The blog of the Urban Institute
September 29, 2020

Disinvestment in Baltimore’s Black Neighborhoods Is Foreboding but Reversible

September 29, 2020

In early spring 2015, five years before the world witnessed the graphic video of George Floyd being suffocated to death by police, Baltimore erupted into protest and turmoil after a young Black man named Freddie Gray suffered a fatal spinal injury while in police custody. Gray grew up in a section of West Baltimore where roughly half the children live in poverty.

But Gray’s horrific death was not likely the lone cause of the ensuing uprising. Like many cities, Baltimore has an enduring history of structural racism and chronic disinvestment in Black neighborhoods. That disinvestment is examined in a new Urban Institute study examining the flow of capital investment in Baltimore, one of the most segregated cities in the United States.

Although the study, conducted by Brett Theodos, Eric Hangen, Brady Meixell, and Lionel Foster, did not probe the root cause of the Baltimore uprising, it did track public and private capital investments in neighborhoods between 2004 and 2016 and can therefore provide insights into community revitalization patterns in the decade or so preceding the 2015’s civil unrest.  

The study follows the money: Which neighborhoods got more loans for endeavors like small businesses, commercial real estate, and housing rehabilitation? Which neighborhoods got the dollars for mission-driven efforts, such as funding from community development financial institutions and other investors seeking both social and financial return?

By virtually all measures, researchers found that Baltimore’s disparities in neighborhood investment are alarming. Capital investments flow unevenly across the city. This phenomenon is driven by poverty and especially by race; white neighborhoods received more than three times the investments that majority-Black neighborhoods received during the 13-year period.

Per household lending and public investment for the median neighborhood in a neighborhood category in Baltimore

Investment from all sources in neighborhoods where less than 50 percent of residents were Black was $26,533 per household per year. In comparison, investment in neighborhoods where more than 85 percent of residents are Black was $8,160 per household per year.

Unsurprisingly, the researchers found that public funding and mission lending were more evenly distributed and more prevalent in high-poverty localities and areas with high concentrations of Black people than private investment, but public funding and mission lending represented only a fraction of overall investment in the city and cannot fully offset the gaps in private investment.

Meixell was struck by “the sheer magnitude of disparity by race.” These are segregated neighborhoods whose conditions are compounded by “segregated capital markets,” he said.   

Theodos explained that the city’s stark racial gap in investment flows is a “durable trend” that is most likely “both cause and effect.” The 12-year stretch of capital disinvestment in Baltimore’s Black neighborhoods means landlords and homeowners are not able to upgrade properties to rent or sell them at higher prices.   

“Less investment begets less investment,” Theodos said. Fewer housing upgrades and neighborhood amenities like grocery stores mean people with higher incomes are less likely to want to live and spend there—and investors are less attracted to disinvested neighborhoods. A mutually reinforcing relationship prevails wherein patterns of race and poverty influence investments, and the allocation of investment itself keeps people in poverty and reinforces segregation patterns.

Foster, who has written about these investment disparities and who grew up in Baltimore’s hypersegregated communities, understands the real-world implications of neighborhood disinvestment.

“When you think about investments and what it means for housing and schooling,” he said, “you’re shaping people’s lives at a bare minimum for the first 18 years of their lives. And the argument that can be made is that once you’ve affected that much of their lives, a certain bit will follow for the rest of their lives.”

“The phrase that I like to use is: What is the geography of opportunity?” Foster said. “Part of what we’re doing with hypersegregation is severely circumscribing what people will even imagine is possible for themselves and their families—and I’ve seen that first hand.”

Policies mandating residential segregation in Baltimore neighborhoods date back to at least 1910, when the city council passed the West Ordinance. Although the Jim Crow municipal code would be declared unconstitutional in 1917, it would be followed by systematic efforts designed to enforce racial segregation and disinvestment in Black neighborhoods using tactics such as redlining, blockbusting, and racial covenants restricting Black ownership.

There is hope for change. The researchers spotlighted the East Baltimore Development Initiative (EBDI) as demonstrating the potential to reverse disinvestment trends. The EBDI is an intensive, place-based effort to redirect public, private, and mission-driven capital to distressed neighborhoods around the Johns Hopkins University medical campus in Baltimore.

But the city remains limited in its capacity to replicate EBDI’s billion-dollar mission and improve opportunities in historically distressed neighborhoods throughout the city. Discovering such stark inequities in neighborhood investments persisting over such a long period is a reality check of the magnitude and durability of the underlying social and economic conditions that can precede civil unrest.

Reversing these trends calls for solutions that meet the sheer scale of the investment challenge. “We need something much more like a Marshall Plan,” said Theodos, invoking the American effort to rebuild western Europe after World War II.  

The sun sets over W. North Avenue looking west near where Freddie Gray lived in West Baltimore, Maryland, on Sunday, April 19, 2020. It was the fifth anniversary of the day 25-year-old Freddie Gray died from his injuries suffered at the hands of Baltimore police officers during his arrest a week earlier. (Photo by Jahi Chikwendiu/The Washington Post via Getty Images)

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