Homeownership No Longer Building Black Middle Class

Kai Wright, writing in the liberal American Prospect, discusses home ownership as the foundation for black middle class and the imploding mortgage crisis’ effect on it, all told through the lens of his mother’s own foreclosure experience:

For years, scholars have primarily turned to one of three measures to identify the middle class: occupation, income, and educational achievement. If you’re a professional or a manager, if your income falls in the middle 60 percent of the national bell curve, or if you’ve graduated college, you fit into one or another researcher’s definition. And by any of those three measures, my mother’s generation posted remarkable gains for people of color.

However, Kai notes the flawed approach in arriving to this definition as it did not account for increasing gap between whites and blacks on these three measures even as more African Americans were meeting the standard. Additionally, the definition looked at income, not wealth or other measures of financial stability.

Kai notes a clearer definition of middle class as:

…long-term security, social stability, and the ability to pass both on to your kids in greater portions than you’ve enjoyed them.

These things aren’t measured just by how much money you make or by what degree and job title you hold; they’re measured by how much wealth you can draw upon when times get tough or an opportunity comes around, and how much you can pass along to give your kids a head start. The upper middle class helps its children with everything from college tuitions to down payments. That wealth cushion is built on financial savings and investments for some. For most, it’s equity in a home.

So under the more updated definition of middle class which takes into account wealth, as opposed to income, “ [o]ne in five families that were middle class in 2004 couldn’t make it three months on assets alone” with roughly “40 percent of both blacks and Latinos lived below the asset poverty line in 2004.”

Their experience and those of millions of others point to a confounding irony that home equity has presented for efforts to close the racial wealth gap. On the one hand, because homeownership was key to 20th-century wealth, the huge racial disparity in ownership rates helped drive the disparity in wealth, too. On the other hand, the wealth blacks and Latinos have managed to accumulate is dangerously dependent on home equity alone, leaving them vulnerable in times like these. According to Shapiro and his research partner, Melvin Oliver, while homeownership accounts for 63 percent of average black net worth, it accounts for just 38.5 percent of average white net worth.

Kai goes on to provide a historical analysis of homeownership and its attempts to close the wealth gap between blacks and whites, and how the housing bust has taken out a significant portion of the black middle class. Kai also provides recommendations to policymakers on correcting the course.

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