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WASHINGTON – Whites had an average wealth of $632,000 in 2010 while Blacks had about $98,000 and Hispanics had $110,000, according to a recent study by the Urban Institute.

“Such great wealth disparities help explain why many middle-income blacks and Hispanics haven’t seen much improvement in their relative economic status and, in fact, are at greater risk of sliding backwards,” the report says.

Blacks start out at a disadvantage.

Whites begin with about 3.5-4 times more wealth than their Black and Hispanic counterparts in their “wealth-building years,” defined as 32-40 years old. By age 60, the wealth of Whites increases to seven times the amount of wealth Blacks are able to accrue over the same amount of time.

Levels of homeownership and retirement savings are shown to contribute to the differences in wealth among races. In 2010, less than half of Black families owned homes, while more than three quarters of White families did.

Algernon Austin, director of the program on race, ethnicity, and the economy at the Economic Policy Institute, says that Blacks were more likely to have loss their homes during the recession because they couldn’t keep up with ballooning mortgage payments.

“What we’ve seen recently is a dramatic loss of wealth for African Americans because there has been a dramatic loss of homeownership,” Austin explains. “Blacks were more likely to be given high-priced sub prime loans and were hit much harder by unemployment. Both factors—more loans, losing a job– makes it more difficult to keep up with mortgage payments.”

The recession has had a dire impact on the wealth of all Americans, with Hispanic families reporting their wealth declined by 40 percent between 2007-2010, according to the report. Blacks experienced a 31 percent decline while Whites’ wealth declined by 11 percent.

Austin calls the loss of wealth experienced by the Black community a “symptom of high levels of unemployment and low wages, but particularly unemployment.”

Today, 27 percent of Blacks live in poverty. In March 2013, Blacks experienced an unemployment rate of 13.3 percent, compared to the national rate of 7.6 percent.

“Homeownership is a really important factor in terms of wealth, but so is unemployment,” Austin says. “If you’re going through frequent spells of unemployment, you’re either going to be losing wealth or going into debt.”

He adds, “The issue of jobs and income are important to address. The higher your income, the easier it is for you to build wealth. The government needs to enact policies that allow for Blacks to get greater income and get better job opportunities.”

Blacks represent about 11 percent of the total workforce, but 14 percent of the poverty-wage workforce, according to the Economic Policy Institute.

According to the Urban Institute findings, Black families saw the most dramatic decrease in their retirement assets, experiencing a 35 percent decline in retirement savings between 2007-2010.

“This finding is consistent with research that suggests lower income families are more likely to withdraw money from retirement savings after a job loss or other adverse event,” according to the Urban Institute report. “The high rates of unemployment and other financial needs that took hold with the Great Recession appear to have led to larger declines in retirement savings for black families.”

While the Great Recession can account for much of the loss of wealth, there are other contributing factors to African Americans’ low-wealth, including policies designed to help Americans accrue wealth and policies aimed at low-income families, a large proportion of whom are African American.

“There’s lots that the federal government does that if it was targeted to lower income Americans it could impact the wealth gap, “ Austin adds. “However, unfortunately, it’s a difficult battle because current policies benefit people who have significant political power and influence.”

In 2009, the federal government spent about $384 billion on policies that help families buy homes, start businesses, put their children through college, and retire.

Many of these policies, however, are administered through the tax code and “subsidize wealth building for the wealthiest among us, rewarding them for the size of their homes and investment portfolios,” according to a 2010 report by the Corporation for Enterprise Development titled “Upside Down: The $400 Billion Federal Asset-Building Budget.”

“The federal asset building budget provides a variety of things—opportunities for families to buy homes, start businesses, and prepare for retirement,” says Jermie Greer, the director of government affairs for CFED. “Yet, this $400 billion budget is skewed to benefit the very wealthy.”

According to the report, a middle class family making $50,000 annually receives less than $500 in benefits from federal asset building policies, while families that make $100,000 receive $2,000 in benefits.

Tax payers who make in excess of $1 million, however, can see more than $92,000 in asset building support through mortgage and property tax deductions and investment tax breaks. Over half of the nearly $400 billion in benefits, according to the report, goes to the top 5 percent of tax payers.

“Conversation around tax reform so often focuses on the relationship between revenues for deficit reduction, but missed the mark on what is the social policy we want to address through the tax code,” Greer says.

“They can take some of the tax benefits that go to the very wealthy and bring them back down to people that are trying to build wealth and scratch their way out of poverty,” Greer adds.

Most low and middle-income families use homeownership to build wealth. In fact, homeownership accounts for the largest proportion of wealth among lower and middle-income households.

Yet, homeowners with lower incomes often don’t receive enough of a deduction to make a difference. According to the CFED report, nearly 80 percent of the value of mortgage and property tax deductions went to the top 20 percent of taxpayers.

“Social policy is really focused on income and the income people earn,” Greer says. “While people need jobs and it’s important that people are able to earn income, but that’s not the only piece of puzzle when you think about wealth.”

“We need to think not only about income, but providing benefits and incentives that help people build wealth through starting businesses, buying homes, being protected from predatory lenders.”

For low-income families in particular, federal programs like the Supplemental Nutrition Assistance Program, or SNAP, help ensure families have basic necessities, but don’t assist in helping to develop economically stable households.

“Many safety net programs even discourage saving: families can become ineligible if they have a few thousand dollars in savings,” he Urban Institute report says.

Individuals who receive benefits from assistance programs can only have savings that equal up to $2,000 before risking losing their benefits. States currently have the flexibility to wave these limits, which keep people from accumulating money that can help them start a business or build wealth that can lead them out of poverty.

Thirty-six states currently waive limits to the SNAP and Temporary Assistance to Needed Families programs.

There are also programs, such as the Self-help Homeownership Opportunity Program (SHOP), which helps low- to moderate-income families purchase homes, that can help low income families build wealth through homeownership, but the programs received less funding than low-income rental programs in 2010.

Austin says that through implementing more policies that benefit a wider range of people from varying socioeconomic backgrounds, we could begin to see the wealth gap “start shrinking instead of watching it grow.”

“It’s possible to prevent [the wealth gap] from growing larger and even shrinking it, but none of the policies that will ensure that will happen by themselves,” Austin says. “With all of these things, they aren’t likely to happen overnight.”

Originally posted at the Sacramento Observer

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