Black housing wealth equality not likely for decades at best: Zillow

While housing can be the tool to help close the economic gap between Blacks and whites, equality in homeownership wealth would not be achieved for decades at best, and would take more than a century using the most likely scenario, Zillow said.

A typical Black household has only about 23% of the wealth of a typical white household. This is a larger gap than prior to the Great Recession, when Black households had 34.6% of the wealth of white households.

Lower home values and rates of homeownership among the Black population account for nearly 40% of that gap, Zillow found. Assets such as retirement accounts and investments in stocks and bonds made up the remaining 60% of the gap.

"The issues caused by historic discrimination won't be solved quickly, but addressing things like increasing access to credit, more-equitable lending standards and reducing exclusionary zoning could make buying more accessible and bring significant strides toward closing the wealth gap," said Treh Manhertz, an economist with Zillow, in a press release. "In the most optimistic scenario, Black millennials could see housing equality in their retirement, and finally pass on some real wealth to the next generation."

A wealth gap also persists based on education level, a separate report from the Center for Responsible Lending noted. For those who have a bachelor's degree or higher, the typical white household had $397,000 in wealth, while for Latinos it was $112,700 and for Blacks, it was $72,450. For whites with a high school education or less, household wealth was $105,590.

Zillow analyzed home value growth and homeownership rate changes for Black households under five different scenarios through 2031, and labeled them ranging from improvement (the best case) to reversal (the worst). In the improvement scenario, Black wealth would grow by more than half a trillion dollars from $931 billion to $1.46 trillion over a decade. In the most likely scenario — in which Black home values rise 5% faster than home values generally and Black homeownership grows at 0.5 of a percentage point per year — it would increase to about $1.18 trillion. With that model, it would take until 2183 to achieve housing wealth equality.

But even in the most optimistic scenario, in which Black home values grow 15% faster than the overall market and the homeownership grows at 1.5 percentage points per year, it would take about 45 years from now, until 2066, to achieve housing wealth equality.

Some progress in closing the housing wealth gap, Zillow noted. The value of homes owned by Blacks grew over one percentage point faster than white-owned home values in each of the last three years.

In February, Black home values were up 10.9% from the previous year, while white home values were up 9.7%. Back in February 2020, Black-owned home values were up 4.6% from a year earlier, while white home values were up 3.6%.

This helped to lower the overall home value gap between Black and white households to 15.9% from 16.7%.

But complicating the issue is the ability to save for a down payment. Based on median income data, it would take a Black household currently renting their home 14 years to save for a 5% down payment on a median priced home, the CRL report found. For a Latino renter household, it would take 11 years but for a typical white renter household, it would take 9 years.

"Homeownership is a key driver of wealth-building, but buying a home also requires wealth, which usually is tied to previous generational homeownership opportunities," said Nikitra Bailey, CRL executive vice president, in its press release. "This is a Catch-22 for Black and Latino communities, which have been denied homeownership through systemic discrimination epitomized by historic government-backed redlining and continued barriers."