Affordable Housing For Under-Served Communities
Housing has always been and continues to be the main vehicle for families to build wealth. This is especially true for black and Hispanic families. 69 % of African Americans’ household wealth and 60 % of Hispanics' household wealth is derived from home equity, compared with 57 % of whites in the current decade.
Unfortunately, America has a long history of housing discrimination that continues to impact black and Latino families today. Decades of public policies that have supported segregation and concentrations of high-poverty communities across the country have made it harder for both African American families and Hispanic families to build wealth.
Expanding Home Ownership Among People Of Color
During the Great Depression, a two-tiered approach to housing policy emerged, which greatly impacted African Americans’ residential mobility by pushing them into segregated communities. While the government promoted home-ownership and suburbanization among whites, it further entrenched inequality in inner-cities through slum clearance and the construction of public housing — originally constructed as temporary middle-class housing and later a permanent housing solution for low-income people of color. In 1934, Congress passed the National Housing Act, which created the Federal Housing Administration (FHA), to support mortgage lending. The FHA adopted the Home Owners’ Loan Corporation’s rating system — known as redlining — around certain areas deemed risky and therefore where lenders would not extend loans. Redlining forced African American and other poor families into higher-rate loans — if they could get them in the first place — which required them to live in certain areas within the community and in many instances prevented them from acquiring a home at all. It wasn’t until 1968, with the passage of the Fair Housing Act, that redlining was made illegal. The FHA also recommended the use and application of racially restrictive covenants, which persisted even after they were eventually outlawed. Despite the illegalization of this practice, the remnants of it in altered forms are still in place and active today.
Because wealth is often built over generations, the legacy of these policies has made it even more difficult for future generations of African American households to participate in home-ownership. Today, the disparity between white and African American families who own homes is stark. 73% of white families own a home compared with 60 % of Latinos and just 45 % of African American families. In addition, African American families who do own homes are more likely to face barriers throughout the process. For example, African American families are more likely to face predatory lending practices and to live in lower-income neighborhoods. According to a study conducted by Stanford University, when African Americans can purchase a home, they are more likely to be in low-income neighborhoods than their white middle- and low-income counterparts. As a result, the mean net housing wealth among white homeowners is $215,800 compared with $94,400 for African American homeowners. Segregation still has a powerful impact on African American families’ home values: Research shows that when a neighborhood becomes more than 10 percent African American or Hispanic, home values decrease. Not only is it harder for African American and Hispanic families to purchase a home, but it is also less likely that they will receive a similar return on their investment. The median home equity amount for white home-owners in 2008 was $86,800, compared with only $50,000 for African American home-owners. Home equity for African American families represents more than half of their acquired wealth, whereas for white families it represents just 39 percent. While increasing home-ownership rates can help narrow the wealth gap between blacks and whites, it alone will not close it completely. A 2015 Demos study estimated that closing the gap in home-ownership rates between white and black/Latino families would cause the racial wealth gap to decrease by 31 percent. Their analysis further uncovered that making the returns of minorities’ home-ownership equal to the returns white families see on their investment would further reduce the gap by 16 percent.