September 1, 2021

Homeownership, racial segregation, and policy solutions to racial wealth equity


Homeownership is often viewed as the entree to the American dream and the gateway to intergenerational wealth. However, this pathway is often less achievable for Black Americans who post a homeownership rate of 46.4% compared to 75.8% of white families.[1] Compounding matters, homes in predominately Black neighborhoods across the country are valued at $48,000 less than predominately white neighborhoods for a cumulative loss in equity of approximately $156 billion.[2] These are significant contributing factors to the racial wealth gap.

In 2016, white families posted the highest median family wealth at $171,000. Black families, in contrast, had a median family wealth of $17,600.[3] Because wealth (as measured by the total amount of assets a person owns minus debts) is a critical predictor of education, health, employment, and other quality of life metrics, a strategy to maximize homeownership and home value is needed.

Lower Black homeownership and the racial wealth gap are byproducts of systemic racism, including the legacies of slavery, Jim Crow segregation, redlining, and other anti-Black policies that targeted Black people and predominately Black neighborhoods. Residential segregation facilitates the extraction of wealth and other vital resources that fuel economic and social mobility. The loss of wealth in Black communities hastens a downward socioeconomic spiral. For instance, schools predominated by Black, Latinx, and Asian students receive $23 billion less in funding than predominately white districts.[4] This is because schools primarily rely on local property taxes rather than a broader pool of funding to equalize school resources.

Furthermore, education as a solution to closing the wealth gap is inherently flawed. White college graduates have seven times more wealth than Black college graduates.[5] This racial wealth gap reveals how little a strategy singularly focused on increasing college degree attainment will have on reducing the racial wealth gap.

Additionally, subpar neighborhood resources lead to fewer banking options, more payday lenders, and less opportunity for financial literacy. Because most people start their businesses using the equity in their homes, Black business development is throttled by Black families’ lack of homeownership and lack of wealth overall.

Recent public policy has not helped matters. The federal government’s first Covid-19 relief package may have exacerbated the problem. The first round of Paycheck Protection Program (PPP) loans (part of the CARES Act, the federal COVID-19 relief package) gave relief only to employer firms. This framework disproportionately excluded Black businesses: 95% of Black-owned firms are non-employer businesses, compared to 78% of white-owned firms.[6] This negatively impacted entire communities. According to a Bloomberg analysis, 27% of businesses in white-majority congressional districts received PPP loans, compared with 17% of businesses in districts where minorities make up more than half the population.[7] A Stanford University study estimated that over 40% of Black-owned small businesses closed during the COVID-19 pandemic.[8] A report examining COVID-19 disparities in Detroit found that small businesses in the city, compared to those in the broader Detroit area, were less likely to receive PPP loans and less likely to receive similar amounts even if loans were allocated.[9]

Segregation and racial bias are robbing Black people of opportunities to build wealth, restricting millions from reaching their potentials. At a time when America is at a precipice of a racial awakening, it is important to provide empirical research on a set of problems that if solved, can significantly improve the racial wealth gap.

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Additional Insights

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