Black History Month - Looking at the Generational Wealth Gap and Homeownership
Posted by : Admin
Black History Month is an incredibly beautiful time to reflect on the contributions of Black Americans and explore the Black American experience. There are books, articles, and documentaries filled with information about Black contributions to music, politics, history, rebellion, and other expressions of joy. Through progress, we hope to add more justice, humanity, creation, and happiness.
In America, the strongest driver of future opportunities is today’s investments, namely real estate. But continued unfair lending and housing practices further exacerbate the current generational wealth gap.
According to the 2016 Survey of Consumer Finances, the median white household had a net worth of $171,000, and Black households only had $17,100, a 10x difference. New studies report that the Black median net worth will fall to $0 by 2053.
With new avenues for wealth creation, right now is an incredible time to close the racial wealth gap; however, home equity accounts for about two-thirds of wealth. There have always been pockets of Black wealth, but today is the first time that opportunity, social progress, and financial literacy overlap, and it will require several generations to close the centuries of disparity and inequality. Fair lending and other practices and functions of real estate ownership and investing will need improvement to ensure success.
A brief look at the history of disparity.
- During slavery, the enslaved could be passed down to children, and the wealth generated from the slave trade and what the enslaved produced fueled America’s economic growth. This is hundreds of years of no wealth or opportunity.
- The Homestead Act of 1862 fueled western expansion and settling, as it provided millions of acres of land to those agreeing to farm it. It was extremely cheap, but only a tiny percentage of Black Americans saw that benefit.
- Black people fought in every war, and the GI Bill of 1944 with FHA loans(1930s) was intended to help soldiers adjust to civilian life by providing them with educational opportunities and home loans. Most Black soldiers were denied these loans, but these loans gave birth to the American middle class.
- Redlining beginning in the 1930s, was a discriminatory practice designating areas, predominantly Black areas, as “hazardous,” thus denying those residents home loans.
- Housing associations instilled racially discriminatory covenants into their agreements denying Black applicants. Many suburbs were created this way eg i.e. – Levittown, Long Island – America’s first suburb.
Current obstacles:
- Reports of lenders denying Black applicants home loans (even at higher income levels) or issuing higher interest rates, also known as the “Black tax.”
- Black homes are appraised at below market value, resulting in the “white washing” of the home by removing family photos or culturally relevant items to ensure an adequate assessment of value.
As we celebrate Black History Month, let us also remember the barriers Black Americans have endured in the pursuit of housing and generational wealth. Let us make a commitment to future generations to ensure there are fewer barriers and more opportunities.
