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A Barrier to Black Wealth & How it Can be Overcome

THE HOMEOWNERSHIP GAP

Today less than half of all black Americans are homeowners. Recent data from the U.S. Census Bureau shows that Black Americans, have the lowest rate of homeownership at a mere 47%. While White Americans have homeownership of 76%, Hispanic Americans of 51.4%, Asian, Native Hawaiian, and Pacific Islanders of 61.4% respectively.

If these figures are not sobering enough, consider the fact that there is a 30-percentage-point gap between White and Black homeownership today versus the 27-percentage-point gap that existed in 1960 when housing discrimination was still legal and common practice, according to Urban Institute data.

LONGSTANDING HISTORIC BARRIERS

Prior to the passage of the Fair Housing Act of 1968, housing discrimination was commonplace in the form of denial of mortgage loans and lack of access to certain neighborhoods due to skin color. These discriminatory practices prevented black families from creating wealth to pass down to the next generation. While we would love to imagine that these discriminatory practices are a sad relic of the past, Black Americans still face many of these very same barriers today.

Looking specifically at lending practices, it has been found that Black Americans have a much harder time qualifying for mortgage loans. According to 2020 data from the Home Mortgage Disclosure Act, lenders deny mortgages for Black applicants at a rate 80% higher than that of White applicants. Additionally, the rise of subprime lending in the mid-2000s and the subsequent housing bubble that followed hit the Black community hardest. Between 2004 and 2007, Black Americans were 105% more likely than White Americans to have a high-cost mortgage according to data from the National Bureau of Economic Research. This led to a disproportionate number of Black families losing their homes during the 2007-2010 housing crisis. In fact, during this time nearly 8% of Black American and Latino families lost their homes due to foreclosure, compared to only 4.5% of White families.

On the matter of neighborhood access, A 2019 Newsday report showed that Black and Hispanic home buyers were disproportionately discriminated against by real estate agents in the Long Island, New York area. The three-year investigation found that many agents required different financial qualifications for White homebuyers and Black homebuyers before presenting house listings or giving home tours. Additionally, the report uncovered that many Long Island agents performed the practice of “steering” — the unlawful practice of limiting where you show a person a home based on race — by directing White homebuyers and minority homebuyers to different communities. If these practices are taking place in Long Island it is not far-fetched to assume they are occurring throughout cities all over the country.

WHY DOES IT MATTER?

It is no secret that owning real estate is one of the quickest ways to build and pass down wealth. It has been proven time and time again that homeownership builds significantly more wealth than renting. According to the 2019 Survey of Consumer Finances, a triennial survey that collects detailed accounts of households’ finances, the median homeowner has 40 times the household wealth of a renter – $254,900 compared to a mere $6,270. Furthermore, owning a home gives families more financial options- options that can be used to help give their children and relatives a financial head start. For instance, tapping into their home’s equity could be used to send a child to college, used as seed capital to start a business, or used as a down payment to aid a relative in the purchase of their own home. These sorts of options are just not available to renters. The gap in homeownership prevents Black families from wealth accumulation, thus perpetuating cycles of generational poverty.

WHAT CAN WE DO

While these facts and figures are bleak and seem to predict a dismal future this does not necessarily have to be the case. It may be difficult to fully stamp out lending and housing discrimination and disproportional negative outcomes, however here are some steps black families can take to set themselves up to achieve the goal of homeownership in spite of the many challenges.

1. Financial Education

The Biblical prophet Hosea wrote, “for lack of knowledge my people perish.” His words still ring true today. If Black families are to overcome generational poverty and begin to build wealth and assets, financial literacy is paramount. Finding a respected real estate professional is a great place to start. If you need assistance or want to speak to a real estate professional, you can talk to us here at Phamily1st Real Estate. Let us help you!

2. Reduce Debt

Having a lot of debt makes it difficult to purchase or even maintain a home. Unfortunately, black people also carry a larger debt burden than other ethnic groups, specifically student loan debt. While only 60% of students take out loans to pay for schooling, nearly 78% of African Americans do. Lenders look at your debt to income ratio when making lending decisions. Look closely at your other debt to see where you can cut back, perhaps car loan or credit card expenses can be eliminated or reduced to lower debt and build up savings.

3. Prioritize Savings

Unfortunately, more families are living paycheck to paycheck unable to even save for emergencies. One study found that 69% of Americans have less than $1,000 in savings. This is abysmal. Lack of savings will make it difficult to purchase a home because the down payment may be an impediment to your homeownership goal. However, there are many downpayment assistance programs out there to assist home buyers like yourself. Additionally, there are other ways to overcome the lack of savings and downpayment hurdles.

So, While the barriers to black homeownership are many, the benefits reaped from owning a home make it a worthwhile goal. Phamily 1st Real Estate agents can help you overcome these barriers and realize your dream of homeownership. Reach out to us today! Let us help you pass on wealth to the next generation and lift our people out of poverty. The wealth-building power of homeownership starts with you. Home is not only where your heart is, but where your wealth is as well. If you can pay rent you can pay a mortgage. Mortgage payments are investments, saving for the future, retirement, inheritance for your children and loved ones. Rent payment is not an investment. Invest your money. Buy a home now!

“Give us your low income, low credit score, low savings,

your masses yearning for homeownership.

Send these renters, couch surfers, adults still living with parents,

To us let us make homeowners out of them.

WE ARE DREAM MAKERS!

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