Racial Disparities in Homeownership Wealth Gap and the Impacts of COVID-19
After Congress had rejected two earlier versions of the Civil Rights Act of 1968, commonly known as the Fair Housing Act, the third version appeared to be going nowhere prior to the April 4th 1968 assassination of Martin Luther King, Jr. It was that crystalizing moment and the resulting civil unrest that spread across the country, which led to President Lyndon B. Johnson signing the Fair Housing Act into law on April 11, 1968. It was the first time that Congress declared it illegal for private individuals to discriminate on the basis of race in the sale or rental of housing.
Today, more than half a century later we continue to experience social unrest and protests centered on issues of equality, equal justice and systemic racism in the midst of a pandemic with racially disproportionate impacts.
Let’s look at the wealth gap and consider that, in 1968, a typical middle-class black household had $6,674 in wealth compared with $70,786 for the typical middle-class white household, according to data from the historical Survey of Consumer Finances that has been adjusted for inflation. In 2016, the typical middle-class black household had $13,024 in wealth versus $149,703 for the median white household, an even larger gap in percentage terms that what it was nearly 50 years ago.
Now consider this: the net worth of a homeowner is 41 times greater than that of a renter.
Why focus on housing? For starters, housing, along with food and clothing and the most primary of our basic needs. However, housing is so much more than that.
In fact, Americans’ primary residences account for about 25 percent of their overall wealth, more than any other asset. Homeownership remains a cornerstone of the American Dream, helps build strong communities and drive the U.S. economy. If homeownership helps provide both a stable foundation and a much needed economic tailwind for so many, we should be alarmed and concerned about the racial disparities in homeownership. In fact, according to the U.S. Census Bureau survey, the African American homeownership rate at the end of the second quarter was 47%. While this number represented the highest levels since 2008, it trails the 76% homeownership rate for non-Hispanic whites by 29 percentage points. This disparity fundamentally limits the ability of African American renters to build equity and long term generational wealth. Long term systematic renting also means that each year these renters are forced to pay both higher rent, in real dollars, and to commit an ever increasing percentage of their income to housing as rent often increase faster than real wages.
Given this gap in wealth equality and homeownership percentages, it helps us understand why 41 percent of Black-owned businesses have been closed by COVID-19, compared to just 17 percent of white-owned businesses according to research at the University of California, Santa Cruz. In reality, if you need $20,000 in order to keep the doors open and you have a net worth of $150,000, much of which may be in your home, you might be able to figure out a way to make it happen. If you are a renter and have a net worth under $15,000, it is nearly impossible. While overt racism in housing has long since been illegal, the disparities in home ownership among African Americans perpetuates long standing inequalities in all areas of society. When the homeownership rate is equal for all races we will have achieved real progress towards “fair housing.”
As seen in The Post and Courier on Sept 5th, 2020