Race and Location: The Role Neighborhoods Play in Family Wealth and Well‐Being

• Published date: 01 May 2018
• Author: Hannah Thomas,Alexis Mann,Tatjana Meschede
• DOI: http://doi.org/10.1111/ajes.12239
• Date: 01 May 2018

Race and Location: The Role Neighborhoods

Play in Family Wealth and Well-Being

HannaH THomas*, alexis mann†, and TaTjana mescHede‡

absTracT. A household’s wealt h provides an important form of

economic security for a family, as well as enabling parents to invest in

children to help them realize their aspirations. Yet in the United States,

wealth inequality between white families and families of color who

are earning the same incomes has reached startling levels. The racial

wealth gap, which reduces the opportunities available to African

American families, has proved to be a pernicious and enduring

phenomenon since it was first identified in 1990. This article identifies

and explores the role of neighborhoods in creating and perpetuating

the ongoing racial wealth gap. Wealth available to a family influences

the neighborhood a family is able to afford to live in: through wealth

available to purchase a home or wealth available to put down a

deposit on an apartment. This article makes the case that the

American Jour nal of Economics and Sociology, Vol. 77, Nos. 3-4 (May-Septe mber, 2018).

DOI: 10 .1111/ajes.122 39

© 2018 American Journ al of Economics and Sociology, Inc

*Associate at Abt Associates. Sociologist with expertise in the racial wealth gap,

homeownership and wealth building. Methodological expertise in semi-structured and

unstructured interviewing, ethnography, and institutional ethnography. Currently works

on wealth-building and housing policy evaluations. PhD in Social Policy and Sociology

from Brandeis University. Dissertation on community and household wealth impacts of

foreclosure. Previously worked at the Institute on Assets and Social Policy at Brandeis

University, managing a longitudinal study of how families with children build wealth.

Email: Hannah_Thomas@abtassoc.com

†Research Associate at Institute on Assets and Social Policy. PhD candidate in

Sociology and Social Policy at the Heller School for Social Policy. At IASP, part of team

examining trends in racial wealth gap and in household mobility, showing how families

leverage resources to buffer against economic shocks. Dissertation examines how re-

gional and city context shapes economic inequality and how families sustain economic

security in the face of growing national economic insecurity. Email: armann@brandeis.

edu

‡Associate Director, Institute on Assets and Social Policy (IASP), and Senior Scientist/

Senior Lecturer at the Heller School for Social Policy and Management, Brandeis

University. Principal/Co-Principal Investigator IASP racial wealth disparities studies, re-

search on housing and homelessness, and evaluation research. Expert on analyses of

large national data sets and lead author on many IASP publications. PhD in Public

Policy, University of Massachusetts Boston. Email: Meschede@brandeis.edu

1078 The American Journal of Economics and Sociology

neighborhood a family lives in not only influences social outcomes,

but also influences how much wealth a family can build over the

years, either as a homeowner or a renter. It also discusses the key

wealth mechanisms that influence neighborhood access as well as

how a household’s neighborhood location influences wealth

accumulation. Historical government policies created an inequitable

landscape of neighborhoods across the United States. Government

policies must seek to address this historical injustice.

Introduct ion

In the last few decades economic mobility in the United States has

stagnated; inequality of income and wealth has reached the highest

levels since the Depression of the 1930s, and the racial wealth gap has

grown. Although most discussions of economic inequality focus on

differences in income, wealth inequality is equally if not more import-

ant. While income is important in providing the means to manage

regular household expenses, wealth provides the means for house-

hold members to manage a financial crisis such as unemployment

or an unanticipated financial expense like a carrepair, or to invest in

opportunities for social mobility (McKernan and Ratcliffe 2009). More

than just the tangible, measurable effects of wealth, Sherraden (2018)

has said that assets are the embodiment of hope. Summarizing all of

the effects of wealth, Sherraden (1991: 180–181) notes:

Assets yield positive welfare effects th at income alone does not provide

… The effects of assets are 1) to improve stabilit y, 2) to create cognitive

and emotional orientation toward the fut ure, 3) to stimulate development

of human capital and other assets, 4) to en able focus and special ization,

5) to provide a foundation for risk taking, 6) to enhance personal ef ficacy,

7) to increase social inf luence, 8) to increase political par ticipation, and 9)

to increase the welfare of offspring.

Inequality in wealth is impor tant because it means inequality in the

protections and opportunities that wealth affords. For households that

are left behind, seeing their wealth grow less quickly than others, or

even stagnate or depreciate, and having less or in many cases zero

wealth, means a loss of economic security, an inability to invest in

1079

Race and Location

the next generation, and lower psychological well-being. In such a

way, wealth differences undermine the foundations of a meritocratic

so cie ty.

Since household wealth takes various forms—the home that a fam-

ily lives in, bank accounts, cars, and financial investments—research-

ers are still trying to understand the dynamics of how wealth is built

and grows unequally.

The racial wealth gap is a term used to describe the gap in wealth

between white families and African American and Latinx families. The

average African American family holds just 8 percent of the aver-

age white family’s wealth, while Latinx families hold just 10 percent

(Sullivan and Meschede 2017). The racial wealth gap also varies by

the financial position of the family, being much larger at the top of the

income distribution than at the bottom. In other words, high incomes

in African American and Latinx families do not translate into wealth as

much as they do in white families.

This gap in wealth is driven by several key factors: homeowner-

ship, education, employment, and inheritance. Of these, homeowner-

ship has the greatest impact through two key mechanisms: unequal

homeownership rates, and lower returns on homeownership. African

American families have a homeownership rate of 45 percent, less than

two-thirds of the white homeownership rate of 73 percent. In addi-

tion, white homeowners see greater returns on homeownership than

African Americans. White homeowners accrue $1.34 for every $1 that

African Americans accrue from homeownership (Sullivan et al. 2015).

Homes are located in different neighborhoods, and the same home

in one neighborhood can be valued very differently from a neighbor-

hood just a mile or two away.

One of the key underpinnings of this unequal wealth accrual re-

sults from the neighborhood itself. Low-opportunity neighborhoods

see less home value appreciation, and over the past few decades,

often experience declining home values. Families of color are more

likely to live in low-opportunity neighborhoods than white families

(Sharkey 2013). That explains some of the differences in wealth ac-

crual by race. This is a result of the long history of residential segre-

gation by race in the United States, along with ongoing policies that

reinforce these trends (Rothstein 2017).