Racial wealth gaps severely impact California’s homeownership rate and as a result, agent’s businesses.
Between 2016 and 2019, household wealth increased:
- 65% for Latinx households;
- 33% for Black households;
- 3% for white households; and
- 8% for other households.
“Other” households include Asian, American Indian, Alaska Native, Native Hawaiian, Pacific Islander, other races, and all respondents reporting more than one racial identity. These households have lower wealth than white families but higher wealth than Black and Latinx households.
Despite the rapid rise in wealth for Black and Latinx households, the wealth gap between Latinx and Black households alongside white households remains significant.
The average white household has eight times the wealth of the average Black household and five times the wealth of the average Latinx household, according to the Federal Reserve.
Many factors contribute to wealth growth and financial security, including:
- inter-generational wealth transfers (such as received inheritance and down payment gifts from relatives);
- homeownership opportunities;
- access to tax-sheltered savings plans and individuals’ savings; and
- investment decisions.
But not all homeownership opportunities are created equal. For example, across the U.S., the average home owned by a Latinx homeowner is worth about 12.8% less than the average home owned by a white household at:
- $246,300 for Latinx owned homes, and
- $282,400, for white owned homes according to Zillow.
In California’s major metros, the Latinx home value gap compared to white households is even larger at:
- -35% in Los Angeles;
- -29% in San Jose;
- -23% in San Francisco;
- -20% in San Diego;
- -7% in Sacramento, and
- -4% in Riverside.
While home values tend to be significantly lower for Latinx households, the actual Latinx homeownership rate gap relative to white households is also lower, at:
- -24% in San Jose;
- -23% in Sacramento;
- -22% in San Diego;
- -21% in San Francisco;
- -18% in Los Angeles, and
- -13% in Riverside, according to Zillow.
Latinx people make up 39% of the population in California, according to the U.S. Census Bureau, and their homeownership and home value rates fall well below California’s white population. Overall, there remains a large wealth gap between Latinx families and white families, and this unequal wealth distribution negatively impacts our housing market.
The next decade
The future stability of our housing market depends on homebuyers from various economic backgrounds having the opportunity to participate freely and openly in homeownership. A steady supply of new first-time homebuyers support agents’ businesses in the long term.
But homeownership rates have been declining every decade since the 1970s and it doesn’t look to be picking up anytime soon. California has the lowest homeownership rate in the nation and it’s steadily decreasing every year. California’s homeownership rate in Q2 2021 decreased further to 53.9%, below its historical average of 55% and well below the national average of 65%.
If we are to close the homeownership gap, it’s imperative that California legislators work to develop non-white homeownership opportunities. Saving our market depends on supporting our current demographic of homebuyers.
Agents can take matters into their own hands by supporting non-white homeownership. For example, agents can keep an eye out for predatory lending and discriminatory housing practices, which both contribute to the low rate of non-white homeownership.
The Consumer Financial Protection Bureau (CFPB) is a U.S. government agency that makes sure banks, lenders, and other financial companies treat everyone fairly. Agents can direct all homebuyers to the CFPB’s mortgage shopping tools for homebuying and mortgage guidance.
To ensure brokers, agents, lenders, and landlords don’t violate non-discrimination laws — even unintentionally — professionals need to:
- ask the same questions of all applicants — for landlords, feel free to ask about matters that will actually impact tenancy like pets or water beds, but never ask about a protected status like race, religion, sexual orientation, pregnancy, etc.;
- keep records of client interactions — while a client is unlikely to pursue legal charges for discrimination, it’s best practice for an agent to keep track of all client interactions and property tours for several reasons, including identifying any unintentional biases; and
- when in doubt, contact a local fair housing expert for advice — find a list of experts at HUD’s website.
To learn the basics of housing discrimination or to file a complaint, visit hud.gov.
Editor’s note — Mandatory anti-bias training may soon become part of agent and brokers’ regular licensing and continuing education courses. Senate Bill 263, which requires anti-bias training as part of the required course load for real estate licensees and license applicants beginning in 2023, is heading toward the governor’s desk at the time of this writing. Follow along for updates at firsttuesday’s Legislative Gossip page.
