Homeownership Is Not Just A “Housing Issue”

While I consider my “policy passion” to be California housing policy, I have begun to realize that my focus over the past year on homeownership may not be so much an issue of housing or shelter as much as it is an issue of wealth inequality and racial equity. 

Homeownership has long been part of the classic “American Dream,” especially for the vast majority of Americans who strive to leave their children some form of inheritance. Homeownership acts as a forced savings plan, and therefore builds wealth while also providing long-term stability through fixed monthly payments (even as inflation and average rents go up). It is a long-term strategy for families to allocate more money towards education, healthcare, more nutritious meals, or whatever fulfills their family. 

For many low-income Americans, particularly people of color, homeownership and all the benefits that come with it are simply out of reach. This is particularly true in California, which is among the most expensive states to buy property, leaving 14.5% of households in the state with zero or negative net worth. When you break it down by race, the issue becomes more clear: 28% of Black households, 19.1% of Latinx households, but only 12.6% of White households have zero or negative net worth. The median homeowner in the United States has 40 times the household wealth of a renter – $254,900 compared to $6,270.

Everything about homeownership has been unequal since the federal government introduced policies that made it easier for (White) families to get home loans after the Great Depression. But while White families built wealth over almost a century, people of color were excluded from the process by almost every manner imaginable: from being “steered” away from desirable properties and neighborhoods, denied loans, given subprime mortgages, to paying higher interest rates. All of this impedes on the ability to build wealth in the same way that middle-class White families can. We now have regulations and enforcement mechanisms like the Fair Housing Act and the Federal Housing Finance Agency which attempt to prevent this going forward, but the legacy of these practices persists intensely to this day.

The most recent recession in 2008 caused more racial inequality as the crisis disproportionately affected people of color, especially Black and Latinx households. Primarily Black, Asian, Latinx, and Native American families lost billions in wealth they had just begun to accumulate in recent decades. The Black-White homeownership gap is now the widest it has been in decades at 31%. And there are similar gaps between other races too: the Latinx-White gap is 27%, and the Asian-White gap is 16%. 

Many low-income Americans, disproportionately people of color, are stuck in a cyclical struggle of not having enough wealth to buy a home, but it being very difficult to build wealth without owning a home. The current Covid-19 recession is bound to make things worse, and I worry we will see the same inequality in lost wealth as in the last recession.

So while housing policymakers obviously have a lot of common goals with those working on the affordable rental or homelessness crisis, in reality homeownership is more about long-term inequity in the ability for those of different races to build intergenerational wealth, while affordable housing and homelessness are issues that need more immediate attention. 

These issues need to be addressed in very different ways. When homeownership is lumped together with affordable housing, it often falls last in priority after providing shelter for people experiencing homelessness, creating stronger tenant protections, and rental affordability. That has led policymakers in California and elsewhere to not create policies that address homeownership specifically. 

Rentals do provide safe, healthy, and comfortable shelter for many and are so important. Homeownership, however, is the most common avenue for wealth creation and creates a stronger financial foundation that can be passed down through generations, and should thus be considered an issue of wealth inequality. Those same programs that were provided to White Americans, that enabled White families to accumulate wealth through homeownership, need to be provided to those who were left out in various ways over the last century.

Hannah studies global development, media, and public policy at Berkeley. She grew up just twenty minutes away, in El Cerrito, but has lived in four other countries since graduating high school through a gap year in Ecuador, studying abroad in Ireland and Chile, and getting her Teaching English as a Foreign Language over a summer in China. She has done extensive work with the Berkeley Student Cooperatives, where she has lived through the entirety of her time at UC Berkeley, as well as with the non-profits California Community Builders and the East Bay Permanent Real Estate Cooperative. These experiences culminated in her primary policy interest in housing and community development. Her work includes research on homeownership rates, sustainable housing fixes, the need for new development, and alternative models for homeownership.