Wealth gap between whites and some minorities widens

The household wealth of blacks and Hispanics dropped more than that of whites during the Great Recession, according to a study released this week by the Pew Research Center.

Researchers say the housing market decline is the main source of the increasing wealth gap between white households and their black and Hispanic counterparts.

The Pew study doesn't break down the gap by each state. But there are indications the wealth disparity in Minnesota is comparable to that of the rest of the nation.

The Pew Research study found that the wealth of an average white family in the United States is 20 times larger than that of a black family and 18 times larger than of a Hispanic family. Researchers used data from the 2009 Survey of Income and Program Participation conducted by the U.S. Census Bureau — the most recent information about wealth and ethnicity.

Falling real estate prices likely account for much of the drop in black and Hispanic assets.


A family's wealth is calculated by subtracting their debts from their assets. In Minnesota, a home is often the biggest asset for a family, said Libby Starling, research manager for the Metropolitan Council.

"Certainly there's retirement income or retirement accounts, there are pensions, there are savings," Starling said. "But owning a home is generally the largest single asset that households have."

In Minnesota, the 2010 census found that nearly 77 percent of whites owned their homes, compared with 25 percent of African-Americans. Nearly 44 percent of Hispanics owned their homes.

But the homeownership gap accounts for only part of the wealth disparity. According to the Pew study, median home values in Minnesota dropped 19 percent between 2005 and 2009.

University of Minnesota law professor Myron Orfield said home values didn't drop equally across the board. He said homes in affluent, largely white neighborhoods were more likely to retain their value.

"If you buy in a black neighborhood or a racially transitioning, inner-ring suburban neighborhood, the odds are you're not going to increase value," Orfield said. "You're going to -- in many cases -- experience negative value, and you don't build equity with negative value. Segregated and re-segregating markets don't gain value in the same way."

Orfield, who heads the university's Institute on Race and Poverty, said home value declines particularly affected families of color in north Minneapolis, Brooklyn Center and east Bloomington. He said families there also were more likely to lose their homes to foreclosure when the interest on their subprime loans soared beyond their reach.

A federal mortgage study found that banks were more likely to steer blacks and Hispanics into subprime loans than white customers, even when minority applicants made more money than the white applicants, Orfield said.


"That's a big reason why black families and Latino families don't accumulate wealth at the same rate that white families of similar education, income and credit history do," he said.

Other factors that contribute to the state's wealth gap include employment and income.

Census figures show that the unemployment rate for black Minnesotans is about three times higher than it is for whites and the median household income for white families in Minnesota is twice that of black families. Hispanics fare better than African-Americans in terms of employment and income, but still lag behind whites.

More information about race, poverty and income in Minnesota is due to be released by the Census later this fall.

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