What Is a Ghetto?

The term ghetto refers to an urban area with low property values and relatively little public or private investment. The word is slang and is generally considered an offensive stereotype because ghettos have historically been inhabited by racial minorities. Ghettos are also characterized by high unemployment, high rates of crime, inadequate municipal services, and high drop-out rates from schools. Urban neighborhoods classified as ghettos may be severely underpopulated with abandoned homes, or they may be densely populated with large families living in small spaces.

Key Takeaways

  • A ghetto is an offensive term for an urban area with low property values and relatively little public or private investment.
  • These areas are characterized by high poverty and crime rates, little development, and income inequality.
  • Urban areas in the United States tend to be racially segregated as a result of a history of redlining, mortgage lending discrimination, and Jim Crow laws.
  • Urban renewal policies and gentrification have rapidly revamped low-income neighborhoods and have been controversial for their effect of displacing minority and low-income residents.

Understanding Ghettos

The word ghetto is a derogatory term used to describe certain communities in large urban centers. As mentioned above, these areas are characterized by a lack of resources, little development, and a high concentration of racial minorities, among others. Real estate values in these communities are generally much lower than in other parts of the same city, as properties tend to be outdated, run down, and/or abandoned.

Areas that are considered ghettos in the United States statistically tend to be racially segregated. This reflects a history of segregation in the country as well as a history of inequality in terms of access to wealth, property rights, and other resources. As such, many of these neighborhoods lack adequate resources, good schools, and may even be heavily policed. Literacy and poverty rates tend to be fairly high while the level of education in many underdeveloped neighborhoods remains low when compared to other areas of large urban centers.

Areas of extreme poverty are defined by the U.S. Census as neighborhoods where 40% or more of the population earn low incomes. Some people identify these neighborhoods by physical characteristics, such as large numbers of poorly maintained buildings, unkempt lots, and trash or debris accumulated in the street or on properties.

Special Considerations

Many neighborhoods that were once considered ghettos have been transformed through urban renewal policies, shifting racial demographics, or gentrification. Large investments come to these areas because of local or state policy, generally from private entities. Governments create policies to entice real estate developers to purchase multiple properties in considerably poor areas. These companies often build new homes and commercial spaces in these neighborhoods. Incentives for the developers generally include tax breaks and loose zoning laws.

Neighborhoods may be transformed very quickly, with new residents moving into new spaces. New residents tend to come from different ethnic groups than the previous minority inhabitants and to have significantly higher incomes. Urban renewal as a policy has been controversial for its effect of displacing minority and low-income residents who generally struggle to find affordable housing in a market with increasingly high property values.

Investing in affordable housing can be both a business and an investment strategy.

History of Ghettos

The term ghetto comes from 13th century Europe when cities in Spain, Germany, Italy, and Portugal sought to segregate Jewish populations into one area upon the suggestion of Pope Pius V. The word itself may come from several sources. Jews settled into an area of an old iron foundry, or ghetto, in Venice, Italy, in the 14th century. The term also has roots in the Greek word "ghetonia," which means "neighborhood," or the Italian "borghetto," which means "small neighborhood."

Jim Crow laws and income inequality contributed to the creation of many low-income, minority neighborhoods in the United States. Some were formed after the Civil War, while others were created in the late 20th century. Residents in these neighborhoods are also subject to predatory financial practices, such as mortgage lending discrimination and redlining. Some of these areas have since changed—mainly because of gentrification—while others remain overwhelmingly poor.