Alicia Lewis and Sophie Mintier Housing Planners at MWCOG recently attended PolicyLink’s Equity Summit 2011 in Detroit. The “Dispatches from Detroit” series provides RF followers a recap of what they learned as well as specific proposals to move our Region Forward. This is Sophie’s second post in the series. Read other “Dispatches” posts here.
With the Occupy Wall Street movement and recent data on income inequality garnering significant news coverage in the last few months the wealth gap is finally beginning to get the attention it demands. Inequality in the U.S. has been intensifying for decades and the wealth gap is particularly severe between racial and ethnic groups.
According to data released last summer by the Pew Research Center the median wealth of white households is 20 times greater than black households and 18 times greater than Latino households. Between 2005 and 2009 Latino households lost 66 percent of their wealth black households lost 53 percent and Asians households lost 31 percent compared to a decline of 16 percent among white households.
One of the reasons for these alarming disparities is that the net worth of black and Latino households is largely concentrated in home equity while home equity accounts for a smaller percentage of the net worth of white households. Thus plummeting home values during the recession have hit black and Latino households hardest. These households have also been disproportionately impacted by the foreclosure crisis which has taken a toll on neighborhoods across metropolitan Washington.
One of the economic goals we’ve committed to achieve through Region Forward is “to minimize economic disparities and enhance the prosperity of each jurisdiction and the Region as a whole through balanced growth and access to high-quality jobs for everyone.” To tackle the wealth gap in our region we need to think creatively not just about job creation and retention to increase incomes but also about asset building strategies including but not limited to homeownership. Families with assets – regardless of income and value of assets – have greater financial security higher educational attainment and higher expectations for their futures. Children with savings accounts in their own name are seven times more likely to attend college controlling for family income.
At the national level we already spend $400 billion per year to encourage asset building through a wide range of federal tax policies but the primary beneficiaries of these efforts are the middle- and upper-income households. We need to focus on developing programs – at the local region and federal levels – to help low-income families build wealth.
A session on asset building at the PolicyLink Equity Summit earlier this month highlighted two products that can do this: Individual Development Accounts (IDAs) and Children’s Savings Accounts (CSAs). Both IDAs and CSAs can be started with a modest initial deposit and provide matches for additional contributions to reward and incent additional savings. They also require the holders to participate in financial literacy classes (for children with CSAs this means age-appropriate financial education) and to use their savings for an asset-building purpose whether financing higher education pursuing job training purchasing a home or starting a small business.
These and other asset-building tools should be part of our larger strategies to address inequality and poverty and to promote sustainable economic development in the region. We could make these tools more widely available to low income households by forming partnerships with local social service agencies housing counseling organizations public school districts and credit unions and other financial institutions. Helping low-income households to build assets and invest in their futures is a critical factor in ensuring our region’s long-term economic growth resilience and competiveness.