What Is a Ghetto?

The term ghetto refers to a neighborhood characterized by low property values and relatively little public or private investment. It is a slang term that is generally considered an offensive stereotype because ghettos have historically been inhabited by racial minorities. Ghettos may also often be characterized by income inequality, high unemployment, inadequate municipal services, and high drop-out rates from schools. Neighborhoods that are classified as ghettos may be 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 a neighborhood with low property values and relatively little public or private investment.
  • These areas are characterized by income and economic inequality, and very little development.
  • Neighborhoods tend to be racially segregated in the United States as a result of a history of redlining, mortgage lending discrimination, and Jim Crow laws.
  • Renewal policies and gentrification have rapidly changed low-income neighborhoods.
  • Urban renewal programs and policies are controversial for their effect of displacing minority and low-income residents.

Understanding Ghettos

The word ghetto is a derogatory term used to describe communities in certain neighborhoods. As mentioned above, these areas are generally 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values in these communities are generally much lower than in other parts of the same city, as properties tend to be outdated and run down. Some of the homes and establishments in these areas may even be 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 when it comes to access to income, wealth, property rights, and other resources.

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 larger areas. Residents in these neighborhoods are also subject to predatory financial practices, such as mortgage lending discrimination and redlining.

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 as ghettos by their physical characteristics, such as large numbers of poorly maintained buildings and lots.

Special Considerations

Many neighborhoods that were once considered ghettos have seen major changes through what is referred to as 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 these areas. Companies often build new homes and commercial spaces, taking advantage of incentives, such as lucrative tax breaks and loose zoning laws. Changes often come quickly, drawing in new residents and businesses and pushing out those who can no longer afford to live and do business there.

These urban renewal policies remain a controversial topic. That's because they have been known to displace minority and low-income residents who generally struggle to find affordable housing in a market with increasingly high property values, not to mention small businesses that operate in these areas. Critics suggest policies should address and help shape the economic and social dynamics that led to the ghettoization of these neighborhoods.

Although some of these areas have gone through the process of gentrification, others may still show signs of inequality.

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

History of Ghettos

The term ghetto comes from 13th century Europe. Cities in Spain, Germany, Italy, and Portugal sought to segregate Jewish populations into one area upon the suggestion of Pope Pius V during this period. In 14th century Venice, Italy, Jews settled into an area of an old iron foundry, otherwise known as a ghetto. 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.