" Homeownership is a unique tool for building wealth in our economy— one that must be made accessible to more people if we hope to increase the financial security of low-income Americans."
Creating more homeowners is not only exciting for people in real estate, but also for those of us in the business of social change and economic equality. That’s because homeownership is far and away the most powerful driver of wealth creation in the U.S. economy. And wealth matters, big time.
Imagine a young family that has just enough cash saved up to get a mortgage. As they build equity in their home over the years, they can borrow against that wealth to weather financial emergencies—a car breakdown, a medical crisis, or whatever it may be. By the time their child is ready to go to college, they can afford to send her off—likely adding hundreds of thousands of dollars to her lifetime earnings and launching her into adult life debt-free.
Across the street, another young family can’t quite afford the down payment on a home. For years, they’re stuck paying rent—not building any wealth–while they work to save up. But when they’re hit with a temporary lay-off, it devastates the family’s finances, with no income and no accumulated wealth to dip into to ride out the hard times. When their child heads to college, it’s only possible with a load of student debt—debt that will have to be paid off before that young person can start building their own wealth.
It’s a simplistic example, but you can spin it out for generations. And it highlights some of the patterns that play out family by family, with results that are evident at the macro-scale. A child born into a wealthy family, for example, is six times more likely to become a wealthy adult than a child who grows up poor. Homeownership has long been a central part of this equation. In 2015, the average net worth of a homeowner in was $195,400, compared to just $5,400 for a renter, according to the Federal Reserve. The significance is even more staggering for people of color. Wealth from equity in a home constitutes 51% of total wealth of the average white household, but 71% for black households. Essentially, if you are part of America’s fastest growing populations, it’s highly likely that without a home, you don’t have wealth.
Excerpts from a blog originally published 04/19/2017 03:00 pm ET by
President and CEO, Living Cities
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