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In the United States, the overlap between property values and the average person’s financial standing means homeownership is key to building wealth. The relationship is readily measured: the Federal Reserve reports that in 2016, the average homeowner boasted a household wealth of $231,400. By comparison, the average renter had just $5,200 to their name. All told, housing equity comprises over 60% of most Americans’ net value.
At least if you’re white.
But as of 2016, just 42% of Black people and 45% of Hispanics owned their homes. By contrast, over 72% of white Americans had their name on a deed. And even when people of color (POC) do get into a home, the same level of homeownership is rarely attainable.
The Relationship Between Race, Homeownership, and Economic Standing: A Study
The convoluted relationship between homeownership, education, and financial success forms a highly connected web that makes it difficult for minorities to break out of the mold. And while it’s common to see pieces of this argument show up in the discourse, today, we’re going to weave these concepts together.
Using the Census Bureau’s 1-year American Community Survey (ACS) data for 2016-2019, SimpleMoneyLyfe looked at the 15 most populous cities in the United States and compared them across several metrics for Asian, Black, Hispanic, and white households.
Pulling from this study, we’ll look at the top two cities for each racial and ethnic group and compare how they fared based on their income, homeownership, and education – and how these factors do (or don’t) impact other aspects of life in these cities.
Top Cities for Asian Populations
#1. Houston, Texas
Of the fifteen cities we analyzed, Houston, Texas ranked #1 for Asian populations with an overall score of 77.
To start, between 2016 and 2019, Asian families saw an increase in their income per capita from $37,900 to $44,954, earning a weighted score of 8 out of 10. In the same period, the median household income rose from $66,927 to $71,218, scoring another 8, while the median family income jumped from $75,392 to $87,988, earning a 9.
Income aside, Houston also earned a weighted score of 10 for the health insurance rate among Asians. Meanwhile, their non-poverty, high school education, and college education rates all scored a weighted 8. And though their overall employment rate earned a 7, their homeownership score sits at a solid 6, with a 5 for labor force participation.
#2. Phoenix, Arizona
Phoenix, Arizona takes second place for Asian families, netting an overall score of 74.
Between 2016 and 2019, Asian families in Phoenix saw their income per capita jump from $32,218 to $43,874. Meanwhile, their median household income soared from $73,665 to $91,090, while the median family income leapt from $85,294 to $100,640. This translated to weighted scores of 9, 10, and 10, respectively.
Phoenix also scored well for its Asian population in college education (9) and non-poverty rates (8). At a 7, its employment rate wasn’t too bad, either. However, health insurance and high school education rates earned a weighted 6, while both labor force participation and homeownership rates got a meager 5.
We didn’t just crunch the numbers for two cities, here is a list of where Asian Americans find success financially.
|San Antonio, Texas||65|
|Los Angeles, California||57|
|San Jose, California||47|
|San Diego, California||42|
|Fort Worth, Texas||41|
|New York, New York||41|
|San Francisco, California||24|
Top Cities for Black Populations
#1. San Antonio, Texas
San Antonio, Texas takes the top spot out of fifteen for Black people, with an overall score of 82.
Between 2016 and 2019, the city’s Black population saw their income per capita grow from $20,178 to $22,306, scoring a weighted 10. Meanwhile, the median household and median family income both scored a 9, rising from $35,709 to $45,834 and $45,917 to $54,131, respectively.
San Antonio also saw high weighted grades in its employment and college education rates, which both netted a 10. Additionally, the high school education and non-poverty rates earned an 8, while health insurance and labor force participation rates both took a 7. But despite its high ranking, San Antonio’s Black homeownership rate sits at an abysmally low 3.
#2. Los Angeles, California
Los Angeles, California ranks #2 for Black individuals in our study, netting an overall score of 72.
Between 2016 and 2019, Black people in LA saw their per-capita income grow from $27,535 to $31,162, earning a weighted 9 in the category. The median household income earned a 7, rising from $36,314 to $46,671 in the period. The median family income also jumped substantially from $49,110 to $60,526, netting another 9.
However, the bulk of LA’s scores suffered by comparison. For instance, while Black people in LA did well in high school education (10) and health insurance rates (9), their employment, college education, non-poverty, and homeownership rates all earned a 6. And at a 4, their labor force participation rate got the lowest score of all.
Below is a complete list of where Black Americans find financial success and financial freedom.
|San Antonio, Texas||82|
|Los Angeles, California||72|
|Fort Worth, Texas||68|
|New York, New York||63|
|San Jose, California||60|
|San Diego, California||43|
|San Francisco, California||13|
Top Cities for Hispanic Populations
#1. Jacksonville, Florida
For the nation’s Hispanic population, Jacksonville, Florida takes the top spot in our study with a weighted sum of 86.
Between 2016 and 2019, the local Hispanic population saw their income per capita grow marginally from $21,375 to $23,449, ultimately earning a weighted 9. Meanwhile, their median household income and family income both scored a 10 – despite falling from $55,306 to $50,260 and $64,252 to $60,613, respectively.
Additionally, Jacksonville earned 10s for its college education, high school education, and labor force participation rates. The employment and non-poverty rates also scored well (8), as did health insurance rates (7). However, the city didn’t do as well in homeownership rates, which earned a 5.
#2. San Antonio, Texas
San Antonio, Texas makes our list again as the #2 city for Hispanics with a weighted score of 80.
Over the four-year period, the Hispanic population in San Antonio saw their income per capita grow from $18,648 to $21,426, nabbing a weighted 10. In the same period, the median household income jumped from $42,516 to $47,637, while the median family income grew from $47,192 to $53,835. Both of these metrics scored an 8.
San Antonio also boasted a shining 10 in health insurance and 9s in homeownership and high school education. With an 8 and 7, respectively, its non-poverty and labor force participation rates didn’t do too badly, either. But its college education rate only earned a 6, while its employment rate was graded a weighted 5.
Here is a complete list of where Hispanic Americans find financial freedom and financial success.
|San Antonio, Texas||80|
|Fort Worth, Texas||50|
|San Francisco, California||45|
|Los Angeles, California||45|
|San Jose, California||45|
|New York, New York||39|
|San Diego, California||38|
Top Cities for White Populations
#1. Houston, Texas
Out of the 15 cities we analyzed, Houston, Texas also ranked first for the white population with an overall weighted score of 86.
To start, the city earned 10s for its income per capita and median household income, despite income per capita shrinking slightly in the period from $59,939 to $58,874. That said, the median household income saw substantial growth from $79,098 to $87,208. Meanwhile, the median family income soared from $116,057 to $128,086 in the period, ultimately scoring a 9.
The city’s white population does well overall in the rest of its metrics, too, with 10s in homeownership, health insurance, and the non-poverty rate. College and high school education rates both nabbed weighted 9s. However, the population did suffer in employment and labor force participation, which both scored a 4.
#2. Dallas, Texas
Dallas, Texas takes the #2 ranking for the white population on our list with a weighted sum of 83.
Between 2016 and 2019, the income per capita grew from $60,341 to $69,742, scoring a 9. Meanwhile, the median household income rose from $75,700 to $86,469, snatching an 8. And the median family income nabbed a 10, soaring from $112,517 to $135,365.
Overall, white people fare well in Dallas, too. High school and college education rates earned 10s, while homeownership and health insurance grabbed healthy 9s. Meanwhile, the non-poverty rate scored a respectable 8. However, the labor force participation rate only scored a 6, while the employment rate dropped to an abysmal 4.
Below is the remainder of the cities where White Americans find financial freedom and success.
|New York, New York||58|
|Los Angeles, California||55|
|San Antonio, Texas||41|
|Fort Worth, Texas||37|
|San Francisco, California||27|
|San Diego, California||25|
|San Jose, California||21|
The Link Between Homeownership, Education, and Economic Standing
The disparities in homeownership between racial and ethnic groups aren’t limited to who can slap their name on a deed. The consequences of where (or if) you buy a home bleeds into every part of life, from your children’s educational attainment to experiencing neighborhood violence.
Race, Homeownership, and Quality Education Go Hand-in-Hand
Homeownership – or at a minimum, the ability to rent in a higher-income area – is a determining factor in the location and quality of your child’s education. Because public schools are funded by property taxes, individuals in lower-income neighborhoods tend to fund poorer schools.
According to Dr. Ann Owens, the Associate Director of the USC Price Center for Social Innovation, this problem is only growing more prevalent. Children nowadays are more likely to live near peers of similar socioeconomic status than they were 25 years ago. As a result, high-income and low-income households often “cluster” together, segregating along financial lines.
And it’s not just residential or socioeconomic segregation: it’s racial, too. It’s a well-documented fact that your skin color disproportionately correlates to your property value. The issue is pervasive and multi-faceted: racist housing policies, discriminatory employment practices, and the wage gap between men and women and whites and minorities all play a role in what you can afford and where.
But for many people of color, the issue is literally skin-deep, as studies show that when more than 10% of a neighborhood is Black-owned, property values drop in response to their presence.
The consequences of this segregation are readily apparent in the makeup of our nation’s schools. Around 75% of high-income schools cater to a majority white student body, with only 30% of students qualifying for free or reduced-price lunches. By contrast, roughly 75% of low-income schools are majority non-white – and in these institutions, nearly 80% of students qualify for low-cost lunch programs.
The Link Between Race, Income, and Educational Attainment
Attending schools where the majority of your peers are similarly disadvantaged often translates into noticeable effects on student performance. From violence in neighborhoods and school hallways to fewer opportunities for creative outlets or more challenging classes, attending lower-income schools can limit a child’s exposure to calm, productive learning environments.
Additionally, low-income schools usually can’t afford more experienced teachers with the skills needed to help students overcome their challenges. Not only that, but educating low-income children typically costs more – especially when they’re surrounded by other low-income children – which poses a problem for low-income schools facing budget constraints.
The impacts of attending a low-income school often reflects in students’ academic achievements. Whereas high-income schools typically rank around the 70th percentile in math and reading scores, low-income schools hover around the 30th percentile. More than exposing a school’s ability to teach, these gaps reveal the challenges that students begin with – such as exposure to violence and the housing and food insecurity that’s more prominent in low-income areas.
But the academic and economic disparity doesn’t end when low-income students graduate high school. (If they graduate – which is less likely for low-income Black and Hispanic students than their white counterparts.)
Despite the fact that college graduates have twice the career earning potential than those with a high school diploma, Hispanic and Black students are less likely to enroll in college than whites or Asians. And though they’re more likely to receive grants, they’re also more likely to take on student debt – and more of it – than other racial and ethnic groups.
Race, Wages, and Economic Standing
Academic and income trends become even more troubling when viewed through the lens of homeownership. Consider that in 1997, the difference in homeownership rates between those with college or high school degrees was just 11%. By 2017, this gap had widened to 20.5%.
But homeownership is more than just a reflection of a person’s academic career: it’s also affected by your ability to obtain well-paying employment. And here, too, people of color face particular disadvantages.
According to the Economic Policy Institute, the median Black household earns just 61 cents for every $1 earned by a comparable white household. Hispanic households earn slightly more, around 74 cents per dollar. Nationwide, this translates into a median income of just over $38,000 per year for Black households – compared to over $61,000 in annual earnings for white ones.
Such a glaring disparity makes it nearly impossible for Black and Hispanic families to pay their bills, save for a home, accumulate wealth, and leave an inheritance for their children. Ultimately, this leaves children of color with a generational handicap.
Decades of wage gaps and housing discrimination have left Hispanic families with 5x less wealth than their white counterparts. For Black families, that number doubles. And even when children of color are born into well-to-do families, they’re significantly more likely to fall into a lower income bracket in adulthood.
What Can We Conclude from the Data?
Before we dive into our analysis, bear in mind that, to view an untainted picture of our data, we aren’t comparing the fifteen cities in our study to the national averages or even across races in our calculations. Instead, each city is compared to the others on the list for every race. In other words, each city had a chance to rank #1 out of 15 for every race and ethnicity, and every metric could potentially receive a weighted 10 for the city’s four-year performance.
By adopting this method, we can more readily compare how each race does in each city compared to similar populations in other locations. And because each list is standalone, we can draw an apples-to-apples comparison for how each race’s “top two” performed, permitting more nuanced conclusions about performance and living conditions among different populations.
Minorities Fare Worse Even in Their Top Cities
Unfortunately, this data shows that, even in their top two cities, minorities tended to fare worse in their homeownership metrics than whites.
For instance, Asians living in Houston, Texas scored highly in their income metrics and saw substantial median growth over four years. Additionally, their non-poverty, health insurance, and education rates scored highly. However, when you look at their homeownership rates, they only scored 6 out of a possible 10.
But perhaps the starkest example of this disparity comes from Black families living in San Antonio, Texas.
There, Black individuals performed very well against the other cities on our list in their income metrics, scoring solid 9s and 10s. Despite that, their earnings per person saw less than $2,500 in growth over four years – suggesting that even when Blacks do well compared to themselves, they still don’t do as well as they should compared to other races. This reality is further cemented in their homeownership rates, which earned an abysmal 3 even though none of their other metrics dropped below a 7.
The discrimination against minorities is even more prominent when examining how Hispanics fare in the same city. Though they, too, only saw marginal per-capita growth, they still scored 9s and 10s in their income metrics. But when you look at the city’s other metrics, the story grows darker.
For instance, although Hispanics earned around $1,000 less per year than their Black counterparts at the end of our study period, they scored a solid 9 in homeownership and high school education – despite only earning a 5 in their employment rate.
Whites Have Better Homeownership Scores – Despite Lower Employment Rates
By comparison, white individuals in their top two cities typically saw higher homeownership rates than minorities.
For instance, in Houston, Texas, the white population earned 9s and 10s in their income metrics despite their income shrinking over four years. Meanwhile, with employment and labor force participation rates of 4, they still managed to score 10s in homeownership, non-poverty, and health insurance and 9s in education.
The story in Dallas, Texas was similar, though their incomes grew consistently over the study period. With 10s in their education rates and 9s in homeownership and health insurance, you’d expect their employment rates to be high, too. But as in Houston, their weighted labor force participation and employment rates were comparatively low (6 and 4, respectively), suggesting a substantial disconnect in the employment-homeownership relationship between races.
The Intricate Economic Web of Homeownership and Race
Alanna McCargo, vice president of the Urban Institute’s Housing Finance Policy Center, believes that lagging homeownership rates among minorities is the result of years of systemic racism. The issue is so pervasive that the 30-percentage-point gap between Black and white homeowners is actually larger than the gap that existed when housing discrimination was legal. Despite this growing problem, our current system shows little indication it’s prepared to correct its trajectory.
The History Behind Today’s Racial Disparities
Prior to the Fair Housing Act of 1968, many Black families were frozen out of the housing market – and by proxy, the opportunity to build generational wealth. At the time, redlining practices were common, resulting in Black and Brown families being denied home loans based on the color of their skin or the location of their home.
Even when minority families moved into “approved” or “changing” neighborhoods, traditional banks often denied their applications based on their race. As a result, many families of color were forced to rent or deal with subprime lenders that charged exorbitant rates for homes that were deemed likely to devalue.
But even after the Fair Housing Act banned race-based discrimination, the trend of setting families of color up for failure continued, albeit more covertly. For instance, between 2004 and 2007, Hispanic and Black Americans were up to 105% more likely to have a high-rate mortgage compared to white Americans. During the 2007-2010 housing crises, 8% of these same families saw their homes foreclosed upon.
The foreclosure rate for white families? Just 4.5%.
Even now, housing discrimination continues. Just take the 2019 Newsday investigation that discovered how Black and Hispanic homebuyers in Long Island, New York were asked for different financial qualifications before agents would offer a tour. Many of these agents also illegally “steered” Black and Brown homebuyers away from predominantly white or higher-income neighborhoods (and vice versa).
The First Hurdle: Qualifying for a Loan
Even when real estate agents aren’t “in” on discriminatory practices, home loan applications reveal another dirty little secret: the (un)likelihood that minorities will be approved for a mortgage.
According to a 2017 Pew Research Center analysis, lenders denied 11% of white and Asian applicants and 19.2% of Hispanic applicants, most frequently for high debt-to-income ratios. Meanwhile, Black applicants were the only group most likely to be denied based on poor credit history – and the only group with a denial rate of 27.4%.
According to the Urban Institute, areas where Black households have higher credit scores directly correlate to smaller Black-white homeownership gaps. While this is somewhat expected – a good credit score is often crucial to getting a mortgage – it’s also incredibly problematic, as Black individuals are statistically more likely to have lower credit scores (if they have one at all). For instance, while over half of white households have a credit score of 700 or higher, only 20% of Black households can say the same. This glaring difference in credit scores alone is responsible for 22% of the current homeownership gap.
The Price of Being a Minority
But even minorities who qualify for mortgages on paper find it difficult to get into a house.
Due to the racial wage gap, Black and Hispanic individuals take more time to save for smaller down payments. As a result, just over half of Black and Hispanic households pay 10% down (or less), versus just 31% of Asians and 37% of whites. Conversely, around 25% of white and Asian households make down payments over 21%, compared to 17% of Hispanic and 12% of Black households.
Making a smaller down payment doesn’t just mean taking out a larger mortgage. Putting down less than 20% also triggers the private mortgage insurance requirement, which can cost thousands of dollars per year in extra fees that don’t go toward the loan principal.
Additionally, lower down payments translate into higher interest rates, which are already higher for Black homeowners than whites – even when their incomes are higher. For instance, in 2015, less than 2/3 of Black and Brown householders had mortgages under 5%, compared to 73% of white and 83% of Asian householders. Conversely, 18% of Hispanic and 23% of Black householders paid more than 6% on their home loans compared to just 13% of white and 6% of Asian householders.
Even after overcoming these struggles, Black and Hispanic borrowers are more likely to get into a less valuable house in poorer neighborhoods than comparable white borrowers. And once they’re there, their homes are more likely to lose value – meaning that minorities families actually lose wealth when they invest in a home.
Homeownership, Race, and Financial Success: More Complex Than It Appears
Malicious intent and racist proclivities aside, the relationship between race and homeownership is far more tangled than it appears on the surface. But when you boil away the specifics, the bulk of the minority-white homeownership gap can be attributed to lower earning potential and an inability to build wealth.
Though our study reflects that families of color do well in some metrics, their median incomes, educational achievements, and homeownership rates fall short compared to their Caucasian counterparts.
Despite decades of improvements, it’s clear that there still exists a substantial disparity in wages, education, homeownership, and overall success. And until we close this gap, the dearth of homeowners of color in the United States will continue – and continue to impact their financial wellness, quality of life, and children’s futures for years to come.
A Quick Peek at Our Methodology
We looked at the 15 most populous cities in the U.S. and compared them across 10 metrics. The data come from the Census Bureau’s 1-year American Community Survey (ACS) for four of the most recently available years (i.e., 2016, 2017, 2018, and 2019). The 10 metrics are as follows:
- Income per capita: Per capita income in the past 12 months (inflation-adjusted for the present year)
- Median household income: Median household income in the past 12 months (inflation-adjusted for the present year)
- Median family income: Median family income in the past 12 months (inflation-adjusted for the present year)
- Labor force participation rate: Civilian labor force participation rate for the population between 16 to 64 years old
- Employment rate: Civilian employment rate for the population between 16 to 64 years old
- High school education rate: At last High School degree attainment for the population 25 years and over
- College education rate: At last Bachelor’s degree attainment for the population 25 years and over
- Non-poverty rate (i.e., one minus the poverty rate): One minus proportion of the population that has income in the past 12 months below poverty level
- Health insurance rate: Proportion of the population between 19 to 64 years old that has health insurance coverage
- Homeownership rate: Proportion of owner-occupied housing units
First, each group’s metric was normalized by dividing it by the city’s metric. For example, for the Black/African-American group in city A, the income per capita for the Black/African-American population in City A was divided by the income per capita for the entire population in City A. Next, these normalized scores were scaled from 0 to 1 with the city with the highest normalized score receiving a score of 1, and the city with the lowest normalized score receiving a score of 0. Then a full weight was assigned to the scaled scores from the 2019 ACS; a three-quarter weight was assigned to scaled scores from the 2018 ACS, a one-half weight was assigned to scaled scores from the 2017 ACS, and a one-quarter weight was assigned to scaled scores from the 2016 ACS. Finally, the weighted scores across all metrics and years were summed to obtain each city’s overall score, with a potential maximum score of 100, and a potential minimum score of 0.