A Tale of Two Recoveries: Impact of the US Housing Crisis on the Racial Wealth Gap Across Generations

Although there is considerable information about higher foreclosure rates among people of color and their higher likelihood of receiving subprime loans during the housing boom in the early years of the 21st Century, there has been less research regarding the long-term consequences of these discriminatory lending practices. The Social Science Research Council’s Measure of America program has collaborated with the American Civil Liberties Union to provide editorially independent research on the intergenerational impacts of lending abuses in the United States on different racial and ethnic groups. This research culminated in a report published in 2015 called Impact of the US Housing Crisis on the Racial Wealth Gap Across Generations.

The research was conducted using a dataset called the Panel Study of Income Dynamics of the University of Michigan. This study has followed thousands of families since 1968 and is now following the fourth generation of descendants of the original families. This presents a unique opportunity to analyze change over generations.

The study examined the likely effect of the financial crisis on the racial wealth gap for the next generation. Among families that owned homes, white households have started to rebound from the worst effects of the housing bust and Great Recession while black households are still struggling to make up lost ground. The divergent recoveries are important in the immediate term, but they are also an especially ominous sign for the future. Unequal opportunity to rebuild wealth and housing equity coming out of the crisis is leading to widening racial disparities. The racial wealth gap, in other words, is now on track to compound over time. The report contains policy priorities for encouraging inclusive lending and providing a disincentive for discrimination in the housing market.