by Tony Brown 

A strong work ethic and a significant improvement in education -- without some asset accumulation like homeownership -- cannot close the overall well-being (three-quarters that of Whites) gap for Black Americans.

For example, no matter how hard Blacks work or how well educated they become, they cannot close the inequality gap unless they significantly improve their accumulated wealth -- home equity, inheritance, savings, stock and other investments. It may also surprise you to find out that because young White families bought their first home, they were able to significantly provide assistance at a crucial stage that advanced the standing of their adult children beyond the merits of their own achievements.

Thank “transformative assets,” as they are called, and higher interest rates on home mortgages typically paid by Blacks for the success of these fortunate White offspring. 

Those are the conclusions of a study reported in a book, The Hidden Cost of Being African American: How Wealth Perpetuates Inequality, by Dr. Thomas M. Shapiro, a professor at Brandeis.

This research by Dr. Shapiro also explains why each succeeding generation of asset-rich White families will continue to maintain an advantage over asset-poor Black families, not just because of discrimination or better schools, but because financially-strapped Black parents do not have the assets to leave to their children or do not understand the value of intergenerational transfers of investments. Even when the Black parents are equal to the White parents in incomes and education, the gap remains when Blacks are without home equity or other assets.

Although Dr. Shapiro does not highlight it, his research also demonstrates that very important core values are at work, and they are as important as the accumulation of assets. White advantaged children have been advancing on the shoulders of selfless parents who put their children first.

We learn, once again, that the future of our nation’s social and economic well-being depends on how well parents care for and prepare their children for the future. With an awareness of this new information about the role of assets as a competitive edge, a burgeoning Black middle class can now do the same thing -- if real estate and lending markets will treat Blacks fairly and capital is made available by the traditional lenders for Black homeowners.

Conventional wisdom tells us that African Americans suffer an inequality gap with Whites solely because of racial prejudice. That assertion was never entirely true, and now there is research to prove that one very important factor is the structural role that investments play. Even as racial prejudice declined significantly over the past three decades and Black income and educational levels have dramatically improved, the well-being gap between Blacks and Whites remained as a puzzling and stubborn reminder that something else was effecting the outcome.

The advantage that Whites have over Blacks, Dr. Shapiro’s research shows, has more to do with real estate and other assets, the inherited wealth, that White families give to their children. That suggests that racial discrimination in homeownership may be the number one reason for a plethora of social and economic problems that plague the Black community, and that increasing homeownership can help reduce these problems.

(When continuing racial discrimination in crucial areas like homeownership is combined with poor schools and high unemployment, they become an almost insurmountable obstacle for the Black community to overcome. However, the future accumulation of assets that become inherited wealth, such as real estate, can forge a dramatic breakthrough for Black America or any economically disadvantaged group. Now that the Black middle class has quadrupled in the last half-century more Black families can shift their investment strategies to ensure a more competitive future for their children. Black families must, of course, focus on inherited wealth for their offspring, such as real estate and other investments. Buying their first home, research shows, is crucial for a family in this delicate process of economic empowerment.)

I have maintained for decades that empowerment for economically disadvantaged groups can only be achieved if they focus on the ownership of real estate as part of a series of market solutions to social problems. Very few influentials in the money markets or community advocates have given my ideas any serious attention. Now this research confirms my longstanding plan for disadvantaged communities to purchase income-producing properties as a way of accumulating equity that can be passed along as an intergenerational transfer of wealth for future generations.

In past years I have shared how to accumulate $1.5 million in equity by purchasing one income-producing property (“wealth homes”) a year in the northeast region (as an investor/member, you can live anywhere in the country) -- under the supervision of mortgage bankers. Entrepreneurial home ownership is only possible with a new definition of success and progress that stresses self-empowerment through “wealth homes” and transfer of property and other asset accumulation to the next generation. Mama also lays out the market forces involved in the demand for scarce housing.

Like this self-help effort, the African-American community’s self-empowerment must come from market-driven solutions (empowerment through entrepreneurship) that can be applied to just about every social or economic predicament.