Do Housing Policies Make The Wealth Gap Worse?

California Community Builders (CCB) has reviewed federal and California state housing policies to see if they uphold their intent to provide affordable homeownership opportunities and rentals for all, including people of color and low-income populations. We discovered that most homeowner-related benefits and opportunities are heavily weighted towards white and higherincome people, as well as those who already own a home. Even with rental subsidies— especially in California—it is increasingly difficult for minorities, millennials, and students to find affordable housing.

Overall, these policies as they stand are sustaining and exacerbating the racial and generational wealth gap. Low-income families and people of color can receive help with rentals, but even that is insufficient in the current economic climate. Since homeownership is the primary avenue of wealth creation in the United States, current policies keep these populations at an economic disadvantage.

Since the 1930s, both federal and state programs have supported constructing and providing affordable housing for low-income families. But the federal government has shifted away from overseeing the majority of these programs, giving state and local governments more control. As a result, housing nationwide has become increasingly unaffordable and homeownership rates for low-income families and people of color have fallen behind. The Great Recession of 2007-2009 hit families of color particularly hard. It resulted in less aid aimed at increasing homeownership rates. More direct aid goes to renters to alleviate lowincome families’ cost of living. But the majority of overall federal housing-related expenditures still goes to current owners in the form of deductions for real estate tax and mortgage interest, and capital gains exclusions. In fact, owners receive over 70 percent of federal housing subsidies, despite making up less than 40 percent of those with severe housing cost burdens.

These trends are exacerbated in California. Rapid job and population growth in the state has inflated the cost of homes, and housing construction has not kept up. California lacks affordable housing, so families throughout the state struggle to make ends meet. This is especially the case for low-income families, minorities, millennials, and students.

In this report, we show how programs that may have started out to benefit all those in need have mainly benefited white, better off homeowners. We begin with a synopsis of our key findings, a comparison of the benefits of homeownership over renting, and some background on the policies in question. Next we move to a more detailed look at how homeownership rates fall across racial and income lines, both nationally and in California. We then take a look at how currently funded California programs fit into the nexus. We finish up with a discussion of what these findings mean for minorities, millennials, and students. In our conclusion, we make recommendations as to how federal and state funding allocations could be distributed in order to help alleviate the current wealth gap.

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