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Blog: Low black homeownership is a national tragedy

Almost all analysts agree that the wide gap between the black and white homeowership rates is a serious problem. African-American homeownership remains near the level it was during the Jim Crow era. What this means is that the majority of African-Americans aren’t gaining the benefits of owning a home — the primary way people save money, access good schools for their kids, build wealth for retirement and pass it down to the next generation.

FHAinsure(1)According to the latest U.S. Census Bureau figures, black-only households had a homeownership rate of 42.1 percent to end 2017. The rate declined 60 basis points from the first quarter of 2017, but was a little higher than the average for 2016. There has been no progress made in closing the gap, however. The white homeownership rate was 72.7 percent to end 2017, 30.1 percentage points higher. The overall homeownership rate stood at 64.2 percent, 22.1 percentage points higher than the homeownership rate for African-Americans. 

The Washington, D.C.-based think tank the Urban Institute recently mapped this problem across the U.S. In its analysis of 100 cities with the largest black populations, not one of the cities had a black homeownership rate that was close to the white homeownership rate. The gap ranged from 14.5 percentage points in Killeen, Texas, to 50 percentage points in Minneapolis.  

The gap between the black and white homeownership tends to be higher in the Northeast, and lower in the South and West regions. According to the Urban analysis, several factors are in play, and these can vary by city. Factors include the size of the city, economic and job opportunities, the makeup of the black population (whether native born versus foreign born), home prices, proximity to education centers and colleges, access to traditional financial services, type of housing stock and affordability.

The Urban Institute took a closer look at four of the cities. Minneapolis, the city with the widest gap, has a smaller share of black households than most cites, at 3.4 percent. Incomes have been stagnant, and home prices have risen rapidly. The city also has a higher proportion of foreign-born black households than most. Pew Center Research suggests that black immigrants are less likely to be homeowners.

In Los Angeles, rising home prices have been a primary factor in keeping the homeownership rate down among African-Americans.

In Atlanta, the black homeownership rate has fallen 6 percentage points since 2005 after a run-up in the rate during the last housing boom. The Urban Institute said the 2008 housing crisis hit the black population in that city particularly hard, and African American households have struggled to make gains during the recovery.

Meanwhile, Washington, D.C., has one of the smallest gaps, but also has a larger percentage of affluent black households.  

Notably, the Urban Institute study doesn’t mention discrimination as a factor, but Urban researchers in other reports have noted that low levels of black homeownership perpetuates racial and ethnic inequality. It really is a vicious, self-perpetuating cycle. Basically, black households face a number of disadvantages, including racism, which makes it harder for them to become homeowners. They thus can't gain the benefits of homeownership —  such as home equity and better schools — that might eliminate some of these disadvantages and break the cycle of inequality.

A recent year-long study by the Center for Investigative Reporting’s Reveal News asserted that blacks and Hispanics have been denied conventional loans at far higher rates than whites. That analysis, based on 31 million records gleaned from Home Mortgage Disclosure Act data, suggests that the practice of redlining — essentially lenders refusing to serve minority neighborhoods — has persisted in 61 metro areas.

The Mortgage Bankers Association, however, called the Reveal News study “deeply flawed,” saying the analysis didn’t factor for a borrower's credit history, debt-to-income (DTI) ratio and loan-to-value (LTV) ratio. MBA also noted that the center failed to evaluate data on Federal Housing Administration (FHA) loans, which are often the best available option for first-time homeowners and lower-income borrowers. 


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