Low income housing that tends to resemble shacks. They are usually inhabited by members of the african american community. of course people of other races can live in these types of houses but the comedy value of the phrase relies on stereotypes. it is to be used by those who are genuinely racist or find humor in the concept of racist but are not racist themselves.
Person 1: you know i went downtown last night to see some show, actually i was kind of dragged to it.
Person 2: oh what was it?
Person 1: fuck thats what i was tryin figure out, it wasnt even good. on the way back i was worried, we drove through a neighborhood of nigger shacks.