Is Housing Inequality the Main Driver of Economic Inequality?


#1

Coworker forwarded this to me. Thought it was an interesting article. Summary bits:

  • Research by Matthew Rognlie found that housing inequality (that is, how much more expensive some houses are than others) is the key factor in rising wealth

The following are some points from different studies mentioned in the article:

  • “Ultimately, [a] study concludes that the rise in both housing wealth and housing inequality stems mainly from the increase in the value of land.”
  • “The main catalyst of housing inequality, according to [a] study, comes from the growing gap within cities and metro areas, not between them.” (particularly of commuting zone, but I haven’t been able to find the criteria of a CZ)

I guess this backs Rahul’s idea of investing some of Raha Foundation’s funds in real estate :slight_smile:


#2

From http://www.washingtonpost.com/sf/investigative/2015/01/24/the-american-dream-shatters-in-prince-georges-county/

For a substantial number of African Americans who remain homeowners, their properties only hurt their net worth. According to the Fed survey, 1 in 7 owed more on their mortgages than their homes were worth in 2013, a sharp increase from 2010.

By comparison, just 1 in 18 white homeowners was underwater, an improvement from 2010. Also, African Americans own fewer businesses, stocks and other equities than whites — assets that have all recovered sharply since the recession.

Many researchers say the biggest portion of the wealth gap results from the strikingly different experiences blacks and whites typically have with homeownership. Most whites live in largely white neighborhoods, where homes often prove to be a better investment because people of all races want to live there. Predominantly black communities tend to attract a narrower group of mainly black buyers, dampening demand and prices, they say.

And response at http://www.slate.com/articles/news_and_politics/politics/2015/05/racism_in_real_estate_landlords_redlining_housing_values_and_discrimination.html

Put differently, they suffered a kind of tax that reflects the stigma associated with blackness, independent of wealth or status. It doesn’t matter how rich the inhabitants are. If a neighborhood is black, other groups don’t want to live there, hurting the value. And on the other end, while we tend to associate gentrification with poor minority neighborhoods, the reality is a little different. According to a Harvard study on Chicago neighborhoods, full gentrification only happened in low-income neighborhoods with substantial white populations, 35 percent. If there’s an equally substantial black population, around 40 percent, the process either slowed, or stopped altogether.

So messed up!! Stock market might make the rich richer, but at least it can’t discriminate based on race and turn what should have been a sound investment into a pile of debt.