Flickr/delphien

Minorities are less likely to own a home, and get worse returns on the ones they do own.

Owning a home isn't just a fragment of the American Dream, it's the key to it. Homeownership is also the primary way by which Americans accumulate wealth. American asset-building policies are heavily focused on homeownership, but these policies have discriminated against minorities in the past, and have left a lasting scar.

People of color continue to face barriers to homeownership. They are less likely to own a home (below) and less likely to get returns from the homes they do own, says Catherine Ruetschlin, senior policy analyst at Demos, a public policy organization. Ruetschlin and her colleagues have authored a new report with Brandeis University's Institute on Assets and Social Policy showing the extent to which inequality in homeownership drives the racial wealth gap, and how eliminating this disparity could significantly reduce U.S. wealth inequality.

Racial disparities in homeownership rates, according to 2011 data. (Demos)

The report finds that if homeownership rates were the same for all races, the wealth gap between black and white families would be reduced by 31 percent. The gap between Hispanic and white families would shrink by almost the same amount—28 percent:

If homeownership rates were the same for all races, the wealth gap would shrink considerably. (Demos)

Homes owned by minorities appreciate more slowly than those owned by white families, and also end up with lower values. One of the main reasons behind lower minority home values is residential segregation. Minorities still live in heavily segregated neighborhoods, and still face barriers to purchasing homes outside of these neighborhoods, says Ruetschlin.

If minority families got the same investment returns from their homes that white families do, wealth inequality between white and black families would be cut by 16 percent, and the gap between Hispanic and white median wealth would come down by 41 percent, according to the Demos report:

If minority families got the same investment returns from their homes that white families do, wealth inequality would decline by 16 percent for blacks and 41 percent for Hispanics. (Demos)

The report suggests that tweaks to current policies could achieve the above-mentioned reductions in wealth gap. It recommends:

  1. Stricter enforcement of anti-discrimination housing laws. This would help reduce residential segregation and give minorities access to homes in different neighborhoods.
  2. Loan modifications for struggling low-income, minority families. These would especially help those hit worst by the sub-prime mortgage crisis.
  3. Lowering the cap on the mortgage interest tax deduction. This change would help black and Hispanic homeowners, who have lower-value homes and don't get the same benefits from these tax deductions.

As is evident, the fixes are aimed at undoing the damage of the past.

About the Author

Most Popular

  1. Design

    Cities Deserve Better Than These Thomas Heatherwick Gimmicks

    The “Vessel” at New York’s Hudson Yards—like so many of his designs—look as if the dystopian world of 1984 has been given a precious makeover.

  2. Homes in Amsterdam are pictured.
    Equity

    Amsterdam's Plan: If You Buy a Newly Built House, You Can't Rent It Out

    In an effort to make housing more affordable, the Dutch capital is crafting a law that says anyone who buys a newly built home must live in it themselves.

  3. North Carolina's legislature building.
    Life

    Should Government Agencies Move Out of Capital Cities?

    North Carolina may relocate its Division of Motor Vehicles from Raleigh to boost lagging Rocky Mount. Can this be a national model for decentralizing power?

  4. A photo of a police officer guarding the New York Port Authority Bus Terminal.
    Perspective

    The Troubling Limits of the ‘Great Crime Decline’

    The fall of urban violence since the 1990s was a public health breakthrough, as NYU sociologist Patrick Sharkey says in his book Uneasy Peace. But we must go further.

  5. Maps

    Welcome Spring With This Psychedelic Map of the U.S. in Bloom

    Maps from the U.S. Forest Service show signs of the season across America's forests, fields, and urban areas.