Equity, before it took on its current “woke” definition, meant value, as in the accumulated value of ownership in real estate.
It still means that. After 30 years of payments for housing, a tenant who pays rent has nothing. An owner who pays off a mortgage loan has equity.
The accumulated value of that equity grows when it’s handed down to the next generation. With each 30-year contribution of work and investment, families can rise from the condition of living paycheck-to-paycheck to build a secure financial foundation that endures through good economies and bad ones.
But not every family had the same opportunity to build equity and generational wealth. For example, California’s 1913 Alien Land Law prohibited “aliens ineligible for citizenship” from owning agricultural land. Under the U.S. Naturalization Act of 1870, that meant Asians: Chinese, Indian, Japanese and Korean immigrants.
California’s 1879 constitution stated flatly, “The presence of foreigners ineligible to become citizens of the United States is declared to be dangerous to the well-being of the State.” Article 19, titled “Chinese,” prohibited corporations from employing “directly or indirectly, in any capacity, any Chinese or Mongolian,” and stated, “No Chinese shall be employed on any State, county, municipal or other public work, except in punishment for crime.”
California’s history also includes a well-known chapter of “redlining,” the practice of discrimination in real estate lending by denying mortgage loans and under-appraising property in communities that are predominantly minority. “Redlining” originated in the mid-1930s, after the Home Owners’ Loan Corporation Act was signed into law by President Franklin Roosevelt. The idea was to help homeowners refinance and avoid foreclosure. But when the Home Owners’ Loan Corporation drew color-coded maps of 200 cities to show relative risks of loan default in different neighborhoods, it used racial and ethnic data to determine creditworthiness.
In 2017, the Federal Reserve Bank of Chicago published a working paper on “The Effects of the 1930s HOLC ‘Redlining’ Maps.” Authors Daniel Aaronson, Daniel Hartley and Bhashkar Mazumder found that the lower-graded neighborhoods experienced “a marked increase in racial segregation” that persisted for more than 40 years. “We also find evidence of a long-run decline in homeownership, house values and credit scores along the lower graded side of HOLC borders that persists today,” they wrote.
California outlawed redlining in 1977. But just three generations later, groups that had suffered under discriminatory practices that limited property ownership were hit again.
This time it was a ballot measure, sponsored by the California Association of Realtors, that robbed families of the generational wealth they had so recently begun to build.
Proposition 19 in 2020 was heavily advertised as a measure that would help wildfire victims and seniors who wanted to move to a new home and keep their old tax bill. What was never mentioned in the costly advertising was the provision in the fine print that removed the constitutional protection from tax increases when family property is transferred from parents to children.
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