Presidential hopeful Warren uses Detroit wall to highlight housing plan

Elizabeth Warren speaks about housing discrimination at Detroit's Eight Mile wall.

Democratic presidential hopeful Elizabeth Warren used Detroit as a backdrop to promote her proposal to help people living in formerly red-lined neighborhoods buy a house.

In a tweet posted late Wednesday, the Massachusetts senator touted her proposal at the site of Detroit's Eight Mile Wall, also known as Detroit's Wailing Wall or Birwood Wall.

The half-mile, 6-foot-high concrete wall was constructed in 1941 in a northwest Detroit neighborhood south of Eight Mile, when a developer wanted to build a housing community exclusively for white families and separate them from black homeowners living nearby. 

"Home ownership is the No. 1 way that working families, middle-class families build real wealth," said Warren in the video with the wall behind her.

"So it's no surprise that starting long, long ago, America subsidized the purchase of housing. For white people. But they discriminated against the purchase of housing for black people. The consequence of that: Generation after generation after generation, a lot of working white families had a chance to build wealth, and a whole lot fewer black families had that chance."

The discrimination continued into the 1960s, "and even today, the consequences of that are still felt," Warren said.

Warren, a former professor at the University of Michigan, Harvard University and other schools, noted the 30-percent gap between black and white home ownership rates is higher today than when housing discrimination was legal in America.

Last year, the Urban Institute reported that the percentage of African Americans who own their own homes dropped in Michigan more than any other state, down to 40 percent from just over half in 2000.

Much of that decline was recorded in Detroit, which until the early 2000s had among the highest levels of black home ownership in the country. Across the country, low-income and minority homeowners saw the value of their homes nosedive during the mortgage and financial crises.

As of 2017, whites comprised 69 percent of Metro Detroit’s population but owned nearly 81 percent of owner-occupied housing in the area, according to the U.S. Census Bureau.

By contrast, African Americans made up 22 percent of the Detroit region’s populace but owned 13.5 percent of the housing. 

Warren's housing plan would offer mortgage assistance to first-time home buyers who live or lived in formerly red-lined areas who were historically excluded from government housing programs. 

"It's our government acknowledging the role that our government played on our behalf to keep African Americans out of home ownership and to keep them from being able to build wealth in this country," Warren says in another video from Waterloo, Iowa. 

"Sometimes, you just have to do what is right." 

To address the nation’s shortage of affordable housing, Warren has proposed spending $500 billion in federal money over 10 years to build or rehabilitate housing units. She would fund the program by rolling back exemptions to the estate tax to Bush-era levels.

An analysis by Moody’s Analytics found that the estate tax reforms would render the proposal deficit neutral. But a Republican-controlled Congress would be unlikely to approve such a change.

Detroit's wall is a visible reminder of racism in the city, though most of the families living in the neighborhood are African Americans.

It still stands today, snaking through the backyards of many homes and the Alfonso Wells Memorial Playground. It was decorated with murals in 2006 with uplifting scenes, including one with civil rights icon Rosa Parks.

Warren began her video by pointing out homes on both sides of the wall.

"If you live in that house, the federal government would subsidize a mortgage for you. But if you lived in that house, the federal government discriminated against you and made it almost impossible for many of these people to get mortgages," Warren said. 

"That is a part of our American legacy that we need to address head on," she continued. "And we just can't pretend it didn't happen, because it continues to have effects today."

Warren then walks along the wall before describing her plan to fund down-payment assistance for certain families. 

The grants would target first-time home buyers who live in formerly red-lined districts or communities that were segregated by law and are still currently low-income. The grants would also be available to those who lost their homes during the mortgage crash.

"So you have a chance to own a home to get in the game," Warren said. 

One analysis of her plan said the grant provision has the potential to lead to home ownership for hundreds of thousands of African-American families.

"The bill is the first since the Fair Housing Act with the explicit intent of redressing the iterative effects of our nation’s sordid history of housing discrimination," wrote economist Darrick Hamilton of Ohio State University and Mehrsa Baradaran, associate dean at the University of Georgia School of Law.

"Critically, it has the potential to make a substantive dent in closing our enormous and persistent racial wealth gap."

But offering first-time home buyers help with down payments poses a "real risk" for families trying to accumulate greater assets, said Howard Husock, vice president for policy research at the Manhattan Institute. 

"I agree with the senator that minority asset accumulation has lagged whites'. There's a lot of reason to be concerned about that," Husock said. "But there's no quick fix for asset accumulation." 

Down payments are in place to guard against foreclosures that would undervalue other homeowners' assets on a street or neighborhood, he said. 

"The extent to which we make it easy to buy homes without having saved, we eliminate one of the most important tests that show their neighbors that they won’t be foreclosed on. Not delinquent, and that they’re going to keep their house in good repair,” Husock said.

“Over time, that’s how you build good neighborhoods. And only when you build good neighborhoods do house values go up, and only then does asset accumulation improve.”

Husock also said a one-size-fits-all approach to new housing won't work in every community, especially Detroit with its housing surplus. 

"You don't really want to start building more housing in Detroit. You want to see the housing that's there get renovated and fixed up," he said.

"The more subsidized housing you have, the more abandonment of the older housing. What might be appropriate for San Francisco probably isn't appropriate for Detroit." 

Warren is among more than 20 candidates running for the Democratic nomination, aiming to unseat President Donald Trump in 2020.  

Staff writer Christine MacDonald contributed