The United States faces rapidly growing wealth gaps between race and ethnicity. As we look to create a more equitable and secure future, we must shift away from public policies that fuel and exacerbate racial disparities in wealth.
The Racial Wealth AuditTM is a new framework that evaluates the impact of public policy on the wealth gap between white households and households of color. The audit helps us to understand how far policies that equalize outcomes in areas such as housing, education, and labor markets could go toward reducing the gap.
Blacks and Latinos are less likely than white families to own their homes and as a result accrue less wealth.
And even among homeowners, segregation and discrimination limit home equity values in communities of color.
Homeownership plays a central part in building family wealth, yet the nation's public policies have systematically locked out black and Latino families from the great benefits of building housing wealth. White families with existing wealth have had greater opportunities for home ownership and building more wealth.
For most families in the U.S., home equity marks the largest segment in their wealth portfolio. By equalizing homeownership rates, there is a substantial effect on the wealth accumulation of black and Latino families.
Learn more about how homeownership affects the Racial Wealth Gap.DOWNLOAD THE FULL REPORT
Despite rising college attendance among black and Latino households, barriers to completing a degree have widened the educational gap. Even with college degrees, economic disparities and a wealth gap remain.
Current policies often cement inequities. Residential segregation and school funding policies disproportionately leave black and Latino students access to only low-quality, under-resourced schools.
Changing college attainment rates for black and Latino households results only in modest reductions in the wealth gap, but college degrees clearly pay off in higher lifetime earnings for everybody.
Learn more about how education affects the Racial Wealth Gap.DOWNLOAD THE FULL REPORT
Disparities in the labor market, including employment discrimination, gaps in access to pensions and other employee benefits, and dissimilar networks, contribute greatly to wealth inequality by race/ethnicity.
Our historical legacy and policy choices have resulted in occupational segregation in labor markets.
Black and Latino workers face more wealth-building barriers than white workers, reducing their ability to turn success on the job into greater wealth. For instance, they are less likely to receive employer-sponsored benefits and instead must disproportionately use income for necessities, such as health care and family leave.
Expanding labor market opportunities and pay equity will help reduce wealth gaps. Increasing access to employer benefits and other less visible forms of compensation is especially important to reducing wealth disparities.
Learn more about how income affects the Racial Wealth Gap.DOWNLOAD THE FULL REPORT
This pattern of spatial inequality is highly racialized. Families of color are more likely to live in subpar neighborhoods than white families. This is a result of the United States' long history of residential segregation by race, along with ongoing policies that reinforce these trends.
In 2000, raising two children and earning a combined income of $115,000, Richard and Brigitte decided to purchase a home to call their own. Their search led them to a newly constructed house with a yard. They obtained a subprime mortgage—a type of loan frequently targeted towards buyers in neighborhoods of color—and refinanced multiple times to obtain a steady mortgage with a fixed interest rate. Like most other houses in the neighborhood, the value of their home has been wildly volatile.
The combination of the subprime loan and unstable home values has impacted the Thomas family's ability to build wealth.
Despite the variable housing prices, they are mainly happy with the neighborhood because it has all the amenities they originally wanted, except for good schools.
In 1996, Michael and Kerry purchased their home in an upper-class suburban neighborhood located in the same Midwest city as the Thomases. They chose "a nice stable neighborhood" that had a solid public school system. All of their children attended the highly ranked neighborhood public schools. Kerry noted that her children found the schools academically challenging.
In 2014, their house nearly doubled in value and they listed it for sale.
Between 1998 and 2010, Nicole was raising her daughter on the East Coast.
During this period, she moved seven times, renting apartments within the same city.
Each time she moved, it was to escape a bad neighborhood and a poor housing situation. Forced to leave one apartment when the ceiling fell in, she moved again because of an infestation of mice. In addition to these health and safety concerns, she often didn't feel safe around her neighbors. While Nicole has finally found a quiet community where she feels comfortable, she is exhausted from the constant moving and hopes to stay in her current apartment and neighborhood long-term.
Richard and Brigitte Thomas
Home Purchase Price: $130,000
Home Value Fluctuation: $100,000 - $172,000
Michael and Kerry Schwartz
Home Purchase Price: $380,000
Home Value Fluctuation: $380,000 - $740,000
In 2007 Marvin left a secure public sector job to do similar development work for a construction company. With this shift came a big increase in income; however, after two years and a weakening economy, Marvin was let go. Collecting unemployment, he was able to complete the BA degree he had been working on for the past ten years, landing a new job. Even with an MA in education, his wife also had trouble finding work and experienced periods of unemployment. While the family's income has dropped over the past ten years, they have been able to rely on substantial wealth to help them bridge this decline.
One key asset has been their home, which appreciated in value by nearly 300,000 over the past ten years. The family was able to purchase this home thanks to a gift of $20,000 from their parents. Over the years they have used this equity to help pay for their daughter's private school tuition and help to cover periods of unemployment. In addition, Marvin inherited $100,000 cash from his mother and another $100,000 in a tax-restricted annuity. Covering most of the down payment of their home and a substantial inheritance from their parents set this family on a very different path towards building wealth than our next family, the Barzaks.
Steve and Christa Barzak are college-educated professionals who have depended solely on the stability of their income and the money they have set aside in their 401(k) to cover daily costs and long-term investments. With no help from family, the Barzaks used a large chunk of their retirement and savings in 1997 as the down payment on a condo. With two full-time jobs, investing in a home in a good school district felt like the right next step. At the height of the Great Recession, Steve was laid off from his management job. Unable to find a comparable position, he took part-time hourly work with no benefits. By 2009 Steve lost his part time construction job and Christa was unable to find work. Their income dropped from $84,000 in 1998 to $20,000. Having exhausted their own savings and retirement and without any family support to help them through this rough financial period, the family lost their largest asset investment to foreclosure and had to pull their daughter out of private school.
Marvin and Allison Scully
MIDDLE CLASS FAMILY
Steve and Christa Barzak
PREVIOUSLY MIDDLE CLASS, NOW WORKING CLASS
In addition to an increase in home equity and over $100,000 in financial support from their parents,
The Millses' household wealth has continued to grow thanks to Blake's steady employment at a firm that offers generous benefits.
Taking time off to care for their children, Andrea has only recently gone back to work. Over the past ten years Blake has remained steadily employed. As a sales manager, he earns the bulk of the household's $125,000 annual income and through his job is able to access retirement savings and health insurance for the family.
After earning her MBA and taking over as the director of a local non-profit, Francesca's income has nearly doubled to $85,000 over the past ten years. Leveraging a period of high personal income, she moved with her daughter into the best home and community she could afford.
With no financial help from extended family, the down payment for the house came directly from income.
While she does not regret purchasing the house, she acknowledges this strategy has left her broke. While she likes their home and feels safe in their gated community, she does not want her daughter attending the local public school. Frustrated that she couldn't afford to move to a community with a better local school system, she spends $7,500 a year on private school tuition. For Francesca, the cost of tuition on top of the $160,000 she's accumulated in student loan debt has meant forgoing investing in retirement, personal, or college savings.
Andrea and Blake Mills
Benefits: Health Insurance + Retirement Plan
Benefits: -$7,500 for Private School