While this upward surge helps homeowners by increasing their net worth, it also magnifies how racial disparities in homeownership create missed opportunities in wealth accumulation for Black families and families of color.  The homeownership rate for Black Americans has fluctuated in the past decade: In 2010 it was 44.2%; in 2020, it fell to 43.4%, per the National Association of Realtors. Even with a slight increase from two years ago, as of the first quarter of 2022, Black households have the lowest homeownership rates in the country at 44.7%, as opposed to white households, which have a 74% rate of homeownership, as stated in the U.S. Census Bureau. Hispanic households fall somewhere in the middle, with almost half—49.1%—of Latinx families being homeowners as of the start of 2022, per the U.S. Census Bureau. 

The consequences of certain racial demographics being excluded from homeownership and thus the benefits of home price growth are incredibly stifling, according to Andre Perry, a senior fellow at Brookings Metro and the author of Know Your Price: Valuing Black Lives and Property in America’s Black Cities. 

“Wealth begets wealth,” Perry told Fortune. “So, people without it are being left behind economically and socially. By not being able to participate in the recent wealth creation moment, we’re bolstering economic stratification and inequality.” 

How does homeownership create wealth?

In 2021, the net worth of a homeowner was about $300,000 as opposed to the $8,000 net worth of a renter, referencing a 2022 report from the National Association of Realtors. Homeownership is central to building wealth because of key financial advantages like home value appreciation, tax savings and increased deductions, and the ability to borrow against the equity you have in your home. The typical net worth of a homeowner is approximately 40 times the net worth of a renter, per the report. 

“The single biggest driver of wealth appreciation in this country is homeownership,” Ryan Gorman, the CEO of Coldwell Banker, told Fortune. “Having that asset against which to borrow at relatively low rates can make all the difference in the world for individual and household financial planning. Last year alone, homeowners made more money from the appreciation of their home than the typical person in the U.S. made from their W-2 income, perpetuating that homeownership gap.”

The average home value appreciation was $52,667 from December 2020 to December of last year, which exceeded the median pretax income in the United States of $50,000, according to a recent study from Zillow. This means that the difference between being a homeowner and being a renter translated to over $50,000 in additional equity in just one year. And in incredibly popular housing markets like San Francisco, Seattle, and Salt Lake City, homeowners saw an average return of $204,914; $131,129; and $119,539 respectively. 

What do racial gaps in homeownership look like in major U.S. cities?

Black Americans account for 15% of the nation’s population across the 50 largest metropolitan cities, but they own a mere 10% of owner-occupied homes across the same areas, citing an April study by LendingTree. In contrast, white Americans across the nation’s 50 largest metros account for 64% of the population—but they own 76% of owner-occupied houses, per the study. 

Several cities that outpaced the nationwide year-over-year home-price increase of 20.55%, including Phoenix and Atlanta—where prices rose 32.4% and 25.71% respectively—also have large gaps in homeownership between Black and white residents, according to Brookings. Phoenix, in particular, has a dramatic Black/white disparity in homeownership rates with a difference of over 30%, per the Brookings report. And in Atlanta, the difference between Black and white homeownership rates is 26.9%, with 48.7% of Black households owning homes, in contrast to 75.6% of white households.

Hence, when home prices rose in the 20 metropolitan areas tracked by Case-Shiller, according to the S&P CoreLogic Case-Shiller Metro Area data, this increase in equity disproportionately advantaged white households—which typically have $165,000 more in household wealth than their Black counterparts to begin with. 

What systemic barriers bar Black individuals from becoming homeowners?

“In an ideal scenario, racism and historical racial inequities [should] play no part in the homeownership experience from buying to selling,” Lindsay McLean, the CEO and cofounder of HomeLister, a nontraditional real estate agency with an emphasis on technology, told Fortune. 

The issue, however, is that race-related obstacles still are blocking many Black households from the American dream of homeownership. Many factors contribute to reduced levels of Black homeownership, like dramatically higher rejection rates for Black mortgage applicants as opposed to applicants of other races, the significance placed on credit scores and credit history, and racial discrimination. 

“Lower credit scores among Black people reflect discrimination and lower wealth,” Perry told Fortune. “Current discrimination in labor markets doesn’t help. In addition, we know that equally qualified Black people are denied loans more and receive higher interest rates. Lower home ownership rates are not a coincidence.” 

In fact, Black applicants are denied a mortgage at a rate 84% higher than white applicants, which is a 10% increase since 2019, according to a recent Zillow report. Credit history is the primary reason cited for Black applicants who are denied access to mortgages. However, the lack of traditional financial services in Black and Latinx neighborhoods systemically perpetuates significant gaps in credit history for Black applicants, per the report.  

Black individuals and households are more likely to live in urban neighborhoods that have a higher prevalence of check-cashing counters and payday lenders and less proximity to traditional banks, referencing a 2021 Brookings report. These alternatives to traditional banking do not build up a credit history for their low-income clients and have the added disadvantage of being exorbitantly expensive—the average interest rate on the average payday loan is 391%, compared to 10.3% for the average personal loan from a commercial bank, per the report. 

Also, average credit scores are typically lower among Black and Latinx Americans compared to white Americans, citing a Credit Sesame survey. More than 50% of white households have a minimum FICO credit score of 700, as opposed to only 20.6% of Black households, citing a research report from the Housing Finance Policy Center. One-third of Black households with credit histories have insufficient credit and lack a credit score, while only 17.9% of white households have missing credit scores. As a result of these financial differences, lenders denied roughly 20% of Black mortgage applicants in 2020, which was nearly double the denial rate for white applicants, according to Zillow. 

What can be done to improve Black homeownership rates?

It is evident that disparities in mortgage application denials and homeownership rates across racial groups are contributing to income inequality. However, steps can be taken to begin to rectify the issue. Financially contributing to communities of color and their respective neighborhoods to better level the playing field is a great starting point, according to Gorman.

“There are several steps that cities can take to boost Black homeownership, and it starts with fair and equitable investments in communities,” Gorman told Fortune. “Decisions such as where to place freeways, which potholes to fix, planning for public transportation, and other basic infrastructure necessities should be prioritized through a socioeconomic lens.” 

Along with investment in in diverse neighborhoods, reworking the credit industry to be more inclusive to applicants with diverse financial backgrounds would lower the barrier to homeownership and positively contribute to increased Black and Brown homeownership rates, according to Perry.

“Adopt credit scoring practices with less discriminatory impact,” Perry told Fortune. “Current metrics of credit scoring do not account for regular payments from rent and utilities; instead they prioritize loan and credit card payments. Expanding notions of credit building can dispel the myth that Black homeowners are risky investments.”

Perry also suggests extending credit and down payment assistance to borrowers impacted by discriminatory housing and lending practices. But to put an end to the rampant racism in the housing industry and create a just future, the trauma and wrongs of the past must be fully addressed, according to the housing expert: “Historical and ongoing policies such as redlining, restrictive covenants, ‘steering,’ and more have extracted wealth from Black neighborhoods for generations,” Perry told Fortune. “While it is not enough to simply extend credit based on redlining maps drawn in the New Deal Era, past injustices must be redressed by helping to develop areas left behind by racist policies.”