What Explains the Black-White Wealth Gap?

The median net worth of non-Hispanic White households was 9.7 times the net worth of Black households in 2016—$171,000 versus $17,600, according to the Federal Reserve Board's triennial Survey of Consumer Finances. The wealth gap is larger today than it was in the early 2000s, when the average non-Hispanic White household had "only" 6 to 7 times the wealth of the average Black household.

What's behind the growing wealth gap? Since non-Hispanic White and Black households are equally likely to be in debt (77.5 and 77.1 percent, respectively) and since non-Hispanic Whites owe more (a median of $74,100) than Blacks ($31,100), the wealth gap is not about debt.

The gap is about assets—in particular, homeownership. Only 44.7 percent of Black households were homeowners in 2016 versus a much larger 72.5 percent of non-Hispanic Whites. Black homeownership fell more than non-Hispanic White as the housing market collapsed with the Great Recession, and Black homeowners saw their houses lose much more value. For Black homeowners, median housing value fell 29 percent between 2007 and 2016—to $124,000, after adjusting for inflation. For non-Hispanic White homeowners, median housing value fell by a smaller 14 percent during those years—to $200,000. Since owned homes are the single largest asset for the average American household, these differences explain not only the large wealth gap but also why it has grown.

Source: Demo Memo analysis of the Federal Reserve Board's 2016 Survey of Consumer Finances