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Wealth, Housing and the

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In 2003 the federal government devoted $23 billion for low income housing ... An estimated 2 million new foreclosures will occur in the next two years ... – PowerPoint PPT presentation

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Title: Wealth, Housing and the


1
Wealth, Housing and the GapHow can we
understand and close the wealth gap?
  • 98th Annual Convention of the National
    Association for the Advancement of Colored
    People. Economic Empowerment Panel.
  • Monday, July 9, 2007
  • john a. powell
  • Williams Chair in Civil Rights Civil Liberties,
    Moritz College of Law
  • Executive Director, Kirwan Institute for the
    Study of Race and Ethnicity
  • The Ohio State University
  • http//www.kirwaninstitute.org/

2
Racial Inequity in Wealth Historical Context
  • Two major national policies to drive wealth
    creation
  • 19th century policies for land grants
  • 20th century housing policies (primarily the
    extension of mortgage insurance for housing, tax
    policies benefiting home owners)
  • During the suburb-shaping years (1930-1960) fewer
    than one-percent (1) of all African Americans
    were able to obtain a mortgage

3
Wealth Gap
  • The lost opportunity for African Americans was
    cumulative the mass redistribution of wealth by
    the Federal Government paved the way for new
    industries and settlement patterns
  • These policies benefited White Americans but not
    people of color
  • Housing assets (home equity) are the primary
    source of wealth for middle class White Americans
    (accounting for approximately 70 of White
    household net worth)

4
Structural Factors Driving Wealth Divide
Contemporary
  • Why Structure Matter for Housing and Wealth in
    Black Communities Nationwide?
  • Wealth is cumulative and made enduring through
    policy and relationships
  • Research finds that institutional arrangements
    resulting in segregation and concentrated poverty
    affect BOTH housing appreciation and values.
  • Concentrated poverty has the largest negative
    impact on housing values of all neighborhood
    characteristics considered
  • Segregation depresses the returns to minority
    housing investments

5
Capital Formation is a Housing Issue
  • In 2003 325.2B in Home Mortgage Interest
    Deductions were distributed to 35 Million
    homeowners (approx 9,291 per household)
  • If every homeowner in Wayne County applied for
    the deduction it would amount to 1.4 percent or
    4.7B
  • Of that
  • 63 of the total would be directed towards White
    homeowners (approximately 2.9B.)
  • About 33 would be directed towards Black
    homeowners (1.55B)
  • Source DataPlace, U.S. Census Bureau, Parisi,
    Michael and Hollenbeck, Scott. (2005) Individual
    Income Tax Returns, 2003 Statistics of Income
    Bulletin. Fall 2005 Vol. 25 Issue 2

6
and an Income Issue
  • The previous example masks the reality of how
    deduction credits are distributed by income.
  • Data suggest the more earned income the more
    likely a homeowner will claim the Interest
    deduction.
  • African Americans and low income households are
    leaving significant value on the table.

7
Policy Widens Gap, Most Subsidies to Wealthiest
Households
  • Government tax subsidies to home owners are
    nearly 500 more than spending for low income
    housing assistance
  • In 2003 the federal government devoted 23
    billion for low income housing assistance, but
    provided 113 billion in mortgage deduction tax
    subsidies
  • These subsidies primarily benefit the wealthiest
    households (chart on right)

8
The Invisible Transformation
  • Much of the nations wealth is locked into
    homeownership
  • For all households, home equity accounts for an
    average of 21 percent of net household wealthbut
    for all homeowners the share is close to 50
    percent

9
Racial Disparity in Wealth
  • Why is wealth important?
  • Wealth allows participation in opportunities to
    take risk which creates new wealth
  • Wealth is concentrated opportunity that is often
    intergenerational
  • Wealth is realized at the individual and
    community level

10
How Wealth is Held is Important
  • Home equity is the more liquid form of wealth
    exposed to and is most exposed to real estate
    market downturns
  • For all homeowners, home equity represented 42
    of their net wealth.
  • For lower income and minority households, home
    equity represented four-fifths (80) of their net
    wealth.

11
African American Overexposure to High Risk,
Illiquid Wealth
  • For moderate-income, African American, and
    Hispanic households, home equity represented more
    than one-half of their net wealth

12
Racial Inequity in Wealth
  • Wealth disparity in America
  • In 2000
  • The median asset value for a white household was
    79,400, for African American households this was
    7,500 (a disparity of 900)
  • For every 1 in assets held by the average
    African American family, the average white family
    has 9 in assets

13
A Million Dollars Goes Far, But Not As Far As It
Used To!
  • The explosive growth in personal wealth is
    evident
  • The number of billionaires around the world rose
    by 102 to a record 793 over the past year, and
    their combined wealth grew 18 percent to 2.6
    trillion.
  • Approximately equal to the GDP of the Peoples
    Republic of China and higher than the GDPs of
    France and the UK

14
The Gap is Present and Changing
  • The net wealth of the typical African-American
    household rose from 5,919 in 1989 to 19,010 in
    2001, an increase of 221.
  • Post 2001-African American families saw
    virtually no change in their median net worth
    from 2001 (20,300) to 2004 (20,400), but their
    mean net worth rose 37.1 percent, from 80,700 to
    110,600.
  • Suggests that a few high-wealth African
    American families are establishing an
    intra-racial gap within the already wide
    White-Non White wealth gap.

15
Individual Home Wealth Policy
  • Seizes Opportunity
  • Mobility programs resulting in homeownership
  • Inclusionary Zoning at the Regional Level
  • Must result in creating home ownership in
    appreciating areas
  • Do not saddle people with the segregation tax
    which limits the potential to build equity

16
Individual Home Wealth Policy
  • Reduces Risks
  • Subprime refinancing
  • Some states, notably Massachusetts is considering
    a massive scale buyout of individual subprime
    loans.
  • The State would float a 200M bond to refinance
    about 1,000 homeowner subprime mortgages
  • In addition, momentum to pursue legislation
    stiffening penalties to unscrupulous subprime
    lenders

17
Housing Wealth as a Community Policy
  • Create Opportunity in communities of color
  • Land Reclamation (aggressive land banking)
  • Earmarking Affordable Housing Trust Fund Dollars

18
Housing Wealth as a Community Policy
  • Reduces Risks
  • Foreclosure prevention programs
  • An estimated 2 million new foreclosures will
    occur in the next two years
  • A recent study found nearly 1 out 5 families in
    non-conventional mortgages were 90 days
    delinquent
  • These trends will have racially disparate impacts
    disproportionately harming families of color and
    urban communities

19
Thinking about the future
  • What is the next wave of wealth generating
    opportunities to consider?
  • Capitalizing on investments internationally and
    domestically
  • Reconsider how capitalism can be put to work for
    the African American community.
  • New forms of engaging wealth-creation through
    institutions, new ventures and networks

20
To Learn More Please Visit Our Website and Blog
www.KirwanInstitute.org KirwanInstitute.Blogspot
.com
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