Is Encouraging Homeownership Misguided?

Cory Booker spoke at lunch at this year’s Assets Learning Conference, the Corporation for Enterprise Development’s biannual conference on policies to help families save money. He told the audience of researchers, government officials, and consumer advocates that they are “soldiers” and “freedom fighters” in a “movement of liberation.”

He also recited a poem by Langston Hughes and quoted Frederick Douglass and Martin Luther King, Jr.

Though he leavened it with humor (Booker’s father wasn’t poor, he was just po’, because he couldn’t afford the extra two letters), it was a fiery, spiritual, even militant speech that recalled the history of the civil rights movement. His tone was a reminder of how much the housing crisis has been shaped by race.

I just listened to a presentation by Spencer Cowan, vice president of the Woodstock Institute, who talked about his research on borrowers in Chicago. In communities of color to the south and west of the city, more than 40 percent of mortgaged homes were underwater, while only about 17 percent of mortgaged homes in white communities were underwater. A typical family in a black community had only $6,800 of equity in their home, compared to $108,000 for a typical white family. (Nationally, the recession has had a similarly disproportionate effect on members of racial and ethnic minorities.)

Cowan pointed out that property in those communities tends not to appreciate in value as quickly as properties elsewhere, and suggested that buying a home might not the best investment for some families. Starting a business or buying securities, he said, might be preferable.

Buying a home “invests a vast majority of a person’s wealth in a single, nondiversified, illiquid asset,” he said.

Several people in the room objected to that provocative statement, pointing out that owning a home has other benefits, such as access to better public education and safety from crime. Yet if Cowan is right that owning a home isn’t for everyone in this country anymore, the crisis could prove a major setback for racial equity.

Max Ehrenfreund

Max Ehrenfreund is a former Monthly intern and a reporter at The Washington Post. Find him on Twitter: @MaxEhrenfreund