Economy

The Economic Devastation Fueling The Anger In Baltimore

CREDIT: AP/Patrick Semansky

A demonstrator at Monday night's protests after the death of Freddie Gray

Last night, peaceful protests after the funeral of Freddie Gray, a 25-year-old black man killed in police custody, turned into more violent unrest when protesters were met with phalanxes of police.

The protesters’ anger was fueled, at least in large part, by the Baltimore police department’s long history of ugly violence against the city’s residents and a pattern of officers facing few, if any, repercussions. But the protests also take place in the context of a city that has been ravaged economically, most recently by the foreclosure crisis and predatory lending.

Freddie Gray grew up in a neighborhood particularly plagued by the problems that have long faced the city of Baltimore. In Sandtown-Winchester, more than half of the people between the ages of 16 and 64 are out of work and the unemployment rate is double that for the city at one in five. Median income is just $24,000, below the poverty line for a family of four, and nearly a third of families live in poverty. Meanwhile, somewhere between a quarter to a third of the buildings are vacant, compared to 5 percent in the city as a whole.

gray-neighborhood

gray-neighborhood2

CREDIT: Andrew Breiner/ThinkProgress

Each of these conditions — high unemployment, low incomes, and widespread foreclosure — has a long history in the city of Baltimore. It was once a thriving economy built on the steel industry. Bethlehem Steel set up shop in the early 1900s with the Sparrow Point mill, and the industry boomed during World War II, employing 35,000 workers at its peak in 1959, according to a 2004 report from the 1199E-DC union. But American manufacturing began its precipitous decline in the 1970s, and Sparrows Point laid off 3,000 workers in 1971, then another 7,000 in 1975. Just 8,000 people were employed at the mill by the 1980s. Overall, the city lost more than 100,000 manufacturing jobs between 1950 and 1995.

The city never really recovered from that loss and the effects can still be seen today. The country’s unemployment rate stood at 5.8 percent in February, down from 7 percent a year earlier, and the rate for the greater Baltimore area was the same. Yet in the city itself, the rate was 8.4 percent, just one percentage point lower than the 8.9 percent rate it had experienced a year earlier.

Those rates also mask huge racial differences. As of 2012, just 5.6 percent of white people living in the state of Maryland were out of work and looking for a job; the unemployment rate was in the double digits for the state’s black residents. In the city of Baltimore itself, the share of employed black men between the ages of 16 and 64 dropped more than 15 percent from about three-quarters in 1970 to just 57.5 percent by 2010. Yet more than three-quarters of white men of in the city were employed by 2010. That racial gap has grown steadily since the 1970s, from a 10 percentage point difference in how many men had work to a 20 percentage point one.

As with other cities that have experienced unrest, like Ferguson, economic decline was paired with white flight. The city’s black population nearly doubled between 1950 and 1970 but whites began moving away: Almost a third of the city’s population left the city between 1950 and 2000. The city’s population peaked at 949,708 in 1950 but began dropping quickly after 1970, falling 118,984, or 13 percent, between 1970 and 1980.

Aiding that flight were real estate agents who would play up racial fears and worries about falling property values, getting white residents near expanding black neighborhoods to sell their houses and then turning around and selling them to black families at a much higher price. A fair housing coalition discovered in 1969 that the Morris Goldeker Company, a developer, had bought homes for an average of $7,320 and sold them for $12,387 to black families, a 69 percent markup. Today, more than half of black men between the ages of 16 and 64 in the Baltimore area live in the city; just 11.5 percent of white men do. Black people make up less than a third of the state’s population but two-thirds of Baltimore residents.

Housing discrimination came in another form just before the financial crisis: predatory lenders. In 2012, a former loan officer with Wells Fargo testified that she and the other officers targeted majority black communities in Baltimore and nearby areas, forging relationships with churches and community groups. They pushed homeowners with perfect credit into loans that had higher interest rates than they should have been paying and also gave mortgages to people with low incomes who couldn’t afford them without any income paperwork or down payments. Bank employees called their clients “mud people” and called the subprime mortgages “ghetto loans.” The Department of Justice eventually found out that 4,500 homeowners in Baltimore and Washington, DC had been affected by these practices.

When the housing market crashed, many of these borrowers with adjustable rates or mortgages they simply couldn’t afford ended up facing foreclosure. Maryland foreclosures surged 280 percent between the end of 2012 and 2013, likely delayed some years by the state’s requirement that foreclosed homes be processed through the judicial system. More than half of Baltimore properties subject to foreclosure on a Wells Fargo loan between 2005 and 2008 are vacant, 71 percent of them in predominantly black neighborhoods. Baltimore still had the ninth-largest number of foreclosures in the country last year at 5,200.

The foreclosure crisis devastated black wealth across the country. Today, black families in the area have much less money than white ones. While white income fell 6.5 percent between 1999 and 2013, from $72,860 to $68,112, black income started lower — at $62,639 — and fell faster, 7.2 percent. Income is also lower in Baltimore — about $39,000 — than in the surrounding county, which makes about $62,400 on average. The city also grapples with an incredibly high poverty rate — 24 percent of households live below the official poverty line.