Evaluating Homeownership as the Solution to Wealth Inequality

Daniel Carroll and Ross Cohen-Kristiansen

Economic Commentary, 2021, vol. 2021, issue 22, 7

Abstract: Homeownership presents an opportunity to accumulate wealth, making it an appealing vehicle for reducing wealth inequality. In this Commentary, we explore the investment side of homeownership. The opportunity for leveraged returns can lead to wealth gains among lower-income households; however, we note that homeownership for low-income homeowners carries three types of risk that are higher for them than for high-income homeowners: location, timing, and liquidity. Thus, policies that incentivize purchasing homes to reduce wealth inequality or close racial wealth gaps should be adopted only after great care has been taken to protect against these risks.

Date: 2021
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DOI: 10.26509/frbc-ec-202122

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