State and Local Approaches to the Chicago Region’s Racial and Ethnic Wealth Inequity

RESEARCH REPORT State and Local Approaches to the Chicago Region’s Racial and Ethnic Wealth Inequity K. Steven Brown Marcela Montes Hannah Hassani November 2019 RESEARCH TO ACTION LAB ABOUT THE URBAN INSTITUTE The nonprofit Urban Institute is a leading research organization dedicated to developing evidence-based insights that improve people’s lives and strengthen communities. For 50 years, Urban has been the trusted source for rigorous analysis of complex social and economic issues; strategic advice to policymakers, philanthropists, and practitioners; and new, promising ideas that expand opportunities for all. Our work inspires effective decisions that advance fairness and enhance the well-being of people and places. Copyright © November 2019. Urban Institute. Permission is granted for reproduction of this file, with attribution to the Urban Institute. Cover image by Tim Meko. Contents Acknowledgments iv Executive Summary v State and Local Approaches to the Chicago Region’s Racial and Ethnic Wealth Inequity 1 Understanding the Racial and Ethnic Wealth Gap 2 Why Does the Racial and Ethnic Wealth Gap Matter to the Prosperity of the Chicago Region? 6 Narrowing the Racial and Ethnic Wealth Gap at the Local and State Level 8 Strategies to Build Black and Latinx Assets 9 Strategies to Reduce Black and Latinx Delinquent Debt 14 Bold Bets toward More Equitable Wealth-Building Structures and Policies 17 Looking Ahead 20 Notes 22 References 26 About the Authors 30 Statement of Independence 31 IV ACKNOWLEDGMENTS Acknowledgments This report was funded by S earle Funds at The Chicago Community Trust. We are grateful to them and to all our funders, who make it possible for Urban to advance its mission. The views expressed are those of the authors and should not be attributed to the Urban Institute, its trustees, or its funders. Funders do not determine research findings or the insights and recommendations of Urban experts. Further information on the Urban Institute’s funding principles is available at urban.org/fundingprinciples. A special thanks to Joanna Trotter of the Chicago Community Trust for her valuable insights, encouragement, and guidance throughout the development of the report. Erika Poethig and Tracey Rutnik of the Urban Institute provided direction in shaping the report’s framing and approach. We would also like to thank Donnie Charleston, Aaron Shroyer, LesLeigh D. Ford, and Emily Bramhall for their contributions and insights on prior versions of this report, as well as Signe-Mary McKernan, Diana Elliott, Justin Milner, and Alanna McCargo for their thoughtful review. Finally, we are grateful to Serena Lei, who helped prepare this report for publication. EXECUTIVE SUMMARY V Executive Summary In Chicago, as in many metropolitan areas across the US, the growing racial and ethnic wealth gap reflects the limits on opportunity that hold back many residents of color. Foundational building blocks of economic prosperity such as owning a home or paying for college require not just income from a job, but access to capital. Without it, families face a ceiling on how much economic success they can achieve. The prosperity of the region, too, is capped when many of its residents are unable to be financially resilient, invest in their futures, and contribute to the economy. In this report, we look at the effects of the racial and ethnic wealth gap nationally and in Chicago; explore which policies and practices created and continue to reinforce it; and present approaches that policymakers, practitioners, and other changemakers could consider to narrow the wealth gap in the Chicago region and in other regions across the country. Understanding the Racial and Ethnic Wealth Gap Wealth is the amount of assets a person owns minus the debt that they owe. So, policies and programs designed to close the racial and ethnic wealth gap should aim to build savings and assets and reduce rates of delinquent debt. In 2016, the median net worth of white families in the United States was $171,000—10 times that of Black families and 8 times that of Latinx families. Those gaps have grown over the past several decades and are expected to continue growing.1 It’s hard to estimate the size of Chicago’s racial wealth gap because data about local wealth are limited. But research on homeownership, asset poverty, and debt and credit in Chicago strongly suggest that Black and Latinx residents are far less well off than white residents.  In Chicago, the homeownership rate for Black families (35 percent) and Latinx families (43 percent) is lower than the rate for white families (54 percent).2  The median home value for white homeowners is $275,000, considerably higher than the median home value for Black homeowners ($145,000) and Latinx homeowners ($180,000) (Henricks et al. 2017). VI EXECUTIVE SUMMARY  An estimated 67 percent of Black households and 71 percent of Latinx households do not have enough saved to live above the povert