In a new report, Professor Mehrsa Baradaran, author of The Color of Money and How the Other Half Banks, proposes a 21st Century Homestead Act as a progressive way to revitalize American cities and build wealth for Americans who were excluded from historical programs that built intergenerational wealth through homeownership. Baradaran looks to the 19th Century Homestead Act and New Deal Era federal credit programs for models of successful government intervention to support the creation of intergenerational wealth. The 21st Century Homestead Act would create a public trust to purchase abandoned properties and then grant them to qualified residents in target cities. By pairing this plan with a suite of programs to redevelop these cities, Baradaran offers a community wealth building approach for urban revitalization.
“For too long, federal policies have relied on tax cuts and incentives to outside investors. These don’t work to build wealth in the communities – the rising equity always stays with those who already have capital and often, gentrification ends up displacing residents,” said author Mehrsa Baradaran. “My goal here is to ensure that the equity gains of revitalization stay with the communities who have been historically excluded from government housing subsidies.”
The 21st Century Homestead Act would create federally-funded, locally administered Homestead Offices that purchase abandoned properties and grant them to low-income families or families who experienced direct harm from redlining and disinvestment. Families would receive financial support for rehabilitating the properties. Baradaran proposes financing this program with an initial appropriation by Congress followed by sale to investors of homestead bonds guaranteed by Treasury with the Fed committed to buying bonds if there is a capital shortfall.
The 21st Century Homestead Act breaks with recent urban revitalization programs’ reliance on tax incentives to corporations to place investment dollars and equity directly in the hands of community members. This report investigates the many benefits of this approach, comparing it to past attempts to revive distressed communities and explaining the unique role the federal government can play in revitalization efforts going forward.
About the Author
Mehrsa Baradaran is the Robert Cotten Alston Chair in Corporate Law at the University of Georgia School of Law, where she teaches contracts and banking law and also serves as Associate Dean for Strategic Initiatives. She is the author of How the Other Half Banks: Exclusion, Exploitation and the Threat to Democracy and The Color of Money: Black Banks and the Racial Wealth Gap, as well as numerous articles in legal journals.
About the Great Democracy Initiative
The Great Democracy Initiative seeks to develop bold, progressive, and actionable policy plans for leaders seeking solutions to key issues facing our country. Instead of proposing technocratic tweaks or layering new programs on top of a broken system, the Great Democracy Initiative targets the structural problems facing our democracy, including unaccountable policymakers, corporations with outsized economic and political power, and policies that subtly stack the deck against average Americans.