Declining Black Homeownership Has Big Retirement Implications

By Rodney Brooks, Next Avenue Contributor

Homeownership among African Americans has declined to levels not seen since before passage of the Fair Housing Act of 1968, a major concern among economists and financial planners. Chief among the long-term concerns is the impact this black homeownership trend will have on the already grim outlook for African Americans and their preparation for retirement.

Credit: Shutterstock

Credit: Shutterstock

“Black people are moving into homeownership at a much slower rate than anything we have seen in the past,” says Laurie Goodman, co-author of the Urban Institute’s recent report, “Are Gains in Black Home Ownership History?” and co-director of the Urban Institute’s Housing Finance Policy Center.

Black Homeownership Gains Erased

In the three decades after the Fair Housing Act passed, the black homeownership rate in America rose by nearly six percentage points, the Urban Institute report said. But from 2000 to 2015, that gain was more than erased as the black homeownership rate dropped to roughly 41%. By contrast, the homeownership rate among white Americans is about 71%.

“Gains in black homeownership have been hard won, which amplifies our concern that in the last 15 years, black homeownership rates have declined to levels not seen since the 1960s, when private race-based discrimination was legal,” says the report.

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The black community got hit harder by the housing crisis than other groups. In general, African Americans bought homes at the peak of the bubble at higher rates that whites and were often offered costly subprime loans, even when they qualified for prime loans with lower interest rates. Also, black families did not benefit as much as white families, overall, from the post 9/11 recovery.

Missing Out on the Best Way to Build Wealth

“Homeownership has historically been the best way to build wealth by far,” Goodman says. “Look at the average wealth of homeowners versus renters. The average wealth for black Americans who are homeowners is $90,000, with $50,000 of that in home equity. The average wealth for black Americans who are renters is $2,000.”

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This troubling trend has many implications for African Americans, but the potential impact on their retirement is especially worrisome, experts say.

The pay gap and the wealth gap are high on the list of reasons for a huge disparity in retirement savings between black and white Americans. And homeownership plays a big part in that wealth gap. The typical white household aged 47 to 64 has housing wealth of $67,000 and the typical African American household in that age group has zero home equity, says the December 2016 report, “Social Security and the Racial Gap in Retirement Wealth” from the National Academy of Social Insurance. READ MORE