Has Public Policy Failed To Increase Minority Homeownership Rates?

This week we saw the release of census data on US home-ownership rates by ethnicity dating back to 1975. After generations of efforts to improve the gap in home-ownership rates in the US, with policies put forth from both Republican and Democratic Administrations, it is striking to see that very little has improved.

Here’s what’s inside the census data. For FY 2018, the overall home-ownership rate in America stood at 64.4% with white-only households at 73%, black-only households at 42.9%, and Hispanic-only households at 47.1%.

The summary is a stark wake up call to policy makers, industry, banking, home builders, and more, to take a closer look at their efforts. Because nearly half a century of effort have only widened the gap in home-ownership rates between whites and minorities.

Two-race households were slightly higher, above 50% for both black-mixed and hispanic-mixed households. In comparison, looking back to the Census tables for 1975, the overall home-ownership rate stood at 64.9%, significantly lower than today. But what’s in the numbers shows that white home-ownership stood at 68.6%, black home-ownership at 43.7%, and Hispanic at 43.9%.

So, with more than four decades of policy focus, significant subsidization, the implementation of new credit underwriting models and more, there has been some improvement in the rate for whites of 4.4%, blacks of less than 1%, and Hispanic households of 3.2%.

The summary is a stark wake up call to policy makers, industry, banking, home builders, and more, to take a closer look at their efforts. Because nearly half a century of effort have only widened the gap in home-ownership rates between whites and minorities.

The Washington Post focused on this same issue with an article highlighting what they call a “heartbreaking decrease in black home-ownership.” They profile how economic hardship on families with less wealth and assets has longer-term negative effects on home-ownership outcomes.

“Over the past decade, the real estate fortunes for African Americans have reversed course. Despite a strengthening economy, including record-low unemployment and higher wages for black workers, home-ownership levels for that group have dropped incrementally almost every year since 2004,” stated the Washington Post article.

So, what is behind this data? In a complimentary story from 2017, author Tracy Jan published a piece in the Washington Post focused on the widening wealth gap between whites and minorities stating: “The median net worth of white families — $171,000 — is now 10 times that of black families, and eight times that of Hispanic families.”

Wealth has a correlation across multiple factors. It is affected by inherited wealth – what is passed down from parents to their children. It is likewise affected by wages and savings. Those who make wages that leave little to no excess after fixed monthly expenses will be less able to build wealth. It is also impacted by the opportunities for homeownership. As the S&P/Case Shiller national home price index below reflects, despite the impacts of the Great Recession, home prices have steadily risen over the decades producing wealth for those who had access to home-ownership.

The Tracy Jan 2017 article referenced research done by Urban Institute on the subject of wealth inequality referencing some stunning charts that point to the widening disparity. According to Urban’s research, “White family wealth was seven times greater than black family wealth and five times greater than Hispanic family wealth in 2016. Despite some fluctuations over the past five decades, this disparity is as high or higher than was in 1963.”

The impact of earnings to long term wealth is fundamental to this discussion. As Urban shows, the long-term wealth from wages earned over a lifetime is starkly different along ethnic lines. For baby boomers, looking to retire with resources to pay for simple things like shelter and food, the gap here can make a significant difference to the level of independence they may be able to afford in retirement.

It is just as stark when looking simply at retirement savings, something that is a challenge for millions of Americans today, but far more difficult for minorities as seen here:

So, what can be done? The first is to recognize what the data says. First, is that the home-ownership gap between whites and minorities has not been measurably helped by public policy efforts to improve the condition of minority home-ownership in America. Second, is to recognize that the roots of this go back to the foundation that formed this nation and cannot be solved without a multi stakeholder, bi-partisan, national effort to change the paradigm of education, job opportunities, wage disparity, household formation and housing stock, and policies related to subsidies. Intentional action that affirmatively focuses on solutions here are the only way to offset decades of exclusion from wealth opportunity in this nation. Third, is for those with the ability to address the gap to recognize that a widening of the wealth gap in a nation like ours that has created such unequal outcomes that over time can result in negative societal responses such as civil unrest, urban frustration, and a slowing of the economic benefits that would come from an intentional focus to close this gap.

Real Estate elevates the nations economy. As was published in the Balance, real estate is a massive economic engine that benefits or can adversely impact the economy depending on its direction. “In 2018, real estate construction contributed $1.15 trillion to the nation’s economic output. That’s 6.2 percent of U.S. gross domestic product. It’s more than the $1.13 trillion in 2017, but still less than the 2006 peak of $1.19 trillion. At that time, real estate construction was a hefty 8.9 percent component of GDP.”, states The Balance. “Real estate construction is labor intensive. The drop in housing construction was a big contribution to the recession’s high unemployment rate.”

Making this debate the primary focus of policy leaders is needed and would benefit the entire nation. Starting by looking at this weeks census data and then focusing on the root causes is how to put a reality check to those who think we are making progress as a nation on this issue. It is the economy here that should be the focus of an effort to lift the wealth of those who have had less access to the opportunities over these past decades. At minimum, a recognition that the efforts for this past half century have done little needs to be acknowledged.

 

Dave Stevens

David H. Stevens, CMB, is Senior Advisor at Mortgage Media, and former SVP of Single Family at Freddie Mac, former EVP at Wells Fargo Home Mortgage, former President and COO of the Long and Foster Realty Companies, former Assistant Secretary of Housing and FHA Commissioner, former CEO of the Mortgage Bankers Association