Homeownership is often viewed as the entree to the American dream and the gateway to intergenerational wealth. However, this pathway is often less achievable for Black Americans who post a homeownership rate of 46.4% compared to 75.8% of white families. Compounding matters, homes in predominately Black neighborhoods across the country are valued at $48,000 less than predominately white neighborhoods for a cumulative loss in equity of approximately $156 billion. These are significant contributing factors to the racial wealth gap.

In 2016, white families posted the highest median family wealth at $171,000. Black families, in contrast, had a median family wealth of $17,600. Because wealth (as measured by the total amount of assets a person owns minus debts) is a critical predictor of education, health, employment, and other quality of life metrics, a strategy to maximize homeownership and home value is needed.

Lower Black homeownership and the racial wealth gap are byproducts of systemic racism, including the legacies of slavery, Jim Crow segregation, redlining, and other anti-Black policies that targeted Black people and predominately Black neighborhoods. Residential segregation facilitates the extraction of wealth and other vital resources that fuel economic and social mobility. The loss of wealth in Black communities hastens a downward socioeconomic spiral. For instance, schools predominated by Black, Latinx, and Asian students receive $23 billion less in funding than predominately white districts. This is because schools primarily rely on local property taxes rather than a broader pool of funding to equalize school resources.

Furthermore, education as a solution to closing the wealth gap is inherently flawed. White college graduates have seven times more wealth than Black college graduates. This racial wealth gap reveals how little a strategy singularly focused on increasing college degree attainment will have on reducing the racial wealth gap.

Additionally, subpar neighborhood resources lead to fewer banking options, more payday lenders, and less opportunity for financial literacy. Because most people start their businesses using the equity in their homes, Black business development is throttled by Black families’ lack of homeownership and lack of wealth overall.

Read the full article about the racial wealth gap by Rashawn Ray, Andre M. Perry, David Harshbarger, Samantha Elizondo, and Alexandra Gibbons at Brookings.