Homeowners ages 62 and older collectively own $9.2 trillion in home equity wealth. But since the 2008 housing bust, very few have accessed the wealth stored in their home equity—even though many older homeowners have low incomes and lack sufficient retirement savings.

Although home equity usage remains very low, our analysis of Home Mortgage Disclosure Act (HMDA) data from 2018 to 2020 shows that low mortgage interest rates and home price gains are motivating more homeowners to extract equity. But within the broader trend of older homeowners increasingly tapping the wealth in their home equity, disparities exist between racial groups.

Older Black homeowners in particular are being left out of the opportunity to access wealth in their homes. This trend could further exacerbate the racial wealth gap that is partially rooted in discriminatory lending practices and racist housing policies that denied Black families equal wealth-building opportunities. It could also limit Black owners’ ability to tap home equity to improve their retirement security, pay off high-interest debts, invest in home improvements, and make intergenerational investments like paying for their children’s education.

The use of cash-out refinances to extract equity varies widely by race, and significant gaps exist between white homeowners and homeowners of color. White homeowners ages 62 and older saw a measurable increase in home equity lending from 2018 to 2020 by loan count. Senior homeowners of color, on the other hand, collectively saw almost no increase. In other words, nearly all the increase in equity lending to seniors from 2018 to 2020 can be attributed to white homeowners.

The number of cash-out refinance loans originated to white, Latinx, and Asian borrowers ages 62 and older increased from 2018 to 2020, but cash-out refinance lending to older Black homeowners decreased. Combined with the across-the-board drop in HELOC lending and a small increase in HECM lending, older Black homeowners experienced a net decline in overall home equity lending from 2018 to 2020.

Read the full article about home equity racial gap by Karan Kaul and Linna Zhu at Urban Institute.