by Contributing Writer Aszurdee Sadé
You dream of accumulating wealth. You want to increase your income, your investments, and your savings over time. However, there’s a problem. Income inequality and other underlying socio-economic conditions are the biggest hindrances to Black homeownership and wealth creation. Black households lack access to affordable financial products and are unable to transfer assets on to future generations.
According to the US Census Bureau, the annual average income for Black households is $41,511, far lower than the national average of $63,179. White households earn an average of $71,000, which means they make twice as much as an average Black household. Here’s the thing: education, financial literacy, and entrepreneurship are critical skills, but won’t help communities build wealth unless Black homeownership increases.
The rate of homeownership among Blacks is lower today than it was in 1968, when housing discrimination was legal. It’s further declining at a rate of 5%, compared with a 1% decline for white families. So, how important is homeownership to creating wealth?
Wealth is a paramount indicator of economic security and homeownership is the foundation of this. It provides families with a sense of emotional and financial stability and boosts household wealth through equity and appreciation in the long run.
Taking out a mortgage and investing in property is a smarter financial decision in place of paying rent. Homeowners can pay off debts, accumulate wealth, and, at the same time, have a home to live in that will inevitably become their own.
Building strong and stable communities
Homeownership fosters a sense of ownership in a community and productive membership in said community. Homeowners invest more in their local communities and eventually aid in increasing home prices.
The sense of ownership reduces crime rates, improves health, and increases volunteerism. A homeowner is also more likely to stay in the same community longer, increasing engagement and participation in that community. People would prefer to own homes instead of renting if given tax incentives and cheaper loans.
Bolsters the economy
The housing market accounts for nearly 15% of the US GDP. Housing runs through all aspects of national and local economies, manufacturing, and construction. Homeownership not only impacts an individual’s financial situation, but it also impacts the local and national economies. It plays a vital role in helping create and sustain strong and stable communities through taxes.
For example, renovations contribute to the economy through the use of local labor, businesses, permits, and other government-related fees. According to the National Association of Home Builders, spending $1 million in remodeling generates approximately $841,000 in private income, $71,000 in government revenue, and creates local jobs.
Other social benefits include:
- Increased civic participation and charitable work
- Less crime
- Better health for homeowners
- Higher social capital
- Stable families, which translates to higher graduation rates
Quick tips for reducing the Black homeownership gap
Homeownership remains the best way to build wealth for most people and can be more financially beneficial than renting. However, increasing lack of access issues related to major homeownership opportunities makes it difficult to close the wealth gap. Homeownership is an effective tool for addressing households’ present and future asset-building ability.
So, how do we reform policy and institutions so that homeownership truly benefits Black families? How do we provide a general boost to overall homeownership and decrease the homeownership disparity? We must reinvest in our communities and we must close gaps in wealth acquisition.
Tangible ways to reduce this gap
- Remove local barriers related to affordability and help people move from renting to homeownership. Government-sponsored housing programs, bank portfolio programs, local finance programs, and housing agencies could leverage their efforts and do more for African-Americans. The federal government should support mortgage lending through various policies, programs, and institutions. The support will enable millions of middle-class and aspiring middle-class Black families to buy homes. It would also remove barriers and create conditions for developers to transform neighborhoods and communities.
- Address housing supply issues. Consider preserving, rehabilitating, or constructing more affordable housing. Vacant and abandoned houses provide an opportunity to create affordable housing as well. Collaborate with developers to rehabilitate and rebuild distressed properties.
- Address financial challenges. Increase access to small-dollar mortgages to improve the Black homeownership rate in local markets. For example, analyze how lenders calculate mortgage underwriting. Stabilize and broaden the reach of down payment assistance and low-down payment lending programs. Also, consider rental payment history to support mortgage eligibility for those currently renting.
A way forward
Let’s continue advocating for expansion of financial services alongside inclusive policies that support and protect asset-building and wealth accumulation for Black households.
Let’s analyze structural and institutional systems that build barriers for Black households to access homeownership.
Let’s make sure policies and programs help underserved Black families acquire the resources they need to achieve homeownership and create generational wealth.
Photo credit: Robert Perry