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The
Growth of the Suburbs - and the Racial Wealth Gap
Developed by David M. Seiter
ACTIVITY 5: Deepening Understandings of Race
and Family
Wealth Accumulation: Six Jigsaw Readings
READING B
How does family wealth affect life outcomes?
Dalton Conley: The single largest item in most people's
nest egg is the family home. That has enormous consequences for
the next generation. It means, for example, that if you own your
home and have significant equity, you're in a high-property tax
district, and you're going to a good, well-funded public school.
It means that when it's time to go to college, if you don't have
money in the bank, you can always take a second mortgage and draw
off the equity in your home to finance your kids' college education.
It means that you're in a neighborhood, most likely in the suburbs,
where jobs are on the increase, and not in the inner city where
jobs are on the decrease.
It means that you're in a neighborhood where your neighbors control
information and access to jobs. So you're getting the cultural
aspects by virtue of living in a high property value area and
you can get your kids better job connections. It means that if
you want to finance your kids' job search after school, you'll
have equity to support them for a while.
These are just a few of the ways that having wealth, or owning
a home, has enormous consequences for the next generation, not
to mention one's own old age.
What does housing have to do with family wealth?
Dalton Conley: Where one's family lives in America is
not just a matter of taste and preference. It has important consequences
for the perpetuation of advantage or disadvantage across generations
for a lot of reasons. First, you have the issue of housing and
wealth. The majority of Americans hold most of their wealth in
the form of home equity. So, that is their nest egg. It is their
savings bank. They are living in their savings bank.
Increasingly, there are lawsuits in various states against this
way of financing, where school funding is based on local property
taxes. But still, it's the dominant form. We pay for our schools
locally based on property taxes. So, in high value neighborhoods,
which are predominantly white, you are getting well-funded schools.
And in low-value neighborhoods, which tend to be predominantly
minority, you are getting inadequately funded schools.
The constraints that minorities face in the housing market doesn't
just affect quality of life issues, you know, and the selection
of homes and styles that people can live in. It really has enormous
consequences for economic stability and upward mobility and the
life chances of the next generation.
Because minorities have faced limited housing options in the
past, now they are usually confined to areas that have worse environment
conditions, have poor school funding, have increased risk of violent
crime, have worse tax bases. Plus their homes have less equity
value, so even if they want to move, they are less able to afford
to. Therefore the whole economic structure of the next generation
can be really readily viewed in the limited housing selections
of the previous generation.
How does home ownership help you accumulate even more wealth?
Dalton Conley: There is this tendency for white Americans
to see the structure of their aid in the form of tax credits and
not as aid, or government assistance, or welfare. But they see
other forms of assistance, like reduced rents or welfare benefits,
as a direct handout from Big Brother.
Owning your home, first of all, gets you a big mortgage deduction.
That means you pay less income tax than you would be paying if
you were renting and making similar monthly payments. Second,
it probably places you in a community that has higher property
values than one where you were just renting. Owner-occupied communities
tend to be valued more, and that means that the property tax base
is higher. That means that local services, everything from garbage
services on up to the public school system, most importantly,
are going to be better off in that community. So, without even
having to spend your equity in your home, you are getting benefits
from it.
Third, there is the ability to borrow off that equity. You can
finance starting up a business by taking a second mortgage. You
can pay for your kids to go to college through a second mortgage.
You can finance your retirement by selling your home. Since homes
have increased so much in value over the course of the latter
half of the 20th century, people can finance their retirements
through the sale of their home and the capital gains they get
from it. The home has been a central part of savings for most
American families in the latter half of the 20th century. White
Americans that is.
Questions for READING B:
- How does family wealth, even more than income, influence life
chances?
- Why is home ownership so central to family wealth accumulation?
What opportunities does it help to open up?
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