How America's Racial Wealth Gap Perpetuates Itself
A 2009 survey showed that the median white family in American had twenty times more wealth than the median black family. How can this be, so many years after the civil rights movement? The answer, according to a new study: black people have been systematically screwed by home ownership.
Well, and a lot of other things, of course. But this fascinating and comprehensive study on the racial wealth gap by Brandeis University's Institute on Assets and Social Policy finds that home ownership is the single largest factor in driving racial wealth inequality.
The study followed 1,700 families for 25 years, starting in 1984. During that time, "the total wealth gap between white and African-American families nearly triples, increasing from $85,000 in 1984 to $236,500 in 2009." (This is insane.) The contributing factors to this wealth gap were as follows:
Among households with positive wealth growth during the 25-year study period, as shown in Figure 2, the number of years of homeownership accounts for 27 percent of the difference in relative wealth growth between white and African-American families, the largest portion of the growing wealth gap. The second largest share of the increase, accounting for 20 percent, is average family income. Highly educated households correlate strongly with larger wealth portfolios, but similar college degrees produce more wealth for whites, contributing 5 percent of the proportional increase in the racial wealth gap. Inheritance and financial support from family combine for another 5 percent of the increasing gap. How much wealth a family started out with in 1984 also predicts a portion (3 percent) of family wealth 25 years later.
Black people tend to buy houses later in life; therefore, their houses do not increase in value as much. They also tend to live in black neighborhoods, where real estate values are lower, since white people don't want to buy there. Black people also inherit far less money, and they are not able to build wealth through marriage as easily as white people. This much, by itself, adds up to a self-perpetuating system in which whites steadily increase their own wealth, while black families mostly cannot.
Add in poorer education, and fewer employment opportunities, and institutional racism, and you have a very, very steep hole for black families collectively to climb out of. And it will take a very, very massive public investment to change it.