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Homeownership is one of the fundamental keys to accumulating
wealth in America—hence why it has been integrally linked to achieving
the American Dream. Unlike rent payments, monthly payments on a
conventional mortgage can steadily grow home equity, and the values of
residential properties tend to appreciate over time. Not only can owning a
home provide a roof over your head and a secure place to live, but because
mortgage payments generally remain fixed while rents may rise over time,
a home can also be a very effective hedge against inflation. Together, these
features can give homeowners an enormous advantage over renters when
it comes to accumulating wealth, and for a society where wealth disparities
often break along racial and ethnic lines, this can have substantial
consequences.
According to the Federal Reserve
Board's Survey of Consumer Finances, a
home represents about 75% of all the wealth
accumulated by the lowest-income households.
For households in the middle of income
distribution, housing wealth represents
between 50% and 65% of total assets. For the
highest income households that have already
accumulated wealth, that is only 34%. Also,
the cycle is self-perpetuating. A 2018 study
by the Urban Institute found that children
of homeowners are seven to eight percentage
points more likely to be homeowners than
children of renters.
ROOTS OF THE RACIAL
HOMEOWNERSHIP GAP
Within our lifetimes, that path to
wealth was deliberately blocked for Black
Americans and other historically marginalized
communities. e White House acknowledges
that "throughout much of the 20th century, the
Federal Government systematically supported
discrimination and exclusion in housing and
mortgage lending. While many of the Federal
Government's housing policies and programs
expanded homeownership across the country,
many knowingly excluded Black people and
Feature
By: Justin Foster &
Derek Brummer
CHANGING THE
MEANING OF
"EQUITY" IN THE
HOUSING INDUSTRY
Homeowners have an enormous advantage over renters when it comes to
accumulating wealth, and this can have substantial consequences.
