By J W Jackie
The White House has announced that it will be taking new actions to build black wealth and narrow the racial wealth and homeownership gaps that currently exist in the US. The Administration has vowed to “Take action to address racial discrimination in the housing market, including by launching a first-of-its-kind interagency effort to address inequity in home appraisals, and conducting rulemaking to aggressively combat housing discrimination.”
It has also announced several other measures—including those which aid disadvantaged businesses, create jobs, and build wealth in communities of colour.
When it comes to housing, much needs to be done. Even prior to the events of 2020, black homeownership had hit a record low of 40.6% (second quarter, 2019). This figure reached 47% in the second quarter of 2020, but US Census Bureau Data shows that the homeownership rate for black Americans is the lowest.
White Americans, for instance, have a rate of 76%. The situation is prevalent across the US, with not a single state having a gap that isn’t sizable. This is the case even in cities like Los Angeles and Washington, where a gap of up to 25% exists.
Owning a home has many pros, including financial benefits (buying is cheaper than renting in the long-term). Buying a home allows homeowners to avail of low-interest rates when they arise (current rates are at an all-time low) and to take advantage of significant tax deductions and capital gains exclusion.
Finally, owning a home allows individuals and families to build equity and to accumulate wealth. The Federal Reserve reports that the average homeowner in 2016 had a household wealth of over $231,000, compared to the average renter, who had a household wealth of a little over $5,000.
The Administration has announced specific steps that will be taken to reduce the homeownership disparity. These include that of taking on discrimination in home appraisals. A 2018 Brookings study showed that homes in majority-black neighbourhoods are often valued at tens of thousands of dollars less than in majority-white neighbourhoods.
This trend, the Administration reports, is worsening over time. Efforts will centre on using federal levers such as potential enforcement under fair housing laws, new regulations, and the development of new standards in association with industry and state and local governments.
The US Department of Housing and Urban Development (HUD), following a memorandum from President Biden, has already taken crucial steps, sending its rules on countering discriminatory housing practices and its rule on the legal duty to affirmatively further fair housing to the Senate and the House of Representatives for review.
There will additionally be a new neighbourhood homes tax credit to attract private investment in the development and rehabilitation of affordable homes for low and moderate-income buyers.
The Administration has meanwhile announced new plans to close the homeownership gap. Reform is needed, owing to the link between wealth building and homeownership. The measures are far-reaching, and include everything from tax credits for investment, right through to the addressing of inequity in home appraisals.