Photo Via ocf.berkeley.edu
When we look at the US economy today, there are stark economic differences between the White people and the black community. Statistics suggest that White Americans are ten times wealthier than Black Americans, something depicted in every aspect of society.
The housing market is critical to this wealth gap, where Black house ownership is far less than their White peers. This write-up will discuss racial discrimination in the housing market and how it impacts the generational wealth of the Black community.
The Black Community and Home Ownership
The home-buying process has a lot of racial discrimination, including the lack of access to credit cards. For instance, Black people were not allowed to own homes in many localities until the 1948 Shelley v. Kraemer verdict and the passage of the Fair Housing Act of 1968.
Steering is another aspect that kept black people from extensive homeownership. It means that an agent shows someone homes based on race or ethnicity, which is a blatant act of discrimination. As a result, Black people have to manage with lesser-valued homes, which don’t give them a significant profit when they’re sold.
A study from the prestigious Brookings Institute suggested that Black-owned homes were worth 23% less than White-owned homes. As a result, it wiped out $162 Billion belonging to the Black people.
Several factors behind this gap in home values include poor neighborhoods, fewer resources, and a smaller middle class. For instance, the average poverty rate in a Black neighborhood is 14%, while it’s just 9% in a White neighborhood.
Home Ownership – A Strong Economic Indicator
Homeownership is a strong economic indicator, signifying the wealth gap between the White and Black communities. It is now beyond doubt that the chances for African Americans to own homes are much lower than they’re for White Americans.
Statistics back these claims, as the US Department of Treasury data revealed that the chances for Black people to own a home was 45% and for the White people were 75% – a difference that has stayed persistent since the 1960s. People think these differences are isolated to ownership only, but they have far-reaching impacts on other walks of life too.
Racial Wealth Gap and Home Ownership
There is no doubt that the stark differences in homeownership lead to racial wealth gaps, seen in every aspect of life. A White American inherits an average of $195,000 while their African American peer inherits $100,000 on average only. Similarly, 37% of Black Americans born in the Middle class fall into a lower rung, while only 25% of White Americans experience the same.
One of the reasons behind it is that Black Americans do not have enough resources to mobilize during an economic downturn. Homeownership is an essential aspect because it provides stability during tough times. Let’s look at how the situation can be improved for Black Americans regarding home ownership and how the wealth gap can be closed.
Resolving the Lack of Home Ownership and the Racial Wealth Gap
You might be surprised that the racial gap in home ownership has increased in the last few decades, making it even more critical. However, changing the course of this downslide requires effective policy making guided by robust national and local data. Closing the homeownership gap is important because it tells us whether we are moving toward a just society with a minimal wealth gap.
Here are a few things that can be done to bridge this gap effectively:
1. Produce More Affordable Housing
There is a need to modernize local zoning and regulations so that more affordable housing can be constructed. For instance, Minneapolis has eliminated all single family zoning and allowed the construction of triplexes anywhere in the state. Similarly, California passed a law fast-tracking projects with at least 50% affordable housing, and Gavin Newsom signed an executive order allocating excess state land to affordable housing projects.
2. Expand Housing Assistance
The private market can produce affordable housing given the right conditions. However, we cannot entirely rely on it, as the lowest segments would still need assistance to afford quality housing.
One way of doing it is to offer a universal basic income (UBI) or expand the earned income tax credit, like the renters’ tax credit introduced by Maryland. Another way of achieving this goal is to offer federal housing vouchers, assisting all families below a certain income level.
3. Widen Home Ownership Options
Some people are experimenting with innovative products in the housing market that could help Black people who have faced steep barriers to home ownership. Some of the potential solutions they’re offering are:
- Rent-to-own agreements allow people who cannot afford a down payment or mortgage to rent a house and buy it down the line at a set time and predetermined price.
- To reduce loan size, shared appreciation loans let homebuyers sell part of their property, including future capital gains.
- Smaller loans help low-income families purchase low-value properties and modular homes.
The racial wealth gap is a serious issue that has to be tackled if we want a just and equitable society. However, it’s possible only when we address the elephant in the room in the form of home ownership and allow Black people to live a life of dignity in homes they can call their own.