Black Americans’ Median Wealth Could Disappear in One Generation
The most common explanation for what drives the racial wealth gap is lack of Black homeownership. A recent study from Duke University’s Samuel DuBois Cook Center on Social Equity dispels several myths about the racial wealth gap — including that homeownership is the driving force.
First, homeownership is one component of wealth. Indeed, wealth or “net worth” is measured by total assets minus total debt. Owning a home is only one of many assets a person or family can have.
Even when homeownership is taken into account, white Americans still hold more wealth. The study points out that while wealth is low among non-homeowners, Black households that don’t own homes have a measly $120 in net worth, while non-homeowning white households have $3,775 in net worth. Neither amount is much, but the gap is wide. As for those who do own a home, median net worth for white homeowners is $239,300 compared to $99,840 for Black homeowners.
The authors do not dismiss the idea of increasing Black homeownership as a worthy goal. However, they question the idea that homeownership drives the racial wealth gap. As they point out,
Rather than homeownership creating wealth, having family wealth in the first place leads to homeownership, particularly high equity homeownership … [B]lacks have minimal initial wealth to invest in homes or pass down to their children to assist with down payments…. [W]ithout sufficient wealth in the first place, households have limited means to invest in homeownership. Wealth, after all, begets more wealth.
Since owning a home is a major non-depreciating asset for most US families, homeownership is important for building overall wealth, but it is just one piece of a larger pie. Looking at the racial wealth gap requires more than focusing on homeownership; it also requires looking at other assets and actual home equity. Federal Reserve data show that white households hold far more home equity than Black households — $215,800 among whites, $94,400 among Blacks. Because of slavery and generations of institutional racism, white people were able to accumulate intergenerational wealth while Black people could not.
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