Racial Segregation and Investment Patterns in Baltimore
February 5, 2019
Baltimore is the 30th-largest US city by population and is a study in contrasts. It has a low average income compared with other wealthy Northeast cities, has nine colleges and universities, and is a magnet for people pursuing higher education but has undergone decades of population loss. A large social sector provides important services to residents and buoys the local economy: nearly every third job in the city is with a nonprofit employer. But this also illustrates the city’s limited economic vibrancy. This mix of market and nonmarket forces makes Baltimore an important place to examine the geography of opportunity in an American city.
Looking at per household trends among big cities in investment in multifamily, commercial, and industrial properties, Baltimore is in the middle of the pack. It is ahead of some larger cities, like Los Angeles and San Antonio, but stands at just 36 percent of DC’s per capita investment levels.
Race in Baltimore
Investment across Baltimore is uneven—fragmented by race, income, and geography.
It is a pattern Morgan State University associate professor Lawrence Brown refers to as “the black butterfly,” an apt description of the shape of segregated black communities fanning across the city’s eastern and western halves.
Capital flows are one indication of a community’s health and vitality. They also determine whether residents will have access to the amenities, services, and resources they need.
This analysis maps and examines several investment types: private, public, and mission (i.e., capital from investors seeking both a social and financial return). We show important differences in economic activity—and access to opportunity—between neighborhoods.
The investment flows we studied include mortgages for homes, apartment buildings, commercial real estate, and other property types. We also have information about property purchases and investments in construction and rehabilitation, and we include information about city, state, and federal programs.
The present pattern of racial segregation began more than a century ago.
In the early 20th century, the city developed and vigorously enforced discriminatory practices. In 1911, the city council passed the first housing segregation ordinance in the country directed at black people. When a similar Kentucky ordinance was struck down by the Supreme Court in 1917, then Baltimore mayor James H. Preston ordered housing inspectors to instead cite anyone who rented or sold property to black people in predominantly white areas for code violations. Preston’s successor further institutionalized these pressure tactics by forming a Committee on Segregation, a public-private partnership of government departments, community organizations, and real estate industry representatives. The committee intimidated real estate agents and homeowners who were willing to transact across racial lines and promoted the use of restrictive covenants, clauses in deeds that banned the transfer of housing to black people.
The federal government also played an important role. In the 1930s, the Federal Housing Administration prevented black people from moving into white neighborhoods.
Racial divisions this stark are not inevitable. They are still felt today in part because of the enormous effort that went into circumscribing opportunity by race and geography.
Poverty in Baltimore
At 23.1 percent, Baltimore’s poverty rate is roughly double the national average of 12.7 percent over our study period. Poverty is widespread, with the exception of some of the northern, largely white neighborhoods (hover or click to highlight) east and west of Charles Street.
Across the city’s northern border, in Baltimore County, the poverty rate drops to 9 percent, which is closer to the state average (9.7 percent).
Summary of capital flows by race and poverty
Investment in Baltimore is highly concentrated. Neighborhoods that are less than 50 percent African American receive nearly four times the investment of neighborhoods that are over 85 percent African American. Low-poverty neighborhoods receive one and a half times the investment of high-poverty neighborhoods.
Investment in building construction, rehab, and demolition
This map shows investments in building construction, rehab, and demolition as measured by estimated project costs recorded in building permit applications. A high concentration of activities requiring permits can reflect several things. It can be part of facility upgrades in industrial areas like the Canton Industrial Area, Holabird Industrial Park, and Dundalk Marine Terminal. It can be a prerequisite to building on and around some of Baltimore’s college campuses, including Loyola University Maryland and Johns Hopkins University. In predominantly residential areas, it can also be a sign of housing renovation and upgrades and new housing development. Going forward, Opportunity Zones, in Baltimore may attract higher capital flows.
Real estate sales
Information about property transactions offers another lens through which to examine differences between communities.
Permits, which we saw above, lead to renovation or development that can increase property values, which is visible when a property resells. This map shows residential, commercial, and industrial real estate sales. Per-home sale prices in predominantly white neighborhoods are higher.
Loans to single- and multifamily dwellings
How are the resources needed to purchase property distributed? Who has access to capital?
Home value represents a significant share of many people’s personal assets, and refinancing a mortgage is one way to tap into home equity. Similarly, developers need capital to build or rehab apartments. This map captures mortgage loans to single- and multifamily dwellings.
Loans to owner occupants by neighborhood characteristics
For every owner-occupied housing unit, the average volume of loans in high-poverty census tracts was $59,822 versus $111,577 in low-poverty census tracts. The racial disparity is even greater. The average volume of loans per owner-occupied housing unit in tracts where the population is more than 85 percent African American is $68,133 but is $160,438 in tracts where less than 50 percent of residents are African American.
Commercial real estate lending
There are higher concentrations of commercial real estate lending in the central business districtand in industrial areas on the waterfront but also in retail centers elsewhere in the city, like Reisterstown Station.
Census tracts where more than 85 percent of residents are African American saw $8,085 in commercial loans per household. Lending levels were more than five times larger ($41,053) in tracts where African American people made up less than 50 percent of residents.
Small business lending
In census tracts where African American people make up more than 85 percent of the population, there was $2,336 of small business lending per household, compared with $11,442 per household in tracts where less than 50 percent of residents are African American.
But high-poverty tracts receive more small business loans per household ($7,145) than low-poverty tracts ($5,498).
Public capital provides opportunities to counteract segregation of resources. Some public programs focus investment in areas that have seen too little of it. The spatial distribution of public-sector capital flows looks different from the private-sector capital flows above.
HOME and CDBG investments by neighborhood characteristics
Bucking the larger investment pattern, public-sector investments are not clustered in predominantly white neighborhoods.
The most intensive concentrations of several programs are in high-poverty census tracts. This does vary by program, however. For example, the HOME Investment Partnerships Program and Community Development Block Grant Program investments are highest among neighborhoods that are more than 85 percent African American.
Capital Improvement investment by neighborhood characteristics
However, Baltimore’s Capital Improvement Program financing is highest among neighborhoods that are 50 to 85 percent African American.
As with public-sector investments, mission lending is more evenly distributed and more prevalent in high-poverty areas and areas with high concentrations of African American people than private investment.
Mission and public funding as a share of all investment
Despite the benefits they deliver, mission and public funding represent just a fraction of overall investment in the city. Following the lead of Detroit, a redoubled public and philanthropic commitment will be needed to grow the footprint of community development financial institutions and efforts like the Neighborhood Impact Investment Fund. Substantial change will also require mainstream investment to reach more Baltimore communities.
Notes: In the text above, we often use the term “black” when referring to people with African ancestry. We do so to include African American people and people of other nationalities, because some of the forms of racial discrimination described in this story were not constrained by national affiliation. We use “African American” when it allows us to maintain consistency with a data source that refers to an “African American” group.
This feature was funded by the Annie E. Casey Foundation. We are grateful to them and to all our funders, who make it possible for Urban to advance its mission. The views expressed are those of the authors and should not be attributed to the Urban Institute, its trustees, or its funders. Funders do not determine research findings or the insights and recommendations of our experts. More information on our funding principles is available here. Read our terms of service here.
DESIGN: Christina Baird
DEVELOPMENT: Daniel Wood
PHOTOGRAPHY: Andrew Mangum
WRITING: Lionel Foster
EDITING: Elizabeth Forney and David Hinson
Copyright © Urban Institute 2019.