This post was updated to reflect that the nation has an estimated $26.3 trillion in primary-residence housing wealth, not $23.6 trillion (corrected 11/22/2021).
Homeownership is a key wealth-building tool, but homeownership rates for households of color continue to lag those of white households. In fact, the homeownership gap between Black and white households has persisted since the Fair Housing Act was passed in 1968. Black households, Hispanic households, and other households of color, except Asian households, also have lower average home values than white households, suggesting that even when they achieve homeownership, these groups may accumulate less housing wealth.
To better understand these homeownership and home value disparities, our new report looks at how the nation’s estimated $23.6 trillion in primary-residence housing wealth breaks down by race and ethnicity and what these gaps mean for households of color more broadly.
We find that these inequities in homeownership outcomes mean that households of color own a smaller proportion of primary-residence housing wealth relative to their population share. Although there were twice as many white households as households of color in 2019, white households held nearly three times the primary-residence housing wealth that households of color held. In fact, households of color represent a third (41 million) of the 123 million households in the US, but they own only a quarter ($6.7 trillion) of the nation’s $26 trillion in total primary-residence housing wealth.
These disparities in housing wealth mean that many households of color are more financially vulnerable than white households, even when they do achieve homeownership. To ensure that all Americans have the same opportunities to build wealth through homeownership, policies must address the barriers—including the history of systemic racial and ethnic discrimination—that limit the ability of households of color to achieve homeownership and build housing wealth.
What key factors drive housing wealth differences?
We find that key determinants of homeownership gaps are disparities across income, credit scores, and educational attainment. Black and Hispanic households in particular lag white households across these dimensions. Among Asian households, a large share has recently come to this country, and immigrants have lower homeownership rates than those born in the US. In addition, Asian households tend to live in areas with higher costs of living and lower housing supply, which also limits homeownership opportunities.
Home values matter as well. We find that the key determinants of home values include household characteristics, such as income and age; property characteristics, such as the home’s size and structure; and neighborhood characteristics, such as whether the home is in a metropolitan statistical area.
According to 2019 American Community Survey data, white homeowners were more likely than homeowners of color to be older, live in detached single-family homes, and have homes with more rooms—all factors that contribute to higher home values. White homeowners were also more likely to believe they lived in neighborhoods with good schools, and they were less likely to believe they lived in neighborhoods with serious or petty crime or flood risk.
Yet even after controlling for household, property, and neighborhood characteristics, Black households, Hispanic households, and other households of color (such as Native American and multiracial households) still have lower-valued homes than white households.
We also find that Asian homeowners have higher home values than white homeowners. This result largely reflects the fact that Asian homeowners have, on average, higher household incomes and a greater propensity to own newer homes in higher-cost neighborhoods than other households of color. But because of data constraints, we did not control for financial wealth in our model, which may also explain why Asian households own higher-valued homes.
What role have racist and discriminatory polices played in reducing housing wealth for households of color?
Homeownership and home value disparities today are partially rooted in historical racist policies. For instance, to prevent people of color from owning homes, racial covenants—which stipulated who could and could not own a home—were embedded in property deeds across the country throughout the first several decades of the 20th century. Redlining, the process by which the Federal Housing Administration refused to insure mortgages in or near Black, Mexican, and Asian American neighborhoods, created systematic disinvestment in neighborhoods of color. And this disinvestment had consequences for both access to mortgages and home values.
In contrast, white neighborhoods received significant investment from mortgage lenders and other financial institutions during this time. The federal government also supported the mass production of homes for white households and guaranteed loans for white homebuyers—thus giving white households a wealth-building head start from which people of color were deliberately excluded.
But limited homeownership opportunities for households of color aren’t just the result of past actions. Racist housing policies and practices continue today. Although the passage of the Fair Housing Act in 1968 outlawed redlining, mortgage lending is often still concentrated in majority-white neighborhoods relative to neighborhoods of color. Racial and ethnic discrimination has contributed to disparities in creditworthiness among homebuyers of color. Appraisers continue to undervalue homes in neighborhoods where most residents are people of color, and real estate agents continue to steer homebuyers of color into less desirable neighborhoods.
These disparities in all areas of the homeownership ecosystem limit the ability of households of color to achieve homeownership and benefit from it.
To achieve housing wealth equity, policies and practices must uproot systemic racism
One-dimensional solutions to homeownership and home value disparities won’t work. Rather, a complex mix of policies and practices must address the roots of these disparities in household, property, and neighborhood characteristics.
Achieving homeownership equity will require a commitment to diverse but equitable investment in households of color. Ensuring workforce equity gives more workers of color the opportunity to obtain higher-paying jobs, expanding down payment assistance and coupling it with renovation assistance, increasing the supply of affordable rental and for-sale housing, and providing equitable local investment in neighborhoods of color can all boost homeownership outcomes for households of color.
Households of color have been excluded from homeownership investments that allowed many white families to build intergenerational wealth and stability. Policies and practices that reduce the discriminatory barriers that lead to lower homeownership rates and less housing wealth for households of color could make that financial stability a reality for all Americans.
The Urban Institute has the evidence to show what it will take to create a society where everyone has a fair shot at achieving their vision of success.