3 Reasons Why Expanding Access to Homeownership Alone Won’t Close the Racial Wealth Gap – Route Fifty
This story was first published by the Urban Institute. Click here to read the original version.
For decades, policymakers have favored homeownership as the main mechanism for individuals and families to build wealth. This stance has been reflected everywhere from federal tax policy, which allows homeowners to deduct mortgage interest and property tax payments from income taxes, to local zoning regulations, which often prohibit high-density, multifamily buildings.
Owning a home is undoubtedly an effective means of wealthbuilding, including for households of color. In 2019, Black homeowners had a median household wealth of $113,130—a majority of which came from their homes—more than 60 times that of Black renters. The disparity was similar, if slightly less stark, for Latinx households.
But policymakers’ focus on homeownership hasn’t led to meaningful progress in closing the racial wealth gap; the disparity in wealth between white and Black households is larger now than it was in 1968, when the Fair Housing Act was passed. This gap is a result of historic and ongoing structural racism and systemic discrimination in not just housing but also employment, education, banking and policing. As a result, though efforts to ensure households of color have equal access to homeownership are important for narrowing the racial wealth gap, closing it will require bold, structural reform that goes beyond any one policy.
Many experts have questioned the merits of focusing on widespread homeownership as a policy goal, both at the societal and individual levels. Below, I summarize evidence suggesting that focusing only on expanding access to homeownership is not just insufficient to closing the racial wealth gap but also exclusionary, inequitable and unsustainable.
1. More than half of Black- and Latinx-led households are renters; they do not benefit from policies targeted to homeowners. Despite increasing in recent years, the share of American households who own their homes is still at its lowest level in nearly four decades and is expected to decrease as a result of both shifting preferences and demographic trends. Homeownership rates for people of color also remain low, in part because of policies and practices that have prevented Black people and other people of color from purchasing homes. In 2019, the homeownership gap between Black and white families reached an all-time high of 32.5 percentage points.
Renters currently represent nearly 40% of all households, and more than half of Black- and Latinx-led households are renters. Subsidizing homeownership as the primary route to building wealth thus excludes a significant portion of the population, who are disproportionately people of color. And though homeowners benefit from both tax breaks and rising property values, the latter have been linked to higher rents, which further disadvantage renters. Moreover, policies that privilege homeowners over renters may press families who are unwilling or unable …….