Between the yardwork, repairs, and maintenance, owning a home can sometimes feel like a full-time job. Last year, though, it also paid like one.
As restless, lockdown-weary buyers stoked competition for the few homes listed for sale during the pandemic, the median price of a Boston-area single-family house rose 9.7 percent in 2020, according to the Greater Boston Association of Realtors — from $620,000 to $680,000. That means the typical Boston-area house earned its owner $60,000 in equity in a single year. That astonishing sum doesn’t represent income that could buy groceries or pay for child care, but it is real wealth that could one day be tapped to pay for college, start a new business, or fund a remodel that increases the home’s value even further.
Meanwhile, someone who worked 40 hours a week at minimum wage in 2020 — then a fairly progressive $12.75 an hour in Massachusetts — would have earned only about $26,500 last year. A couple who both worked full time for minimum wage wouldn’t have earned as much combined as, say, a three-bedroom Colonial in Dedham did by just sitting there.
In fact, Boston area houses made more money last year, on average, than our preschool teachers, cooks, journalists, and paramedics. That seems ... absurd. And lest we’re tempted to write this off as an anomaly produced by Boston’s famously frenzied housing market, a similar scenario played out nationwide: Median home prices across the United States rose 13 percent through December, according to Redfin, from $295,000 to $334,000, generating about $39,000 of wealth in just a year for the typical American homeowner.
These figures would cast a startling contrast in any year. But against a pandemic that has stolen the lives and livelihoods of Black and brown people with disproportionate ruthlessness, it’s particularly jarring. Because even as people of color are more likely to have lost their jobs due to the pandemic, the bulk of housing wealth is accruing to an already privileged class of white homeowners.
In Massachusetts, 67 percent of white households own their home, according to census estimates. That’s almost double the Black homeownership rate of 36 percent, and the gap between the two groups remains as wide as it was in 1968, when the Fair Housing Act was passed. The homeownership rate among Latino households in the state is even lower, at just 28 percent.
The roots of these racial disparities are deep and sprawling. From legally racist redlining policies of the 20th century to present-day discrimination that infiltrates the lending, appraisal, and credit scoring industries, structural forces have conspired to shut out too many people of color from homeownership — and the intergenerational wealth it can provide.
“Even before the pandemic, people of color were already disproportionately worse off,” says Michael Neal, senior research associate at the Urban Institute. “The impact of the pandemic has really been to quicken and worsen a lot of the structural gaps that were already in place.”
The income gap in the United States remains alarmingly vast. The racial wealth gap is even wider. And wealth matters. As Americans, we claim to value hard work, but it’s often wealth, not labor, that begets more wealth. Houses are just one example. The S&P 500 gained about 18 percent last year, including dividends, so many 401(k)s likely outearned low-wage workers, too.
“Wealth is actually much more of a predictor of all other disparities — educational disparities, health disparities — than income is,” says Dania Francis, assistant professor of economics at the University of Massachusetts Boston. Wealth is intergenerational, Francis adds, and not just in obvious ways. If parents are able to take out a home equity loan to help pay their kids’ college tuition, for example, those children can graduate with less student loan debt, making it easier for them to buy their own homes in a well-funded school district later on. The benefits compound over the generations — or leave you further behind, if your parents and grandparents were forbidden access to the instruments of wealth creation in our country.
Even modest wealth offers a layer of protection from negative life events, such as an illness or job loss. It can also lay the groundwork for entrepreneurship. A safety net of assured support from family can make someone “more willing to start a small business, or more willing to fail at a small business and try again,” Francis says.
One positive in the current data, Neal says, is values of lower-priced homes are “by and large rising faster than those of higher priced homes.” Since Black homeowners tend to purchase less expensive homes, he adds, they may be seeing particularly strong equity gains.
The flip side, of course, is that entry-level housing is now more costly than ever. And while record-low interest rates are helping buyers stretch their purchasing power, Black home buyers are still more likely to be offered a higher rate or be denied a mortgage altogether, according to a recent Northwestern University study.
Francis has argued that reparations and the dismantling of structural inequalities are the only ways to truly close the racial wealth gap, and research from McKinsey suggests doing so would help the overall economy. Until then, some cities, including Boston, are making their own efforts to boost Black home ownership. Evanston, Illinois, is using cannabis tax revenue to fund reparations programs including grants of up to $25,000 toward a home. Boston now offers grants targeted at first-generation home buyers, in addition to discounted mortgages and down payment assistance for eligible buyers.
Meanwhile, if you’re living in a home that has risen in value, it’s perfectly reasonable to leverage that windfall to your benefit or that of your kids, Francis says. Just don’t conflate your home’s good luck with your own hard work. “Intergenerational wealth really underlies a lot of advantages,” she says. “It’s OK if the advantage is there — but you can’t pretend that it’s not there.”
Jon Gorey is a regular contributor to the Globe Magazine. Send comments to firstname.lastname@example.org.