This examining health inequities series is created as a part of being a student in Examining Health Inequities at the University of Alabama at Birmingham, where I am challenged to examine health inequities and provide my own opinion.
Summary and assessment of Race, Homeownership, and Wealth
Summary
A racial income gap is commonly recognized and agreed upon by people across the United States and policies and programs are regularly discussed to close this income gap. However, Shapiro argues that closing the income gap is not near as important as closing the Wealth Gap. Specifically, the wealth gap defined by homeownership.
Racism is a system that creates inequities for people based off of their race. The process of how someone acquires and maintains their home falls right into this system. There are three primary reasons identified for why African-Americans are limited in their ability to purchase and own a valuable home that results in an increase of wealth.
- Higher home mortgage rejection rates | Securing a mortgage is a critical first step in purchasing a home. However, African-Americans have a mortgage rejection rate about 60% higher than whites. This has even been identified through studies with families that have similar credit histories and incomes.
- Higher interest rates | Equally as important as a mortgage, a loan interest rate determines how much a home will cost a homeowner long term, and determines where finances will be used. African-Americans pay about one-third higher percent than whites for interest rates. This can net about $12,000 over a 30-year fixed mortgage. That is money that could be utilized for furthering education, investing in your family, or just raising the quality of life.
- Depreciation of home value | One of the greatest reasons why homeownership contributes to an increase in wealth is because most homes appreciate. Historically, communities have been segregated through policies and programs like redlining that place a high-volume of African-American homes in communities where homes depreciate in value, reducing the wealth of a family. Homes lose about 16% of their value when located in a neighborhood that is more than 10% black.
Importance of this information to society
The top 10% of the wealthiest people in the United States, own 70% of the U.S. wealth. Wealth matters substantially more than income in securing a families’ long-term financial opportunities. People should care about this topic because we live in a world of abundance, where multiple people have the opportunity to be wealthy while not impacting a neighbor’s opportunity at wealth. Especially in regards to homeownership wealth, a home’s value increasing will typically just continue to increase the value of the home’s around it.
Putting more wealth in the hands of people with little wealth today will only add to the economic engine of the U.S. Increases in wealth directly impacts the ability for consumers to purchase more or invest in a family that could result in a child receiving education that will set them on a path to change the world, just because their family has more wealth and more opportunity.
People should also care about this topic because homeownership is the foundation of wealth. In the United States, home wealth accounts for 60% of the total wealth among the middle class. This is likely not to change and should only continue to recognize the importance of creating accessible opportunities to improve homeownership wealth.
Strong supporting evidence
This article did an exceptional job at explaining why homeownership is so important to the wealth of people across the U.S. From policies and programs created by groups like the Federal Housing Administration, the ability to own a home was possible for millions of families. Laying this foundation was important in understanding why and when the housing market increased and how that impacted family wealth.
Studies were also referenced throughout that cited how African-Americans were discriminated against when attempting to secure a mortgage or a loan rate. These studies were really important in clearly showing that with all variables controlled except for race, there was a clear discrepancy in outcome.
Weak supporting evidence
This article was likely a lot more impactful when published in 2006, but after 16 years the lack of updated information has been diluted. The wealth gap has not improved as the Federal Reserve cites that African-American families have a median and mean wealth of 15% less than whites. The article effectively lays the foundation for this topic, but struggles to maintain relevance without recent data.
Additionally, the timeframe for the article places this less than two years from the 2008 housing market crash. This crash has a lot of relevance to this topic due to Shapiro citing that approximately 30% of the housing loans to African-Americans were subprime. This directly impacted most black households losing 40% of wealth and being 47% more likely to foreclose on a home than whites.
This article also cited at the very beginning that wealth was not tracked until 1980, so the article did not reference the wealth much prior to this period. However, families across the country had wealth prior to 1980 in a variety of forms that likely can be traced back to slave ownership and the wealth generated through these practices. This is an important foundation for wealth and there was an opportunity to reference this as the beginning and the impact that this still has today.
Erik Angus 