Investigation of the black and white wealth gap RETIREMENT

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Investigation of the black and white wealth gap

Black Lives Matter demonstrators have once again drawn attention to the continuing economic inequality that separates black and white America.

Home ownership is at the heart of this inequality.

For many Americans, their greatest source of wealth is the value they have built up over time in their homes. The home has traditionally also been the main method for middle and middle income parents to pass wealth on to their children.

But fewer than half of African-Americans own homes, and those who own a fraction of the white stock are largely due to the country’s long history of segregated housing, economists say.

In addition, the tidal wave of foreclosures a decade ago reduced the already low home ownership in minority communities, which felt the brunt of the collapse of the property market. The black home ownership rate is only 42 percent – 5 percentage points lower than in 2000. The white home ownership rate remained stable during the crisis and is now around 72 percent Urban Institute said.

Home equity is a big part of the wealth chartThe result of this combination of less black owners and less equity for those who own a house is that the typical African American worker has $ 4,400 home equity compared to $ 67,800 for whites. The home gap makes up about half of the black and white differences in total wealth.

A network of systemic reasons explains the home gap. Black homebuyers have more debt, also because they are twice as likely to get a high-rate mortgage than white buyers with comparable income.

And while open segregation has waned since the Housing Act of 1968 made it illegal for real estate agents to refuse to sell houses in white areas to black families, whites still live in mostly white areas, a Brown University study found. And white neighborhoods have dramatically higher house prices than the more diverse neighborhoods where black people live.

The composition of the neighborhood affects property prices as white homeowners tend to have higher incomes that support higher property prices and also provide stability when the property market is in decline. And the income gap between black and white neighborhoods is strong: the average wealthy black household lives in a poorer neighborhood than the average white low-income resident, according to the Brown study.

The real estate crisis of 2008 has dramatized the additional risk of buying in a more diverse neighborhood. When the US real estate market finally recovered, the black homeowners did not see a price increase like the white homeowners. For example, in the low-income black neighborhoods on Chicago’s south side, property prices are still only half their pre-crisis value, according to a Study 2018 from the Federal Reserve Bank of Chicago. In contrast, prices in the Tony Lincoln Park neighborhood have exceeded their previous high.

Other factors also weaken prices and reduce equity in black neighborhoods, including less access to local businesses and less tax revenue to fund public schools. The cumulative impact of these factors, combined with lower incomes, lowers the average home price of the black owner by $ 48,000 compared to white owners Brookings Institution.

Less home equity has a knock-on effect on traditional upward mobility. Less home equity means fewer black homeowners can borrow or even sell a home to raise capital and “start and invest in and invest in tuition fees for their children,” Brookings said.

Housing is an essential factor in the inequality of wealth. Will growing support for the Black Lives Matter movement bring real change?

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