Evaluating Homeownership as the Solution to Wealth Inequality

Abstract

Homeownership presents an opportunity to accumulate wealth, making it an appealing vehicle for reducing wealth inequality. In this Commentary, we explore the investment side of homeownership. The opportunity for leveraged returns can lead to wealth gains among lower-income households; however, we note that homeownership for low-income homeowners carries three types of risk that are higher for them than for high-income homeowners: location, timing, and liquidity. Thus, policies that incentivize purchasing homes to reduce wealth inequality or close racial wealth gaps should be adopted only after great care has been taken to protect against these risks.

Disparities in food insecurity among Black and White households: An analysis by age cohort, poverty, education, and home ownership

“…However, some age cohorts of Black homeowners have the same PPFI, and in some cases significantly higher PPFI, than White households not owning a home. This result may be since low‐income homeowners, particularly Black ones, may be at higher risk of experiencing low liquidity (Carroll & Cohen‐Kristiansen, 2021), which may result in trade‐offs between purchasing enough food and affording mortgage payments. As the PPFI homeownership gap narrows for White household across age cohorts (See Figure 4), the gap persists longer and does not narrow as much for Black households.…”

“…4 4 Although homeownership can proxy for the accumulation of wealth particularly for low‐income households (Wainer & Zabel, 2020), there are limitations. See Carroll and Cohen‐Kristiansen (2021) for a discussion. …”