Racial Inequalities in Home Ownership

Abstract

This paper examines black-white differences in patterns of home ownership, using data from a recent national survey. Race differences are estimated net of household socioeconomic characteristics, family composition, and location. Results indicate, first, that the probability of home ownership is considerably lower for blacks than it is for comparable whites, throughout the United States. Second, outside the South (but not in the South), black owner-occupied homes are worth considerably less than the homes of comparable whites. The paper concludes by discussing the implications of these results. Home ownership is an intrinsic part of the American dream. The purchase of a home has a special significance in the establishment of a family: it is, in fact, the single most important purchase that most families face. Apart from its importance as a symbol of status and security, home ownership also bestows considerable financial benefits. Since housing absorbs a bigger fraction of their budget, these financial benefits are particularly significant for people of low to middle income, who have fewer opportunities for alternative investment. In fact, home ownership is generally regarded as a primary method of capital accumulation, especially for low to middle income families (e.g., Kain and Quigley, b). Besides the wealth that accrues from housing equity itself, the well-known tax savings from home ownership also contribute to capital formation. While these tax savings increase with income (Aaron), they are more significant for families of low to middle income because there are fewer other tax shelters available for them. Finally, of course, home ownership is an important hedge against inflation, especially for those who must devote a larger portion of their income to housing (e.g., the calculations in Kain and Quigley, b, Appendix C). In this paper, we examine patterns of home ownership among white and black Americans. Major inequalities between blacks and whites have