Larry Santucci is a senior advisor and research fellow at the Federal Reserve Bank of Philadelphia. The views expressed here are solely those of the author and do not necessarily reflect the views of the Federal Reserve Bank of Philadelphia or the Federal Reserve System. Nothing in the text should be construed as an endorsement of any organization or its products or services. No statements here should be treated as legal advice.
A challenge facing researchers and policymakers is understanding the historical factors contributing to the origins and persistence of the racial wealth gap in the United States. For many Americans, housing wealth comprises the largest share of nonfinancial wealth. Accordingly, my recent study investigates the relationship between economic disparities between White and Black Americans and historical housing practices in Philadelphia and many other US cities. All too often, racial covenants and other barriers made it difficult for Black Americans to acquire homes, increased the prices paid for them, and depressed their returns to home ownership.
An Overview of Wealth Disparities
The magnitude of the US wealth gap by race is large, and has persisted over time. In 2019, for instance, the median White family wealth stood at $188,200, versus $24,100 for Black families – an 8:1 ratio. Moreover, median young White families possessed 42 times more wealth than their Black counterparts.
This pattern in wealth differences has also persisted across generations. On average, about $350 billion of wealth (2016 dollars) was transferred inter vivos (between one living person to another) annually between 1995 and 2016. Nevertheless, recent evidence suggests that only 10% of Black families receive an inheritance, versus almost 30% of White families. Additionally, the average White family inheritance amounted to almost $200,000, twice the $100,000 average for Black families.
A key explanation for this large disparity is attributable to different home ownership patterns across racial groups. In fact, housing in the US is the primary wealth accumulation vehicle, yet home ownership rates differ dramatically for Whites and Blacks. In 2016, 73% of White families owned their homes, versus 45% of Black families. In addition, average net housing wealth reflected this gap, with White families owning homes worth $216,000, versus only $94,000 for Black families.
The Role of Racial Covenants
Racially restrictive covenants emerged in the late 19th century in the United States, used as a legal mechanism to systematically exclude Black Americans from owning, renting, or occupying property in certain neighborhoods. Their use exploded during the first half of the 20th century after racial zoning ordinances were ruled unconstitutional.
Such contractual provisions included prohibitions on the purchase, lease, or occupancy of properties by specific racial and ethnic groups. These restraints were generally legally enforceable until the 1948 Shelley v. Kraemer Supreme Court decision, yet even after that, they were supported by federal policies. Indeed the Federal Housing Administration (FHA) continued to finance racially exclusive housing developments until 1962.
Research Findings
In our work, we have examined 900,000 property deeds in Philadelphia to identify close to 4,000 cases which included a racial covenant in the deeds between 1919 and 1932. Such covenants tended to be concentrated in parts of the city under development at that time, or which abutted neighborhoods with high concentrations of Black residents.
Racial covenants created invisible barriers that restricted Black families to specific neighborhoods. My research suggests the possibility of lasting effects: racially segregated neighborhoods exhibited, and continue to experience, lower home ownership rates, and worse economic outcomes.
Implications and Future Research Plans
This research, therefore, underscores how historical housing discrimination in the United States created long-lasting barriers to property ownership for Black Americans. Specifically, it systematically prevented Black Americans from accumulating housing wealth, negatively affected returns to home ownership for Black Americans, and contributed to geographic patterns of economic disadvantage that persist today.
With the help of the recently-established Center for the Restoration of Economic Data (CREED) at the Philadelphia Federal Reserve, we are expanding our research efforts in several directions. First, we are digitizing historical census and real estate transaction data, and extending the racial covenant data collection effort further in time. Next, we will develop more granular block-level statistical analyses. And finally, we will continue investigating the long-term consequences of these historical barriers to the creation and transmission of wealth
While significant challenges remain, our research provides essential insights into the complex origins of the racial wealth gap, providing a foundation for more effective policy conversations.
Views of our Guest Bloggers are theirs alone, and not of the Pension Research Council, the Wharton School, or the University of Pennsylvania.







