As we head into 2022, California’s economy continues to stumble toward a recovery from the 2020 recession — but not all stumbles look the same. Some demographics are entering the recovery at a steeper disadvantage than others, as unequal job losses have only exacerbated pre-pandemic household wealth disparities.

Prior to the recession, from 2016 to 2019, the median net worth of U.S. households increased 17.6%, an increase of $24,000, according to according to a recent Mortgage Bankers Association (MBA) study. The increase in homeownership, home values, and the stock market mainly helped to increase moderate-income wealth from 2016 to 2019 with a:

  • 8% increase in moderate-income wealth;
  • 2% increase in high-income wealth; and
  • 6% decrease in low-income wealth.

The mean net worth of every racial and ethnic demographic also increased. The largest increase came from Black and Latinx households. Yet wealth disparities by race persist. Among moderate-income households, white households have higher homeownership rates and more home equity.

The mean net worth for white, Black, and Latinx moderate-income households in 2019 stacks up at:

  • $322,000 for white households;
  • $198,000 for Latinx households; and
  • $193,000 for Black households.

Meanwhile, the average homeownership rates for moderate-income households in 2019 followed at:

  • 87% for white homeownership;
  • 82% for Latinx homeownership; and
  • 79% for Black homeownership.

Homeownership is the primary source of wealth accumulation for most moderate-income households. While homeownership climbed in concert with home values near the end of the 2010s, the 2020 recession complicated those gains. The recession spanned a mere two months but left an outsized legacy of economic instability such as lopsided job losses that have yet to fully recover.

Playing out in the margins of this recovery is a clear racial divide that disproportionately locks minorities out of a critical wealth building tool in America.

Legislating housing resiliency

Legislators responded to the most recent economic downturn by delivering the CARES Act stimulus, and the Paycheck Protection Program to help fund small businesses and nonprofits with loans. These programs served as a life jacket during the 2020 recession, but will it be enough to fully recover job losses, especially for the hardest-hit demographics?

Legislators have failed to support the main components of household wealth to better assist in correcting financial inequality. The main sources of household wealth consist of:

  • 36% principal residences;
  • 22% businesses; and
  • 17% retirement accounts, according to the MBA.

Focusing on helping qualified homebuyers become homeowners is the fastest way to grow household wealth and cut the wealth gap down to size.

In terms of reaching financial equality, California still has a long way to go. Household wealth is a determining factor in financial stability among all race groups for the long term, but California ranks fifth in wealth inequality out of all 50 states, according to U.S. Census Bureau data — and that was in 2019, just before the pandemic.

Legislators need to implement new policies that combat this increasing inequality if they expect to make meaningful gains against economic stagnation. This is especially urgent now as the country is recovering from an economic recession, job losses that have yet to fully rebound, and a roiling housing shortage.

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