Roadblocks to homeownership have denied blacks a path to the middle class

It’s often said that homeownership is one of the best tools that members of the working class have at their disposal to accumulate wealth. It’s said so often — usually by people who have an interest in selling or financing homes — that perhaps the idea doesn’t carry as much weight as it used to, particularly since the housing bust, when many families lost much or all of their net worth.

MarketWatch’s Rex Nutting neatly summarizes some stats that suggest the conventional wisdom about homeownership as a path to building a nest egg should not be dismissed:

“According to the latest Census Bureau data on wealth, the median American household had $68,828 in net wealth in 2011 (half of households had more, and half had less). Among 78 million families who owned their own home, the median net worth was $161,826, while the median net worth for the 37 million families who rent was $2,066. Excluding the value of their home equity, owners had a median net worth of $47,297.”

But Nutting is not just rehashing the old “own vs. rent” debate. He’s explaining the underpinning of a new argument for paying reparations to the descendants of slaves.

In what Nutting characterizes as a “heartbreaking read,” Ta-Nehisi Coates, a national correspondent at The Atlantic, details how laws and policies made it difficult or impossible for blacks to become homeowners, keeping many out of the middle class.

“From the 1930s through the 1960s, black people across the country were largely cut out of the legitimate home mortgage market through means both legal and extralegal,” Coates writes. The FHA, for example, employed maps that rated neighborhoods according to their perceived stability. “Neighborhoods where black people lived were rated ‘D’ and were usually considered ineligible for FHA backing,” making it harder to obtain financing and undermining property values in those neighborhoods.

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Arguments against reparations often revolve around the political and practical obstacles, Nutting notes. But such arguments “ignore how much the government already spends every year to nurture the wealth of the (largely white) middle class: the mortgage-interest deduction, tax breaks for retirement savings, tax breaks for employer-provided health insurance, and even Social Security (which excluded about 65 percent of African-Americans when it was enacted in 1935).”


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