One of the largest challenges in housing is how to address a minority homeownership rate that is at its lowest rate in 70 years for African American households.
Changes that were put into place to try to address the widening gap between Black and White homebuyers have not always helped, and in fact, have backfired. Before the housing crisis in the early 2000s, some of the programs put into place opened the door for predatory lending practices that preyed on minority homebuyers with teaser rates and access to credit that didn’t match what was best – or viable – for the borrowers.
This is an issue that plays a large part in the economic health for African American families. A larger percentage of minority families’ wealth is often in their homeownership, while White borrowers overall have more legacy wealth.
Alanna McCargo at The Urban Institute published A Five Point Framework for Reducing the Black Homeownership Gap last May.
The points: Focus on sustainable homeownership and preservation; Advance policy solutions at the local level; Tackle housing supply constraints and affordability; Promote an equitable and accessible housing finance system; and Accelerate outreach and counseling for renters and mortgage-ready millennials.
McCargo recently talked with industry veteran Teresa Bazemore and Mortgage Media to take a closer look at these points.
“You have to deal with local level issues because in different parts of the country, the issue for Black home ownership is different,” McCargo said, noting that there isn’t one tidy solution. “In some parts of the country, it’s an issue of just unaffordable supply, 100%, right. But in other parts of the country, it’s completely like a banking desert. Absolutely a lack of access to credit. There are different reasons depending on where you are. So, we’ve got to kind of take the conversation local.”
McCargo said we should also look at the role the GSEs are playing – or not playing – in terms of participating or making access available.
“Counseling and outreach definitely are a piece of this,” she said. “We worked with Freddie Mac and identified a very large population of mortgage-ready Black and Hispanic millennials that are living in places now that have credit scores, incomes and could support home ownership, but for whatever reason, they’re still renting.”
Another concern is that the rate is falling as black seniors who were homeowners before, are leaving homeownership, McCargo said. “That is having a significant impact on the homeownership rate overall. So, sustainability is huge as well.”
Bazemore pointed out that this also goes to the transfer of wealth.
“The wealth in the black communities has often been tied to home ownership,” Bazemore said. “Seniors are losing their houses for whatever reason – I’m sure some of it is predatory – but some of it’s probably also they may be more impacted by increases in costs and medical issues.
“Other things that keep them from being able to keep their homes include taxes going up,” Bazemore continued. “There are neighborhoods that have historically been black neighborhoods for a long time. Now, they’ve changed as more people and millennials are willing to go re-gentrify areas. Then it becomes unsustainable sometimes for the existing homeowners to be able to pay the taxes as property values go up … that also means that if those folks are losing their houses, whether they lose them or they’re forced to sell, that means that wealth is not transferring over to the next generation.”
There are many aspects that need examining, including a look at the history of the issue – separately for recent history, and for pre-2000, when borrowers had to face race-based laws and redlining. What are the specific regional challenges, and what can be done about hot markets advancing gentrification? Closer attention needs to be paid to supply and finance challenges, and how renters become buyers.
What needs to be done at the federal level? At FHA and VA, what reforms and improvements are needed? And how do the plans look for the 2020 presidential candidates? These are all questions McCargo and Bazemore discussed as issues that should be looked at in more depth.
This is an issue that Dr. Martin Luther King, Jr., fought for in the mid-1960s, as he co-led efforts in Chicago for “open housing” – the right for Black Americans to buy homes anywhere they wish. Read this excellent article by Aastha Uprety at EqualRightsCenter.org. There’s an informative graphic on Civil Rights Testing. In a 1966 speech at Chicago’s Soldier Field, Dr. King addressed job and housing inequality. “Now is the time to make real the promises of democracy,” he said. “Now is the time to open the doors of opportunity to all of God’s children.”
So now, 54 years later, how open are those doors of opportunity? We look again to the data from Urban Institute, which has made it a priority to examine the homeownership gap.
“I’m probably completely biased because of what I do for a living, but I personally think that Black home ownership is critical. Property ownership is critical for every Black family,” McCargo said. “I think the way we think about the wealth that’s generated through it, we have to think about it through a different lens. The reason that it’s worked for white families, for example, is that the wealth from home ownership has been translated into taking that equity, investing it in your child’s education or taking that equity and helping your child put a down payment on their house or having a will transferring the proceeds or an actual home to that family. And those things aren’t happening equitably in the Black community. We need to take a hard look at that.”