Why Homeownership (Still) Matters
Americans have long been striving for the “American Dream” of working hard, pursuing homeownership and building wealth that could be passed down to children for generations. But the housing bubble of mid-2000s and the subsequent collapse of the housing finance industry turned the American dream into a nightmare for many. The stable path of wealth building that Americans had followed for nearly 60 years was now completely irrelevant. However, even before the housing crisis, the poorest in our communities were already in this nightmare. Countless families were working hard, but unable to make ends meet, much less save enough money buy a home.
For many low-income Americans, particularly people of color, the wealth building opportunities of homeownership are out of reach. According to the Prosperity Now Scorecard, 1.6 times as many White households in the US are homeowners compared to households of color. When broken down by income, over two times as many of the top 20% of households are homeowners then the bottom 20% of households. In certain states, the gap is much greater. In Washington, DC nearly six-times as many of the richest 20% of households are homeowners compared to the poorest 20% of households. According to a recent study by the Urban Institute, not one of the 100 cities with the largest Black populations has anywhere close to an equal homeownership rate between Black and White people.
Earning less money, being unemployed, having negative net worth, and little to no savings—this is the current life of many low-income Americans, particularly people of color in communities across the US. Their life is a continual struggle of running in place, unable to build wealth without buying a home, but not wealthy enough to buy home.
Yet homeownership is still a foundational piece to Americans’ ability to amass wealth. Simply put, homeownership is a form of forced savings. Every time you pay your mortgage you are contributing to your net worth. For nearly 25% of all Americans, their home is their biggest financial asset. The average net worth of a homeowner in was $231,400, compared to just $5,200 for a renter, according to the 2016 Survey of Consumer Finances by Federal Reserve.
Prosperity Now supports policies and programs under which lower-income Americans can attain homeownership and build wealth. We advocate for consumer protections and smart regulations in the banking and finance industry; support on the ground organizations in innovative asset building initiatives like children savings accounts (CSAs) and individual development accounts (IDAs), and continually provide data driven insights to contribute to wealth for all Americans.
Let’s celebrate Homeownership Month, by making sure housing policies create sustainable, affordable housing that is available for everyone. Let’s strive to make better choices about investments and public policies that strengthen the ability of low income communities to build wealth. We need policies and programs that help families achieve homeownership, removing barriers to wealth-building, and providing support to those with the least resources.
If would like to support the work Prosperity Now is doing to make homeownership attainable for every American, join the Affordable Homeownership Network today.