Equity and Ownership – The Key to Generational Wealth (Part 2)
Part 2 – Owning Things Makes You Rich
In part one of this series, we explored the concept of equity and where it can be found or created. Now, we'll explore the broader implications of generational wealth not just for individuals, but for families and entire communities.
Generational wealth has driven economic growth in the United States for centuries, and yet a significant gap can still be seen in wealth accumulation across racial and class lines, particularly when it comes to homeownership. According to data from the Urban Institute, in the past 60 years, America has seen a huge transfer of wealth from the middle class to the most upper-class families, increasing wealth inequality. In 1963, upper class families had 36x the wealth of middle-class families in America. In 2022, that number had grown to 71x the wealth of families in the middle class. In 1983, the average wealth of White families in the US was around $320,000 higher than the average wealth of Black families and Hispanic families. Like the previous statistics, by 2022 that number had grown to more than $1 million higher than that of Black and Hispanic families. We can recognize that a wealth gap not only exists but continues to grow. Which begs the question, what is the cause?
When we look at homeownership rates between Black and White families during these same time periods we may find our answer. In 1960 the homeownership rate for White families in the US was 64.9% while the Black homeownership rate at the same time was 38.2%. This disparity in homeownership has a profound impact on wealth-building, as homes are often a primary source of wealth for many American families. In 2022 homeownership for White families was at an all-time high at 73.1%, while Black family homeownership grew to just 44.3%. The wealth gap is compounded by historical barriers such as redlining and discriminatory lending practices and the withholding of GI bill benefits to Black veterans post WWII, just to name a few. These practices have disproportionately affected communities of color. As a result, the ability to pass down wealth across generations remains uneven, limiting economic opportunities for future generations in these communities. Terry Gross from NPR said:
“African-American families that were prohibited from buying homes in the suburbs in the 1940s and '50s and even into the '60s, by the Federal Housing Administration, gained none of the equity appreciation that whites gained.”
So, what does this all mean? To quote the title of this article, it means that owning things makes you rich! Of course, “rich” is a subjective word so, more specifically, owning things can allow you to build wealth which can be a game changer both now and in the future. As Terry Gross noted in her NPR article on race, White families who were able to purchase homes in the 40s, 50s, and 60s used the equity in those homes to send their children to college, care for aging parents without relying on their children, and pass down wealth across generations.
In conclusion, the historical data we’ve examined has made it clear: ownership is not just a key factor to building wealth, it’s the foundation on which entire families and communities build long-term financial stability. The disparity in homeownership rates and wealth accumulation across racial and class lines highlight the powerful, compounding effect that ownership, or the lack thereof, has on generational wealth.
In the final part of this series, we’ll dive into the practical ways that individuals can begin to leverage equity to create Generational Wealth. We’ll explore strategies for using what we own to build a future that is financially secure to pass down through the generations. Stay with us as we move from the “Why” to the “How” of creating Generational Wealth.
Brown, M., McKernan, S.-M., Garon, T., Cohen, O., Harvey, C., Steuerle, C. E., & Biu, O. (2024, April 25). Nine charts about wealth inequality in America. Urban Institute. https://apps.urban.org/features/wealth-inequality-charts/
Gross, T. (2017, May 3). A “forgotten history” of how the U.S. government segregated America. NPR. https://www.npr.org/2017/05/03/526655831/a-forgotten-history-of-how-the-u-s-government-segregated-america
