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This is the first chapter in a series of research articles on racial inequities in US housing produced by the Chandan Economics Research Team. Other posts in this series can be found here: 2. Racial Inequities in Housing Affordability ; 3. Racial Inequities in Access to Credit ; 4. Racial Inequities in Housing and Environmental Quality ; 5. Racial Inequities in Housing: Policy Considerations.
There are several potential ways to try and quantify the racial wealth gap. However, given how income and asset building play a significant role in upward mobility, measuring household wealth gives us a metric that reflects economic effects on both current and future generations.
Policies that enabled racial discrimination and de-jure segregation in American cities throughout the 19th and 20th centuries primarily facilitated today's status quo. While structural racism was prevalent throughout the United States before the 1930s, racial-exclusionary elements of several New Deal-era programs compounded the effects of segregation as the nation's housing stock expanded. Similarly, practices such as redlining by other federal agencies, including the FHA, were used across US metropolitan areas to limit real estate financing in minority-majority communities, catalyzing the entrenched racial segregation that continues to be observed in major cities today.
According to a 2019 paper by Opportunity Insights, Black Americans and Native Americans have significantly lower rates of upward mobility than White Americans, contributing to an inter-generational wealth gap. The impact of the persistent racial wealth gap stretches beyond economic outcomes, affecting environmental quality, crime impact, and health outcomes in minority-majority areas.
The Homeownership Gap
The homeownership gap between Whites and Minorities is an important metric that underscores the abject tepidness of recent progress. According to the US Census Bureau, as of Q4 2022, just 44.9% of Black households were homeowners compared to 74.5% of White, non-Hispanic households. The gap between White, non-Hispanic households and other races is smaller but persists.
Despite the dismantling of many discriminatory lending and underwriting practices over the last several decades, the gap between White and Black homeownership is wider now than before the civil rights era. In 1960, the White homeownership rate was 65%, and the Black rate was 38%, a 27-point gap, compared to a more than 29-point gap today.
In the decade following the Great Financial Crisis (GFC), homeownership rates broadly declined across all races and ethnicities. Still, the gap widened as Black and non-White Hispanic households were more than twice as likely as White households to receive a sub-prime loan during the housing bubble — exacerbating the crisis’s impact in minority-majority communities. The homeownership gap between Whites and minorities has declined modestly during the pandemic years, driven partly by the wage increases and location flexibility brought forward by pandemic effects.
The Income Gap
One of the leading contemporary factors underlying the gap in homeownership is racial disparities in average annual earnings. Analyzing disparities through the lens of both race and sex, Asian men maintain the highest average annual earnings of $81,794, while Hispanic women register the lowest, with average earnings of $39,511[1]. White and Black households populate the middle ground of income distribution, but the gap persists. The average White male and female earned $61,740 and $55,550, respectively. The average Black male and female earned $50,187 and $46,543, respectively.
Household income is crucial to wealth building beyond simply the price of a home one can afford. A recent study by the US Treasury Department reviewed cash and cash equivalent levels among US households as a proxy for measuring a household’s ability to weather financial shocks. The analysis found that a typical White US household holds four times the amount of cash than a typical Black or Non-white Hispanic US household, with racial disparities prevalent across all income levels. Cash and cash equivalents, on average, make up less than 5% of an American household's total wealth but can have an outsized impact on consumption levels.
Other posts in the 2023 series can be found here:
[1] Data are through 2021
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