Net Worth of Latino Renters Drops 22 Percent
Latino homeowners’ median net worth increased from 2013 to 2016, but the net worth of Latino renters* declined 22 percent. The median net worth of Latino renters fell from $5,200 to $4,000 (Figure A). Non-Latino renters also had a decline in their median net worth, but only of 9 percent, from $5,800 to $5,300.
The renters’ trends are quite different from what occurred for homeowners. Latino homeowners had a 9 percent increase in wealth from 2013 to 2016, from $96,900 to $105,200 (Figure B). Non-Latino homeowners saw an increase of 15 percent. Non-Latino homeowners’ wealth increased by over $30,000, rising from $213,500 to $246,300.
Most of American families’ wealth is in the value of their home. The typical homeowner has many times the wealth of the typical renter. Home values are recovering from the bursting of the housing bubble 10 years ago, and these rising home values are helping to boost the net worth of homeowners.
Renters, on the other hand, are experiencing rising rental costs, and the costs have been rising more rapidly than their wages. We can see the results of these trends by the increasing rates of “cost-burdened” renters who are paying more than 30 percent of their household income on rent (Figure C). In 2001, 46 percent of Latino renting households were cost-burdened. In 2014, 55.8 percent of these households were cost-burdened. As it has been becoming more difficult for renters to pay for housing, the federal government has exacerbated the situation by significantly reducing its support for low- and moderate-income housing.
While the federal government slashes support for low- and moderate-income housing, it continues to subsidize the housing of rich Americans through the Home Mortgage Interest Deduction. The Mortgage Interest Deduction is used by households that (1) already have a home and (2) have enough income and deductions that it makes sense to itemize their deductions. Most Americans take the standard deduction and do not itemize. The Mortgage Interest Deduction even can be used for a second home.
Many advocates hope that more Latino and African-American families will become homeowners, but if renters are losing wealth, their ability to save enough for a down payment on a home is also declining. It is important that we find ways to build wealth among renters, for those who will rent for their entire lives and for those who would like to save enough so that they can transition into homeownership. As first steps, policymakers need to restore all of the funds that have been cut for low- and moderate-income housing, and the Mortgage Interest Deduction needs to be radically redesigned so that it helps low- and moderate-wealth households build wealth rather than helping the already wealthy become wealthier.
* “Renters” refers to renters and other non-homeowners.
