Home ownership in the United States is broadly seen as a way build a modest amount of household wealth over time. If one can afford a mortgage, it usually makes sense in Rochester to own rather than rent. After all, households are going to experience housing costs whether they rent or own, but home ownership allows a family to pay for their housing while also building savings in the form of home equity. Those financial resources can then, ideally, be passed on to one’s children and grandchildren.
But as with so many other issues, it appears that there are racial disparities in the effectiveness of home ownership at building wealth, at least here in Rochester. Simply, the whiter a census tract is in Rochester in 2019, the greater likelihood that homes in that census tract have increased in value since 1996. Nearly every majority white census tract (24 of 25) in Rochester increased in value from 1996 to 2019, while only 37% of majority non-white census tracts increased in value over the same period of time. This suggests that home ownership may be a better wealth generation tool for white households in Rochester than for Black and Hispanic families.
I downloaded a 1996 property tax assessment file from the City of Rochester’s open data platform, and matched 1, 2, and 3 unit residential properties to a similar file from 2019. I then geocoded the addresses, and compared the median value home by census tract to the demographic composition of that neighborhood from the most recent American Community Survey.
Consider the implications of this dynamic. Lets say two families purchased homes for $50,000 in 1996. One was in predominantly African-American neighborhood, the other in a predominantly white one. The home in the Black neighborhood (more likely to be owned by an African-American family) is sold 23 years later for $40,000. The home in a white neighborhood (more likely to be owned by a white family) sells for $90,000. Both families are probably better off than if they had rented the entire time, but the (likely) white homeowner’s wealth is more than double that of the Black homeowner. Now multiply that across thousands of households.
In fairness, I’ll note that there are some significant limitations to this analysis.
I can’t distinguish between owner-occupied and renter-occupied properties. I suppose its possible that rental properties in majority non-white census tracts depreciated considerably over time, while many owner-occupied homes increased in value. If this were the case, then it would seem to suggest that rental housing conditions are deteriorating rapidly in the city. It would, however, contradict my point about racial disparities in wealth generated through home ownership. Beyond the owner/renter dynamic, I also can’t identify the race or ethnicity of actual homeowners.
Assuming those caveats don’t doom the basic conclusion, I’m left with a number of questions about what factors are driving the decline in property values in non-white city neighborhoods. There’s an enormous racial income gap in this community, and many white home buyers are, ummmm, reluctant to buy homes in predominantly Black or Hispanic neighborhoods. The home buyer market in these neighborhoods therefore does not include the largest and wealthiest race/ethnic group in the region. How much of the decline in home values is connected to persistently low or declining Black and Hispanic household incomes? How much of the decline is the result of challenges Black and Hispanic households face when trying to secure mortgages? How much of it is connected to the aging housing stock in the city, and the deterioration of housing in low income areas? Very few things are mono-causal, but it would be helpful to understand what exactly is driving the decline in home values in much of the city.
This is the type of thing that I hope the Commission on Race and Structural Equity (and others) tries to tackle. The relationship between property values and race/ethnicity is the kind of deeply entrenched structural issue that we need to confront as a community. Closing the racial income gap would (I think) help build home ownership wealth in Black and Hispanic neighborhoods, but short of that, there are likely other things the city and county can do. Are there ways to strengthen or expand the city’s housing rehabilitation and repair programs? Would the establishment of a public bank expand access to mortgages in low-income areas? What other policy levers are at the city and county’s disposal that could be applied to this, and many other challenges?
Consolidating school districts could be a step in this direction. Not a panacea, but if a significant number of buyers are using “district quality” criteria as measured by test scores, that would also drive a difference in demand.