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Housing Gains Narrow The Racial Wealth Gap

Apr 26, 2021
Photo of suburban neighborhood.

Zillow analysis finds that the racial wealth gap narrowed during the pandemic, due to increased home value and Black homeownership rates. If these incremental increases continue over the next decade, Zillow predicts this will shrink the 3 trillion dollar racial wealth gap by hundreds of billions of dollars.

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%.

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. Nearly 40% of that gap accounts for housing factors, such as lower home value and rates of homeownership. Other assets like investments in stocks and bonds and retirement accounts make up the rest, the report finds.

Only 42% of Black households own their home, compared to 72% of white households. Typically, black households are also 18% less in value compared to white households. However, Zillow estimates that if Black household value and ownership rates matched their white counterparts, Black wealth would more than double from $931 billion to $2.1 trillion.

“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,” said Zillow economist, Treh Manhertz.

In a more realistic scenario, Black home values would grow 5% faster than home values generally and Black homeownership would grow at 0.5 percentage points per year, but equality in housing wealth wouldn't come until 2183. The most optimistic scenario that Zillow predicts is Black home values grow 15% faster than home values generally and Black homeownership grows at 1.5 percentage points per year, causing housing wealth equality to move up to 2066.

Further analysis by Zillow finds that Lenders deny mortgages for Black applicants at a rate 80% higher than that of white applicants. 

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

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