Higher Financial Instability in Illinois' Racial & Ethnic Communities

Nearly 27% of Illinois household are “asset poor,” meaning they lack the cash reserves to get by at the federal poverty level for three months when their primary source of income is eliminated through a job loss or other disruption. Racial and ethnic minority households are disproportionally asset poor. Where almost one in five (19%) while households are asset poor, approximately half of African-American (50%) and Latino (48%) households are asset poor. Asian/ Pacific Islander households and Native American households (38%) are also disproportionately more apt to be faced with asset poverty.

Illinois Households by Race/ Ethnicity:
White Households – 19% in asset poverty vs. 7% in income poverty
African-­American/Black Households – 51% in asset poverty vs. 25% in income poverty
Asian/ Hawaiian Pacific Islander Households – 26% in asset poverty vs. 16% in income poverty
Hispanic or Latino Households – 48% in asset poverty vs. 11% in income poverty
Native American Households – 38% in asset poverty vs. 16% in income poverty

Among the many reason for this disparity – a history of discriminatory mortgage lending practices, limited access to quality financial products, a weak systemic infrastructure to promote financial literacy and skills – are the troubling findings from the Federal Reserve Bank’s Survey of Consumer Finance. African-American & Latino families rely on their home as their primary asset. It accounts for 77% of the average African-American families’ wealth and 73% of the average Latino families wealth, compared to 34% of the average white families wealth. As housing prices tumble and foreclosures rise, the current recession depletes families of color of their primary investment, their home equity.

The unemployment rate, currently projected at 10% (August 2009) masks the disproportionate impact of this economic recession on racial and ethnic minorities. Since 2000, unemployment among African-Americans in Illinois has been, on average, 5.9 points higher than statewide figures. Latino unemployment has been, on average, 1.1 points higher that statewide figures. Rough estimates find unemployment for African-Americans at approximately 16%; Latinos it is approximately 11% (Illinois Department of Economic Security, 2009). As unemployment remains high in Illinois, a significant number of racial minority families are at risk of financial destitution.

The effects of the economic recession look more like a depression in communities of color. With higher rates of asset poverty, public policy needs to focus on the importance of improving the economic stability of families and individuals of color. Assets are the hallmark of financial stability for individuals of all income levels, providing a safety net for families.

Public policies promoted by the CFED Assets & Opportunities Scorecard and the Illinois Asset Building Group aim to help build wealth.

  • SUPPORT AFFORDABLE HOMEOWNERSHIP: To address the high housing cost for renters and homeowners, Illinois should provide additional assistance to first-time homeowners, safeguard homebuyers from high cost mortgage products, and encourage the development of affordable rental housing.
  • IMPROVE ACCESS TO HEALTH CARE: To address disparity in health care coverage across income groups, Illinois should expand public health care coverage for parents and adults without children, and help defray health insurance costs for small businesses and their employees.
  • CURB PREDATORY MORTGAGE LENDING: To reduce the number of homebuyers with high-cost mortgage loans and to lower the high foreclosure rate, Illinois should strengthen predatory lending and consumer protection statutes.

Targeting these and other public policy toward racial and ethnic minority individuals, families, and communities helps eliminate disparities and build financial stability and prosperity for all.