For centuries BIPOC-led households were prevented from accessing the same opportunities for land and homeownership as white households, who were able to build generational wealth derived from their owned properties. As a result of this and other factors, fewer than half of all Black and Latine households currently own their homes, while over 70 percent of white households are owners according to Harvard’s Joint Center for Housing Studies. Indeed, Black homeownership rates are lower even after accounting for differences in income, education, marital status, and credit scores.

Building wealth through other means remains a challenge for many BIPOC-led households given long-standing disparities in access to education, employment and healthy living environments that are crucial to shaping economic outcomes. Yet those disparities are themselves a product of past residential segregation and disinvestment of BIPOC communities. Coupled with lower homeownership rates, this lack of access to wealth compounds over time, leading to large gaps between BIPOC and white household wealth levels. Data from the Federal Reserve shows that the median wealth of white households in 2019 was approximately 8 times greater than that of Black households, a ratio that is larger than it was at the beginning of the century (see Figure 1). This difference is also not fully explained by variations in age, income and education among Black and white household heads.

A 2017 study by the Urban Institute found that discrimination has also harmed Black Americans’ creditworthiness, highlighting that more than 50 percent of white households had a FICO credit score above 700, compared with only 21 percent of Black households. In addition, the study found that 33 percent of Black households, as compared to 18 percent of white households, have credit-use levels that were too low to generate any credit score. Credit scores are closely tied to a person’s ability to grow wealth and succeed financially in the U.S.

In addition to providing access to mortgage financing, credit scores determine eligibility for apartment rentals, other commercial loans, and even jobs. Among renter households, disparities by race and ethnicity are also apparent in the share of households spending large shares of their income on housing. Enterprise Community Partners’ analysis of 2019 U.S. Census data on renter affordability found that, in the year before the Covid-19 pandemic, 30 percent of Black renters spent more than half their income on housing, compared to only 21 percent of white renters (Figure 2). Unlike differences in homeownership rates, however, much of this variation can be explained by the higher share of Black renters among households with extremely low incomes (i.e., earning less than 30 percent of the area median income) relative to white renters and persistent concentration of BIPOC-led households in neighborhoods with fewer opportunities for upward mobility.

It has been difficult for BIPOC-led households to access housing and neighborhoods that could have expanded their opportunities to live affordably and build wealth today. While the ramifications of this cycle impact low-income people of color particularly, research shows that BIPOC families at all income levels have higher housing costs and lower incomes and credit scores, often leading to tradeoffs with expenditures for medical care, food, transportation and other essential quality of life resources for these residents.

As seen in Figure 3, the rate by which people with low incomes live in low-income communities varies significantly by race. A 2020 study by the Brookings Institution revealed that, as a result of the continuing and compounding effect of racial segregation, over 80 percent of Black people with low-incomes and three-quarters of Hispanic/Latine people with low-incomes live in communities that meet the federal statutory definition for “low-income” communities, whereas less than half of white people with low-incomes do. This means that a significantly greater proportion of lower-income Black and Latine families are impacted by a neighborhood context that impedes upward mobility, through worse access to quality education, employment opportunities, health care and open space. By contrast, a significantly higher proportion of lower-income white families have access to the amenities and benefits that accrue to neighborhoods that are more resourced. By offering housing options that are affordable without considering who is accessing that housing, the condition of the housing and the context in which those options are offered, affordable housing providers may not be maximizing the opportunities to advance racial equity.

In addition, despite the rapid pace with which the U.S. is becoming increasingly multiracial, rates of white isolation remain very, very high. Another Brookings analysis found that while the neighborhoods for the average Black resident increasingly shifted to become diverse pluralities in response to an increase in Latine population growth, the neighborhoods for the average white resident have remained much more homogeneous (see Figure 4).

Racial and income segregation can lead to negative impacts for BIPOC individuals and families even at higher income levels. Whereas increased income and levels of education translate into opportunities for white families to live in neighborhoods of greater resource and affluence, a review of census data found that over the last few decades, affluent Black and Latine Americans live in neighborhoods with higher poverty rates and fewer resources than did low-income whites. Of particular import, these patterns of persistent racial residential segregation mean that middle-class and affluent Black families are more likely to send their children to high poverty schools than are low-income whites. The impact of this segregation by race and by income is illustrated in Figure 5, which highlights the significant disparity in outcomes for Black men who live in highly segregated communities, versus moderately segregated and more resourced communities.

Finally, by applying the lens of the Housing Bundle, we note that even if higher income Black families are able to find housing that is affordable in the segregated communities, the neighborhood context of these systematically marginalized communities impairs their outcomes.