Racial inequalities in homeownership are crucial to understanding the racial wealth divide. According to the St. Louis Fed, 73.7% of White Americans own a home, in contrast to 44% of Black Americans. Nonetheless, Black Americans hold more equity in homes than in any other asset, and homeownership represents one of the most tangible ways of building wealth. Consequently, in addition to increasing the Black homeownership rate, we need to address the systemic obstacles that Black homeowners face in using their homes as wealth-building tools.

A history of anti-Black policies and actions, such as redlining, contract selling and White flight, have created what some call a “segregation tax”—referring to the observation that homes in largely Black neighborhoods tend to be lower-priced than comparable homes in areas with negligible numbers of Black residents. A 2018 study by the Brookings Institute found that on average, when homes are located in neighborhoods that are 50% Black, they are approximately half the price of homes in neighborhoods with no Black residents. This is a systemic phenomenon: in 117 out of 119 metro areas, homes in majority-Black neighborhoods were valued less than those located in areas that were less than 1% Black. The problem is exacerbated by the fact that, according to Scorecard data, Black residents consistently face more affordability issues than White homebuyers, meaning that they are priced out of certain neighborhoods.

Additionally, homes owned by Black residents tend to gain less through appreciation. In Atlanta, for example, home values in predominantly White neighborhoods increased by 5% between 2006 and 2017, while they decreased by 6% in Black neighborhoods. Another study of 15 metro areas shows that in the post-Recession era, Black home values actually appreciated more than White home values in some places. However, Black homeowners’ gains lagged when measured in absolute dollars because of the higher values of other homes. On the one hand, the overall picture bodes well, as it shows that Black homebuyers have been able to share in recent gains. On the other hand, it shows that there is still much work to be done in ensuring that wealth and economic security are equal across the board. This is especially important as an upcoming pandemic-caused credit crunch could hurt the homeowning prospects of financially vulnerable populations.

There is a long road ahead to make homeownership a truly equitable tool of wealth building, but there are already ways to get started: a properly reformed Community Reinvestment Act could serve to ensure that financial institutions are funneling capital into communities that need it; states could enact policies to assist first-time homebuyers; and institutions like the Consumer Financial Protection Bureau could help protect against discriminatory lending. To stay up-to-date on Prosperity Now’s housing-related work and what you can do to help, join Affordable Homeownership Campaign. This is National Homeownership Month. Let’s work to correct the harmful legacies that history has left us by working for a more equitable distribution of wealth and homeownership in the United States.