregation?

The Jim Crow Laws (legalized segregation between blacks and whites) started in the 1880’s and was abolished by the Civil Rights Act of 1964. The sixties wasn’t that long ago as the social norm was to keep a separation between races which inevitably perpetuated through the years and continued even up until the present day in many cities across America. But while segregation is now prohibited from being practiced by institutions is it possible that, in the real estate business, there is still a legal form of segregation? Not based on race, gender, ethnicity, or religion but rather socioeconomic status?

You can drive to any subdivision around your city and read the sign out front that says “Starting in the $300’s.” It’s a way to explain to the consumer that community only sells homes that start at the price of $300,000.

“Housing segregation is the practice of denying minority groups equal access to housing through the process of misinformation, denial of realty and financing services, and racial steering.” But factors such as socioeconomic status also contribute to perpetuating housing segregation. The more developments that are built which serve the needs of one or another particular economic class naturally excludes others that can’t afford to live there.

Is this a way to protect the financial investment of homeowners who may pay more for their home? Is it a way to build a more consistent community that serves the needs of a particular market? Or, is it a way to separate people by socioeconomic status?

The answer could be all three without any malice intent given to the latter. But could one make the argument that built into the system by which we use to build homes in America there is an inherent element of segregation?

However, to make sure we’re being fair to the reader I think it’s important to also explain the other key factors that must be considered around this topic.

From a business perspective it wouldn’t make sense to build a $200,000 home on a lot that cost $150,000. The economics simply wouldn’t work and the home builder wouldn’t make enough money to support their business. So the cost of the lot, supplies, and labor will drive the cost of how much the home should be sold for; and this is before one take into account what the market can bare for a home in a specific location.

Additionally, the market also has a say in the matter. Assuming the economics made sense for home builders to build homes next door to one another at various price points; would a buyer who can afford a home for $300,000 want to live next door to another home worth $150,000? Many buyers use the homes that sit on the same street as a way to gauge their interest in the home they’re looking to buy. If one home was larger and had significantly more features than the home less expensive next door would the majority of buyers want to make the purchase?

In large planned unit developments there are usually various price points within that community that are separated into sections where homes that start in the $200’s, as an example, would be built in one area of the community and homes that start in the $400’s would be built in another. It still is a system that separates people based upon socioeconomic status but it’s been the best system of use to date that still allows for people to come together in common areas such as pools, green space, and walking trails.

So, are we headed for a new segregation or are we already there? Is there a better system that should be considered or is this the best we can do?

Things do tend to change over time but are the dynamics to complex for this to ever change at all?

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