Share
September 1, 2021

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

Download

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.

Continue reading at Brookings

Additional Insights

Your source for articles, white papers and reports that motivate our mission to increase wealth and homeownership in diverse communities across America.

The Secret Bias Hidden in Mortgage-Approval Algorithms

Even accounting for factors lenders said would explain disparities, people of color are denied mortgages at significantly higher rates than White people.

Steven A. Sugarman Speaks at 74th Annual NAREB Convention on Expanding Black Homeownership

The Change Company, America’s Community Development Financial Institution (CDFI), announced today that its founder Steven Sugarman presented to the 74th Annual National Association of Real Estate Brokers (NAREB) Convention in Cleveland, Ohio. Mr. Sugarman spoke during the Legislative Forum and discussed the unique opportunity for advocacy that exists for NAREB and The Change Company to impact public policy and end government sponsored or sanctioned redlining in America. Mr. Sugarman discussed advocacy positions which would help to immediately expand homeownership across the Black community and begin to reduce the wealth gap between Black and white families in America.

Expanding Homeownership In LMI Communities

Homeownership remains the primary means by which most households in this country can attain wealth.Yet many families—especially those of color—are locked out of the opportunity to buy homes of their own. Homeownership rates in low- and moderate-income (LMI) communities and for people of color have historically been considerably lower than other groups, making it one of the largest drivers of the racial wealth divide. Barriers to accessing mortgage finance are a major explanation of this.