Policy Matters is a quarterly series of reports that provide timely research and guidance on issues that are of concern to policymakers at the local, state, and national levels.

Volume 5, Issue 2 by Vanesa Estrada is entitled: The Housing Downturn and Racial Inequality.


Executive Summary

Racial inequality in homeownership is a key dimension of wealth inequality in America and has been a major concern of housing policy reforms since the 1990s. Since the housing market downturn began in 2006, however, little attention has been given to its implications for racial inequality. Questions of racial inequality are particularly important in diverse states like California, where no racial group can claim majority status. This article addresses three crucial questions which policy makers should consider when evaluating solutions for the current housing crisis. First, did the most recent housing boom alleviate racial inequalities in homeownership? Next, how has the downturn affected disparities across racial and ethnic groups? Finally, how has the downturn affected the economic outlook and housing-related burdens in rapidly changing communities?

This article reviews the policy and market decisions which brought about the housing
boom and bust, and explores the implications of these decisions for people seeking to become homeowners and those already owning. In terms of the downturn and its effects on racial inequality, this report is a preliminary look at the effects of a still-unfolding economic recession. There are indicators of financial distress and foreclosures which allow us to evaluate how neighborhoods are changing and families are affected. The evidence so far indicates that Latinos and African Americans are more likely to have loans and live in areas that are experiencing the highest rates of foreclosure. Also, mortgage counselors report that minority clients receive worse outcomes than white clients in the foreclosure prevention and loan modification process. Finally, survey evidence from Riverside County, formerly one of the fastest growing regions in the country, indicates that that Latino, African American, and Asian American homeowners are experiencing a far greater financial strain from housing (or “housing strain”) than whites in the region. Taken together, these findings suggest that more comprehensive and far-reaching solutions to the housing crisis are necessary to remedy deep racial inequalities in wealth in California and, by extension, other parts of the United States.

Vanesa Estrada Correa is Assistant Professor of Sociology at UC Riverside. Her research interests include social stratification, race/ethnicity, migration, demography, urban sociology and public policy. Her current work focuses on housing and neighborhoods. Vanesa can be reached by email vanesa.estrada@ucr.edu or by phone at (951) 827-5851.