Housing Gains Could Grow Black Wealth More Than $500 Billion in a Decade

Rhea-AI Summary

According to a new Zillow analysis, increasing homeownership rates and home values among Black households could significantly reduce the $3 trillion racial wealth gap, potentially generating hundreds of billions of dollars in the next decade. Currently, typical Black households hold only 23% of the wealth of white households. The analysis suggests that boosting Black homeownership by 5 percentage points could lower the wealth gap by $74 billion. Despite challenges, Black households have made some progress in homeownership rates during the pandemic.

Positive

• Black homeownership rate increased by 1 percentage point between early 2019 and early 2020.
• Black-owned home values appreciated faster than white-owned homes, narrowing the home value gap.

Negative

• Black households have only 42% homeownership compared to 72% for white households.
• Black homeownership rates are denied at a rate 80% higher than that of white applicants.

SEATTLE, April 26, 2021 /PRNewswire/ -- Incremental increases in homeownership rates and home values among Black households would help shrink the current $3 trillion racial wealth gap by hundreds of billions of dollars over the next decade, according to a new Zillow analysis.

Today's typical Black household has only about 23% of the wealth of a typical white household, down from 34.6% before the Great Recession. Housing factors -- including lower home values and rates of homeownership -- directly account for nearly 40%² of that gap, with assets like investments in stocks and bonds and retirement accounts making up the rest.

"Housing will be a prominent factor determining the course of the racial wealth gap over the next decade," says Zillow economist Treh Manhertz. "The issues caused by historic discrimination won't be solved quickly, but addressing things like increasing access to credit, more-equitable lending standards and reducing exclusionary zoning could make buying more accessible and bring significant strides toward closing the wealth gap. In the most optimistic scenario, Black millennials could see housing equality in their retirement, and finally pass on some real wealth to the next generation."

About 42% of Black households own their home, compared to 72% of white households, and Black-owned homes are typically worth about 18% less than white-owned homes. Zillow estimates that if Black homeownership rates and home values rose to match those of their white counterparts, Black wealth would more than double (from $931 billion to $2.1 trillion).

Zillow analyzed home value growth and homeownership rate changes for Black households under five different scenarios through 2031. In the most optimistic, Black wealth would grow by more than half a trillion dollars -- from $931 billion to $1.46 trillion. In the most likely, it would increase to about $1.18 trillion.

In that most likely scenario -- which projects Black home values growing 5% faster than home values generally and Black homeownership growing at 0.5 percentage points per year -- equality in housing wealth wouldn't come until 2183. If Black home values grow 15% faster than home values generally and Black homeownership grows at 1.5 percentage points per year -- the most optimistic scenario explored in the analysis -- the timeline for housing wealth equality is moved up to 2066.

Opposite of the disproportionate hit taken during the Great Recession, Black households saw modest progress in narrowing the wealth gap during and leading up to the pandemic, a small start toward reversing trends that helped widened the gap over the past decade. This was largely due to housing gains. For example, the Black homeownership rate grew about one percentage point between early 2019 and early 2020, while the white homeownership rate stayed flat.

Black-owned home values have also grown just over one percentage point faster than white-owned home values each year for the last three years. In February 2020, Black-owned home values were up 4.6% from a year earlier, while white home values were up 3.6%. In February 2021, Black home values were up 10.9% from the previous year, while white home values were up 9.7%. This faster appreciation among Black-owned homes narrowed the overall home value gap from 16.7% to 15.9%.

Further, the analysis shows that Black homeownership rates and home values contribute equally to the housing portion of the overall wealth gap. If the Black homeownership rate increased by five percentage points the wealth gap would decrease by $74 billion. If home values increased by five percentage points the reduction would be $31 billion. Combined, alleviating these two disparities could cut the wealth gap by about 40%, to $1.9 trillion.

Lenders deny mortgages for Black applicants at a rate 80% higher than that of white applicants. The relationship between housing factors and the racial wealth gap underscores the urgency of efforts like expanding access to credit and other initiatives that break down color barriers to homeownership.

"It's abundantly clear that this issue won't solve itself naturally or quickly. The problems run deep and perpetuate inequality," said Manhertz. "Intentional, targeted and dedicated policy is necessary to repair this broken system."

Black - White Wealth Gap

Metropolitan Area (Top 50)	Black Home- ownership Rate	Black Home- ownership Rate Gap, Relative to White Households	Change in Black Home- ownership Rate 2018 to 2019	Typical Black-owned Home Value	Black-Owned Home Value Gap, Relative to White Households
United States	42.0%	-30.2pp	0.5pp	$229,182	-18.3%
New York, NY	32.4%	-33.3pp	-0.4pp	$460,855	-14.1%
Los Angeles, CA	34.6%	-21.9pp	3.1pp	$618,485	-31.4%
Chicago, IL	39.8%	-34.7pp	-0.8pp	$169,079	-40.5%
Dallas, TX	36.8%	-32.8pp	1.7pp	$228,125	-24.1%
Houston, TX	40.1%	-31.9pp	-0.6pp	$193,425	-25.9%
Philadelphia, PA	47.9%	-27.3pp	0.2pp	$218,434	-26.1%
Washington, DC	50.6%	-21.8pp	-0.7pp	$452,920	-9.2%
Miami, FL	46.8%	-26.5pp	1.1pp	$273,822	-20.8%
Atlanta, GA	48.7%	-28.4pp	0.3pp	$230,564	-19.2%
Boston, MA	35.3%	-33.6pp	0.3pp	$457,693	-17.1%
Phoenix, AZ	34.8%	-37.0pp	1.0pp	$299,816	-16.0%
Detroit, MI	43.4%	-35.6pp	1.3pp	$112,383	-48.4%
San Francisco, CA	34.9%	-25.2pp	-0.5pp	$946,828	-25.4%
Seattle, WA	29.2%	-35.8pp	-4.2pp	$504,819	-16.4%
Minneapolis, MN	25.6%	-50.8pp	0.9pp	$284,090	-13.0%
Riverside, CA	45.5%	-25.9pp	2.3pp	$436,440	-2.0%
Tampa, FL	44.0%	-29.4pp	5.7pp	$230,037	-13.4%
Saint Louis, MO	39.0%	-38.5pp	-0.3pp	$119,877	-41.9%
Denver, CO	44.7%	-25.4pp	8.6pp	$434,097	-14.4%
San Diego, CA	29.0%	-32.8pp	2.0pp	$575,152	-22.7%
Baltimore, MD	46.2%	-30.9pp	0.1pp	$281,640	-16.1%
Pittsburgh, PA	31.4%	-41.7pp	-1.6pp	$138,280	-24.5%
Charlotte, NC	44.5%	-30.9pp	0.6pp	$229,187	-19.1%
Portland, OR	38.6%	-27.1pp	5.6pp	$450,661	-3.5%
Orlando, FL	48.5%	-22.9pp	2.7pp	$250,373	-12.0%
Cleveland, OH	37.2%	-37.1pp	2.6pp	$109,471	-41.7%
Cincinnati, OH	33.3%	-40.1pp	-1.7pp	$175,428	-18.0%
Sacramento, CA	34.3%	-34.3pp	-4.3pp	$453,275	-8.7%
Kansas City, MO	37.4%	-34.0pp	1.3pp	$177,240	-26.1%
San Antonio, TX	45.0%	-25.9pp	2.3pp	$218,837	-12.4%
Las Vegas, NV	28.4%	-34.8pp	0.0pp	$309,412	-6.4%
Columbus, OH	29.7%	-39.1pp	-1.6pp	$183,115	-24.4%
Austin, TX	39.4%	-24.8pp	-1.3pp	$325,660	-25.0%
Indianapolis, IN	36.9%	-35.7pp	2.9pp	$187,204	-10.1%
Nashville, TN	41.3%	-32.3pp	-0.3pp	$275,607	-12.8%
San Jose, CA	27.5%	-34.3pp	0.8pp	$1,249,840	-12.6%
Virginia Beach, VA	42.2%	-30.2pp	0.0pp	$251,718	-7.8%
Milwaukee, WI	26.7%	-43.4pp	0.4pp	$137,797	-40.9%
Providence, RI	36.0%	-32.4pp	0.1pp	$325,144	-11.4%
Jacksonville, FL	43.4%	-31.5pp	-0.5pp	$203,186	-24.1%
Oklahoma City, OK	36.3%	-33.8pp	-4.5pp	$144,763	-18.4%
Louisville, KY	37.0%	-37.9pp	0.8pp	$149,249	-27.3%
Raleigh, NC	43.1%	-31.7pp	0.6pp	$267,719	-16.9%
Memphis, TN	43.9%	-31.6pp	-1.7pp	$132,732	-34.1%
Richmond, VA	49.6%	-26.2pp	-1.0pp	$244,099	-13.1%
New Orleans, LA	48.8%	-24.8pp	2.2pp	$186,774	-23.2%
Buffalo, NY	36.0%	-36.3pp	2.9pp	$112,217	-44.6%
Hartford, CT	43.1%	-33.1pp	0.6pp	$210,964	-22.0%
Birmingham, AL	47.3%	-31.4pp	-4.6pp	$111,050	-48.3%

Home values based on ZHVI

About Zillow Group:

Zillow Group, Inc. (NASDAQ: Z and ZG) is reimagining real estate to make it easier to unlock life's next chapter.

As the most-visited real estate website in the United States, Zillow® and its affiliates offer customers an on-demand experience for selling, buying, renting or financing with transparency and nearly seamless end-to-end service. Zillow Offers® buys and sells homes directly in dozens of markets across the country, allowing sellers control over their timeline. Zillow Home Loans™, our affiliate lender, provides our customers with an easy option to get pre-approved and secure financing for their next home purchase. Zillow recently launched Zillow Homes, Inc., a licensed brokerage entity, to streamline Zillow Offers transactions. 

Zillow Group's brands, affiliates and subsidiaries include Zillow®; Zillow Offers®; Zillow Premier Agent®; Zillow Home Loans™; Zillow Closing Services™; Zillow Homes, Inc.; Trulia®; Out East®; StreetEasy® and HotPads®. Zillow Home Loans, LLC is an Equal Housing Lender, NMLS #10287 (www.nmlsconsumeraccess.org).

1 In order to paint a picture of the majority of the population and not have our analysis swayed by the extreme wealth of the nation's billionaire class, we measured the median wealth gap, tallying what the total wealth difference would be if every household had the typical wealth for their race and age group.
2 Based on Zillow's analysis of the 2019 Survey of Consumer Finances and ZHVI, home value and homeownership rate disparities combined account for an estimated 38.4% of the overall racial wealth gap.

 

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SOURCE Zillow

FAQ

What is the racial wealth gap according to Zillow's analysis?

The racial wealth gap is currently $3 trillion, with Black households holding only about 23% of the wealth of white households.

How can increasing Black homeownership affect the racial wealth gap?

Increasing Black homeownership rates could potentially reduce the racial wealth gap by hundreds of billions of dollars over the next decade.

What is the current homeownership rate among Black households?

As of the analysis, about 42% of Black households own their home.

What is the projected increase in Black wealth if homeownership rates rise?

If Black homeownership and values match white households, Black wealth could more than double from $931 billion to $2.1 trillion.

What is the timeline for achieving housing wealth equality for Black households?

In the most optimistic scenario, housing wealth equality could be reached by 2066.