Friday, July 13, 2018

The Racial Wealth Gap

There is a large wealth gap between white families and nonwhite families.  Median wealth for white families is $171,000. Black and Latino families, meanwhile, have far less wealth: Black families have a median wealth of $17,600, while Latino families have $20,700. The most common explanation for what drives the racial wealth gap is lack of Black homeownership.

It would take decades to centuries for Black families to achieve the same amount of wealth that white families have. It would take Black families 228 years to reach the same amount of wealth that white families have today.

All Americans saw their wealth decline after the Great Recession in 2008, after the housing market collapse. However, Black and Latino Americans were hurt the most. In 2007, the median net worth of all households was $135,700. That dropped to $82,300 in 2010 and $81,400 in 2013. Nonwhite Americans already had less wealth than whites and saw what little wealth they had deplete even more. In 2007, the median net worth of white households was $192,500. White median net worth dropped to $141,900 in 2013. Meanwhile, what little wealth Black and Latino households had prior to the recession was further depleted. In 2007, Black median net worth was $19,200, while Latinos had $23,600 in wealth. Their wealth, in 2013, dropped to $11,000 for Black households and $13,700 for Latinos.

Obama’s homeowner relief measures did very little to provide relief. For example, the Home Affordable Refinance Program (HARP) helped homeowners refinance their mortgages, but only for those not in danger of foreclosure. As a result, it did not help the homeowners most in need, particularly subprime borrowers. This especially hurt Black and Latino borrowers since their refinance rates under HARP were lower.

The post-recession “recovery” has seen an obscene increase in housing prices across the nation. As of this month, median rent for a one-bedroom apartment in San Francisco is $3,500 a month. But San Francisco isn’t the only expensive city. Median rent for a one-bedroom in New York City is $2,860 a month, in Seattle, $1,990, and in Miami, $1,800. The national average rent reached $1,405 last month.

Housing prices are also outpacing wages. The median wage for US workers is $30,533.31 a year. Today’s minimum wage of $7.25 an hour is not enough to afford a two-bedroom rental home anywhere in the country. Not even $15 an hour is enough for most locations. One would have to make $22.10 an hour, on average, to afford a two-bedroom rental home and $17.90 an hour for a one-bedroom.

Because apartment rents and home prices are so high, it is incredibly difficult for young people of color to buy homes and accumulate wealth to pass down to their offspring. University of California, Berkeley, professor and housing expert Carolina Reid told Truthout that renters “are compelled to pay increasingly more of their income on rent, and there’s no wealth gains to be made from rent.” Reid also warned that if someone is struggling to pay rent and their rent continues to increase, they are more likely to take out a predatory loan. In fact, loosely regulated independent mortgage companies are creating half of new mortgages compared to nearly 20 percent in 2007, echoing signs of the previous collapse. Many of these loans are to low-income people. Even if another financial crisis does not happen, Reid says, “Your ability to save for a down payment to buy a house in the future is compromised.”

A 2017 Institute for Policy Studies report found that the median wealth of Black Americans will drop to zero by 2053 and Latino median wealth will drop to zero 20 years after that. Meanwhile, “median white household wealth would climb to $137,000 by 2053.”

For the full article go to
https://truthout.org/articles/black-americans-median-wealth-could-disappear-in-one-generation/

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