Subsidizing Interest Rates to Bridge the Racial Wealth Gap

Abstract

There is a large, persistent, and worsening wealth gap between Black and White households in the United States. Black families’ median and mean wealth is less than 15 percent that of White families (Bhutta et al. 2020). New research shows current monetary policies designed to aid in the economic recovery from the COVID-19 recession will likely exacerbate this wealth gap (Bartscher et al. 2021, 33). This paper proposes issuing a government-subsidized two percent mortgage interest rate reduction for prospective Black homebuyers to provide a financial incentive for Black households to build wealth and to promote integrative behavior among neighborhoods.