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Are Income Disparities Driving the Racial Homeownership Gap? [housingmatters.urban.org]

 

By Arthur Acolin, Desen Lin, Susan M. Wachter, Cityscape, October 23, 2019

Fifty years after the adoption of the 1968 Fair Housing Act, which prohibits discrimination in the housing market, homeownership rates have not increased for Black or Hispanic[1] households. What factors are suppressing homeownership growth for these households? In this article, researchers analyze how differences in households’ current and expected lifetime income (i.e., household endowment), market conditions, and citizenship status account for disparities in homeownership rates between white, Asian, Black, and Hispanic households.

Researchers used demographic, income, housing tenure, and housing market data from the US Census Bureau’s American Housing Survey from 1989, 2005, and 2013. The researchers measured household endowments using two key metrics: current household income and permanent household income, which is the expected income over the course of a head of household’s lifetime, based on their educational attainment, age, gender, marital status, race, and geographic region, among other qualities. Given the limitations of the data, researchers were unable to factor in current household wealth or parental wealth, but past studies have found that permanent income can proxy for household wealth. After controlling for demographic effects, researchers used the household endowment metrics and data on market conditions to examine the factors driving the decreases in homeownership gaps between 1989 and 2005 and the increases in homeownership gaps between 2005 and 2013. The analysis estimated the percentage of homeownership gaps explained by household endowments and the share explained by unobserved factors, such as disparities in parental wealth, access to credit, and various forms of discrimination. Researchers also explored the role of citizenship status on homeownership rates across racial and ethnic groups for the years 2005 and 2013.

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