Beyond Four Walls: How Home Quality Impacts Racial Wealth and Health Gaps

Homeownership is one of the most—if not the—most important factors in building intergenerational wealth for families in the United States. Decades of disinvestment have led Black Americans to face systemic discrimination at nearly every step of the home-buying process, resulting in a staggering 30 percent Black homeownership gap.

This racial chasm for homeownership remains a critical challenge—one that requires radical policy changes to drive transformation.

But simply closing the homeownership gap may not fully ameliorate these significant racial health and wealth gaps. When Black families become homeowners, they are far more likely to live in lower-quality properties. This reality has critical implications for both the racial health and wealth gap, amplifying pre-existing inequities.

Setting the Scene: Inequities in Homeownership and Wealth

Homeownership 

The gaps between Black homeownership and white homeownership have worsened over the past few decades. Today, the rate of Black homeownership is lower than it was in the 1960s when race-based discrimination was legal.

While various factors have impacted inequities in homeownership, the Black community was hit particularly hard by the 2008 housing crisis. Many Black homebuyers bought homes at the peak of the bubble—disproportionately making them victims of predatory subprime lenders.

When many white families benefited from the economic recovery, Black families did not. The homeownership rate dropped more than two percentage points from 2000 to 2010—and decreased another five percentage points after 2010.

Income and Wealth Gaps 

Significant factors contributing to national inequities faced by Black families are income and wealth gaps. The median Black household earns 61 cents for every dollar earned by a comparable white household, and the median household income for a Black household is $38,183 compared to $61,363 for white households. The net worth of a typical white family is $171,000—nearly ten times greater than that of a Black family at $17,150.

Severe income gaps only serve to exacerbate wealth gaps. Without access to capital or financial stability, Black households continue to lag behind in purchasing their own homes—a key pillar on the path to building intergenerational wealth. Without sufficient wealth for a downpayment, a buyer cannot afford a home—or even if they can raise a downpayment, it will not be enough to make the monthly mortgage costs affordable.

Housing Disparities and Health 

Some of the most prominent examples of racial disparities in housing are seen in connection to health. Lead poisoning, air pollution, and substandard housing contribute to exposing minority populations to severely unhealthy environments.

Air Pollution and Environmental Racism 

Fine particulate matter air pollution, known as PM 2.5, is responsible for 85,000 to 200,000 deaths per year in the United States, as well as conditions such as asthma, lung disease, and hypertension.

Asthma and Housing Discrimination 

Asthma rates in the U.S. are inextricably linked with environmental policy, housing policies, and racism. Decades of redlining and non-compliance with pollution control have made air quality segregated: One in 13 people in the U.S. suffer from asthma and Black children are nearly three times more likely to have asthma compared to white children.

Lead Poisoning

Rates of lead poisoning remain far higher in low-income, minority neighborhoods compared to white, affluent neighborhoods. This is correlated with the fact that most low-income, minority neighborhoods still have housing stock built between 1940 and 1978—before lead-based paint was illegal. One study finds that Black children living below the poverty line are twice as likely to have elevated levels of lead compared to poor white or Hispanic children.

Key Impacts of Low-Quality, Inadequate Housing

When Black households become homeowners, they often live in housing or communities that are considered less desirable due to the age and condition of homes due to years of disinvestment. Homes and neighborhoods deemed less desirable have a critical impact on the racial wealth gap for two key reasons:

Lower Property Values

Black homeowners are nearly twice as likely to live in inadequate housing compared to white homeowners. This results in lower property values for these homes owned by Black homeowners, according to research from the Urban Institute.

The median value of physically inadequate primary housing owned by Black households was the lowest at $119,045, which is 45.1 percent less than the median property value of physically inadequate homes owned by white households at $235,238.

Another critical element is instances of racial discrimination that may contribute to property value and appraisal. Bank appraisers consistently undervalue properties owned by Black homeowners in comparison to white counterparts: In neighborhoods with predominantly Black populations, 12.5 percent of appraisals were below a property’s contract price. However, in majority-white census areas, just 7.4 percent of appraisals were below contract price.

Higher Utility Costs

Black homeowners living in inadequate housing face higher utility costs and are more likely to have received a utility shut-off notice.

This reality has dangerous implications. Black homeowners are more likely to forgo basic necessities because of home energy bills, and are therefore more likely to keep the home at an unhealthy temperature. In doing so, Black homeowners are at risk of dangerous health outcomes, such as higher blood pressure, clotting factors, and cholesterol issues.

Consistent exposure to cold air can inflame lungs and inhibit circulation, increasing the risk of respiratory conditions, such as asthma, worsening of chronic obstructive pulmonary disease (COPD), and infection.

Closing Racial Inequities in Property Conditions 

Experts at the Urban Institute suggest several steps to address the racial wealth and health gaps that exist for Black homeowners.

• Support affordable homeownership, refinancing, and renovation spending. In addition to expanding access to safe, high-quality, and affordable for-sale housing, Black homeowners will also benefit from expanded down payment assistance and financial literacy education to support the process.
• Support home equity for homeowners to make improvements. Black homeowners are less likely to refinance compared to their white peers—but using one’s own home is a key strategy for financing improvements. One potential solution is to develop streamlined rate refinance programs that don’t require employment or income verification.
• Create or expand renovation assistance programs. Many cities across the country are expanding assistance programs for home repairs and renovations. Income-based repayment plans for home improvement can help homeowners stay in their homes but access the necessary upgrades for a healthier living environment.

At Smith NMTC Associates, we’ve pioneered a New Markets Tax Credits (NMTC) funding model to bring affordable, for-sale homeownership to many underserved—and predominantly Black and Brown—communities in the U.S.

For nonprofit developers, investors, and lenders, we see a significant opportunity to leverage the NMTC program as a tool to drive more housing opportunities for Latino homeowners. To learn more about how the NMTC program can serve your community and your constituents, reach out to us.