Black Suburbs Lose Out on Home Investment

By: Paul CaineInvesting in a home does not pay the same dividends for black suburbanites as for white homeowners, The Chicago Reporter has found.

Property values in suburbs with significant black populations do not increase at the same rate as in white towns. The result: Black homeowners are taxed at higher rates, just to maintain adequate municipal services.

For most Americans, buying a home is the biggest investment they will ever make. Home equity accounts for more than 40 percent of the wealth of the average household, according to the U.S. Census Bureau.

While homeowners in many white towns have higher property tax bills, they get better schools and municipal services in return. Suburbs with significant black populations must continue to raise their tax rates just to maintain services, and often ask voters to approve even higher taxes through referendums.

"It’s a noose around the neck of the black community," said James Shannon, director of the fair housing centers for the Leadership Council for Metropolitan Open Communities. "Why don’t blacks and other minority groups get the opportunity to share in the wealth that whites gain when property values increase so rapidly?"

Using data from the census bureau and the Illinois Department of Revenue, the Reporter analyzed home values and tax rates for all municipalities in the six-county area with populations of at least 10,000 in 1980. Changes in population and tax rates were compared between 1980 and 1990. Among the findings:

While minorities make up 17.3 percent of the 4.48 million suburbanites, nine of the 10 municipalities where home values grew slowest in the 1980s are at least 18 percent black. The worst, Sauk Village, grew an anemic 12.9 percent, while its black population increased from 1.4 percent to 18 percent in the decade. The median increase among Chicago suburbs was 65 percent.

Nine of the 10 towns with the greatest increase in home values are at least 89 percent white. Evanston, the lone exception, is 22.3 percent African American.

Seven of the I 0 municipalities with the highest ta-x rates also are among the suburbs with the largest numbers of blacks.

Voters in majority white school districts are twice as likely as minority districts to approve referendums to raise additional funds for education.

Changing Towns
Bellwood is a quiet community, 13 miles west of the Loop. Founded in 1900, the village saw a housing boom in the 1950s that produced many brick starter homes for returning World War 11 veterans.

Residents say it is a friendly town where you can see the mayor without an appointment. And former Chicagoans who have moved there say Bellwood is a good place to raise a family.

Betty Bijou moved to the village in 1976. "I had a child and I wanted her to grow up in a decent community," she said. "I also liked the schools."

The city of Berwyn lies five miles southeast of Bellwood. At flat glance, the towns appear similar. In 1980, both had median home values of about $58,000. like Bellwood, Berwyn’s homes are mostly bungalows, ranches and Cape Cods.

Bellwood’s black population grew from 35 percent in 1980 to 71 percent a decade later. Berwyn has remained more than 90 percent white.

In 1990 homes in Berwyn were worth an average of $16,000 more than homes in Bellwood. Bijou says she knows why.

"It’s because Berwyn is a white community," she said. "You tell me how it works. I’ve seen some of those homes and they look like shit."

Whites think all blacks are irresponsible homeowners, she added. "Whites do not like mixing with blacks, and when blacks move in they leave."

The residential tax burden in Bellwood has risen from 9.8 percent in 1980, or $9.80 for every $100 of assessed value, to 12.8 percent in 1990.

Consequently, Bellwood’s property tax rate is one of the highest in the six-county area. "It becomes a very difficult book balancing operation," said Michael Stearin, the village’s economic development officer. "We have to maintain services to remain competitive."

And while Berwyn’s tax rate of 9.7 to 10.1 percent is not low, it is 20 percent lower than Bellwood’s.

Tax rates are set by individual taxing bodies, including municipalities, school districts and townships. Each taxing body sets a rate based upon the assessed value of property and its revenue needs. To insure uniform assessments, the state gives each county an "equalization factor," or multiplier. In 1992, Cook County’s multiplier was 2.05.

In 1980, 37 municipalities in the six county area had median home values of between $60,000 and $70,000. Four towns-South Holland, Matteson, Glenwood and Country Club Hills-had the lowest home value increases, from 18 percent to 34 percent. The towns also posted the largest gains in black population, from 11.1 percent to 45.6 percent. In the Reporter’s analysis, home values were not adjusted for the 60.2 percent inflation rate in the 1980s. Properties that did not keep pace with inflation actually lost value.

By contrast, half of the 28 towns with black populations below 5 percent had home value increases of between 59 percent and 87 percent. The disparities stand out in the south suburbs, where towns with sizable black populations border on white villages.

In Country Club Hills, for example, a ranch home purchased in 1980 for $61,700 was worth $72,997 in 1990. But a similar property purchased for the same amount in Worth, 10 miles northwest, was valued at nearly $95,000 in 1990.

In 1980, Country Club Hills and Worth had 14,676 and 11,592 people, respectively, with median household incomes of $27,239 and $21,778. But while Worth’s population has remained 96 percent white, Country Club Hills grew from 12 percent to 58 percent black.

"It’s an unfair burden on black home seekers that are choosing the suburbs as their moving up opportunity," said Sharon Caddigan, director of planning, zoning and development for Country Club Hills. "It becomes a lateral move. They are being denied the American Dream."

Shannon of the Leadership Council supports "integration maintenance"-a town’s use of marketing to prevent areas from changing from predominantly white to mostly black.

When that happens, communities become labeled "for blacks only’ and are marketed exclusively to black buyers. "That means that maybe 80 percent of potential buyers are not shown your property," Shannon said, and less demand leads to lower home prices.

"Nobody wants to buy a house just to live next door to somebody white, that’s not the point. I can’t afford to live in segregation, the cost is astronomical."

But Park Forest Village Treasurer Erica Petersen said a correlation between race and home values is "too easy, it’s like any stereotype." She believes the disparities have more to do with "the economic well-being of the family" and its values.

The attitude of a town’s residents has the biggest impact on home values, said George Patt, executive vice president of the Southwest Suburban Association of Realtors. "What drives the price down is the attitude that ‘Oh my God, there are minorities in my neighborhood, I have to sell my home,’ " Patt said. "If the seller is panicked and will take $10,000 less for their home then the price will go down. That is not to sat that some real estate agents don’t prey on people’s fears."

Of 37 suburbs in which tax rates declined in the 1980s, only four are more than 10 percent black. The aggregate tax rates in these communities range from 5 percent to 11.7 percent. Home values in two of those towns-Evanston and Oak Park-increased by more than 100 percent in the 1980s. But housing activists say that these communities are exceptions precisely because they have not seen the rapid racial change that has undermined home values in other areas.

Evanston’s minority population grew from 27 percent to 31 percent in the 1980s. Oak Park’s minority population rose from 17 percent to 25 percent.

Raising Revenues
Property taxes are the lifeblood of local government, providing the largest portion of a town’s revenues. Public schools get from 45 percent to 70 percent of their funds from property taxes, said Toni Hartrich, director of research at The Civic Federation, a tax watchdog group.

When home values explode, property tax revenues also jump, allowing local governments to cut tax rates without jeopardizing services.

Seventy-four suburbs saw the assessed value of their properties rise by more than 100 percent in the decade. Of those, 67 were less than 5 percent black.

When home values lag, property tax revenues also slow, forcing many municipalities and school districts to raise their tax rates just to maintain services.

Four of the five suburbs with the highest increase in their tax rates are at least 34 percent black. The tax rates in these towns grew between 30 percent and 42 percent in the 1980s. Harvey, which is 80 percent black, has a rate of 15.4 percent, the highest in the six-county area.

"Blacks pay higher taxes for inferior services and they are not able to get the home equity that whites get," said Douglas S. Massey, a professor of sociology at the University of Chicago and co-author of "American Apartheid," a new study of housing segregation. "It’s one of the ways that segregation undermines black economic well-being," Massey said.

When home values are depressed, property taxes and revenues also decline, leaving suburbs with two choices: cut services or raise taxes. Reduced services may lead to even lower home values. But higher taxes can drive businesses away and scare off potential home buyers.

Caddigan, the Country Club Hills official, said her city has been hurt because its property values have failed to keep pace with those in neighboring towns.

But Harvey Mayor David N. Johnson; the city’s first black chief executive, warned against blaming African Americans for the economic decline of a community "when the economic decisions are made outside of the black community. Industrial decline was well underway in Harvey before blacks came," he said. "With the change of the American economy and the abandonment of the industrial sector, [Harvey] has lost tremendous revenue."

Hidden Agenda
Schools are the biggest beneficiaries of property taxes, and among the hardest hit when revenues fall short. "Schools are the hidden agenda in all of this," said Park Forest Village President Patrick Kelly. "People base their decision on where to move based on the quality of schools."

School districts with large minority populations are more likely to be financially troubled, the Reporter analysis shows. These school districts have higher tax rates than their richer, whiter neighbors and they spend less money per pupil.

School districts serving communities with depressed home values are starved for resources. In Park Forest, the assessed valuation has increased only 30.5 percent since 1980. To maintain services, Park Forest Elementary School District 163 has raised tax rates in its education and operations funds to the maximum that state law allows. But it has not been enough.

"Our community is giving as much as it can," said Park Forest School District Superintendent Donna K. Jemilo. "The effort is there but we do not have the resources."

Of 473 suburban school referendums since 1988, voters approved 141, or 29.8 percent, according to the Reporter’s analysis of election results. Majority white districts passed 132 of 417 referendums, or 31.6 percent. Predominantly minority school districts passed just nine of 56 referenda, or 16.7 percent.

Since 1988, School District 160, which serves Country Club Hills, has gone to the voters nine times seeking increases in its educational and building fund tax rates. All were rejected.

District 160 School Superintendent Edward L. Chartraw said funding shortages forced him to cut services.

"We’ve got 10-year-old kids walking two miles to school in freezing weather across roads that I consider hazardous because we cannot afford busing," he said. "This school district cannot provide the quality of education at $3,000 per child that Winnetka can at $8,000."

Illinois politicians need to focus on school finance reform, said Chartraw, but he added that it might take strong measures to make it happen. ‘Politicians are like jackasses," he said. "You have to hit them right between the eyes with a two-by-four just to get them to act."

Passing Blame
Everybody blames someone else for disparities in home values. "Appraisers blame the realtors, realtors blame mortgage bankers and the mortgage bankers blame appraisers," Caddigan said.

Kelly of Park Forest can’t explain why home prices there don’t keep pace with neighboring towns. But perceptions by whites that there are too many minorities can reduce home values because "banks won’t finance [them] for more," he said.

"If appraisers believe that black homeowners will mean lower home values it becomes a self- fulfilling prophecy," Massey said. "If an appraiser decides to knock $20,000 off a home value because a black family moved into the area, there is not a whole lot you can do about it."

But "appraisers can’t set the market, they can only interpret it," said Steven R. Friedman, president of the Chicago chapter of the American Society of Appraisers.

But home values aren’t the only drag on the economies of suburbs that have undergone racial change. In 1991, The Civic Federation calculated the suburbs’ "effective" tax rates, which are based on the tax bills of typical commercial and industrial properties and homes, divided by their market values. The federation found that the industrial tax rate in Harvey was twice the rate in Chicago, and more than six times that of west suburban Oak Brook.

"That’s what you are fighting," said Hartrich. "Even without bias, why would you want to locate there?

"They can’t do anything to get out of debt because all their tools have been taken away," she added. "These are stressed communities, they cannot make it by themselves and the taxpayer is already overburdened."

Research Assistant: Burney Simpson
Interns Alex Blumberg, Cara Jepson and Kelli Worley helped research this article.