How to Close the Wealth Gap

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The gap in wealth between whites, blacks and Hispanics has grown to historic levels, as discussed on today’s Diane Rehm Show.

“These people draw upon their assets… to finance their children’s education, or to help with children’s tuition or to use as a down payment on their first home,” Roderick Harrison, senior research fellow at the Joint Center for Political and Economic Studies, said on the show. “This will play out not only until we see the net worth of these families rising back to the levels that they rose to in 2005, but it will play out in the lives of their children.”

We caught up with Harrison after the show to ask if D.C., with its rising home prices, stands in contrast to the growing wealth gap seen on a national level. He said, “D.C. is an exaggeration. It’s more polarized by income and by race [than elsewhere].”

The District’s whitest ward is also the ward with the most high-income residents; and the wards with the highest concentration of African Americans are also the most low-income areas.

The growing racial wealth gap is partially attributed to the housing crisis — blacks and Hispanics had more of their wealth tied up in their home equity before the bubble burst. But D.C. didn’t suffer the same drop in housing prices that communities around the country did — values are actually increasing.

“The rising housing prices are probably exacerbating [the gap] in that while it increased the equity of those who are homeowners and particularly in the hotter residential neighborhoods, it is probably pushing out people who are renters or homeowners who can’t keep up with the increasing housing costs,” Harrison noted.

Some black homeowners left D.C. for majority-black Prince George’s County, which now has the worst foreclosure rate in the metro area. For homeowners who did hold on in D.C. “that group benefits.” But renters are left vulnerable if landlords want to convert their apartments into luxury units or condos, Harrison said.

So what is needed to close the gap?

“Until you have the jobs back, you can’t get the wealth back,” he said. “Employment is the beginning and it’s the end.”

That may take awhile; the latest jobs report showed dismal figures, and blacks and Latinos are still facing higher unemployment rates than their white counterparts who have the same education levels.