The Corporation for Enterprise Development (CFED) and the Institute for Policy Studies released a report titled The Ever Growing Gap that documents racial inequities in wealth accumulation and provides federal policy prescriptions to address the racial wealth gap. Housing policies are identified as a key factor in both contributing to and resolving the gap.
Growth in the average wealth of white households has outpaced that of African-American and Hispanic households over the last 30 years (Table 1). Average wealth increased for each group, but by 85% for White households, 69% for Hispanic households, and 27% for African-American households.
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Table 1. Average Household Wealth by Race |
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Non-Hispanic |
Hispanic |
Non-Hispanic White |
|
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Average Household Wealth in 1983 |
$67,000 |
$58,000 |
$355,000 |
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Average Household Wealth in 2013 |
$85,000 |
$98,000 |
$656,000 |
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% Change (1983-2013) |
27% |
69% |
85% |
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Figures in 2013 dollars. Figures do not include value of consumer durable goods, such as automobiles, electronics, housing appliances, furniture, and similar items. Source: The Ever Growing Gap: Without Change, African-American and Latino Families Won’t Match White Wealth for Centuries |
Average wealth, however, is greatly influenced by the wealthiest households and does not reflect the wealth of typical households. The wealthiest 20% of households received more than 99% of the growth in wealth over the last three decades. As a result, the authors’ comparison of average wealth by race is likely an indication that wealthy white households experienced greater wealth accumulation than relatively wealthy African-American and Latino households.
The original research upon which the CFED report is based provides trends in median household wealth, which is a better indication of the wealth of typical households. As shown in Table 2 below, median wealth declined by 75% for African-American households and 50% for Hispanic households over the past 30 years, while it increased by 14% for white households.
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Table 2. Median Household Wealth by Race |
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Non-Hispanic |
Hispanic |
Non-Hispanic White |
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Median Household Wealth in 1983 |
$6,800 |
$4,000 |
$102,200 |
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Median Household Wealth in 2013 |
$1,700 |
$2,000 |
$116,800 |
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% Change (1983-2013) |
-75% |
-50% |
14% |
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Note: Figures in 2013 dollars. Figures do not include value of consumer durable goods, such as automobiles, electronics, housing appliances, furniture, and similar items. Source: Wolf, E.N. (2014). Household wealth trends in the United States, 1962-2013: What happened over the Great Recession? Cambridge, MA: National Bureau of Economic Research. |
The report provides several policy prescriptions to close the wealth gap. One is to reform the mortgage interest and real estate tax deductions in the federal tax code, which primarily benefit higher income households. The authors recommend reducing the caps on the tax benefits that homeowners can receive and using those savings to promote homeownership among low-wealth households by providing financial assistance to first-time homebuyers or a refundable tax credit to households who can safely afford homeownership. The report notes that homeownership can be a significant wealth builder for households.
NLIHC’s United for Homes campaign proposes to convert the mortgage interest deduction (MID) to a nonrefundable tax credit and to reduce the portion of a mortgage eligible for federal tax relief from $1 million to $500,000. The combined changes would provide a tax benefit to nearly 15 million additional homeowners, the vast majority of whom have incomes below $100,000 who don’t currently benefit from the MID, and would save $213 billion over ten years that could go to affordable rental programs for extremely low income households for whom homeownership is not financially feasible.
The Ever Growing Gap: Without Change, African-American and Latino Families Won’t Match White Wealth for Centuries is available at: http://bit.ly/2aIYkYk
The original data used for The Ever Growing Gap is available at: http://bit.ly/2b87Mmg