Potential solutions
Reasons include lower incomes, trouble with mortgage approvals
Darlene Easley doubted she could ever buy another home.
In 2014, the 53-year-old AfricanAmerican social worker lost her previous house to foreclosure after she went bankrupt over $245,000 in medical bills from her breast cancer treatment.
“I tried to hold on to the home, the car, but the bills kept piling up,” says Easley, who also was raising her teenage daughter on her own. “I was paying what I could, but everything spiraled out of control.”
In August 2017, Easley closed on a three-bedroom ranch home in Canal Winchester, Ohio. It wasn’t without work. She got on a budget, paid down debt, improved her credit score and compromised on location.
“The same house would have been probably $30,000 higher on the other side of town,” she said. “I had to go where ... my finances were.”
Easley’s challenges echo what many minorities face as they chase the American Dream of owning a home. The past year was no exception, according to a survey of home buyers from the National Association of Realtors.
All home buyers faced a tough housing market as prices and interest rates rose and affordability declined. But larger shares of black and Hispanic buyers had to surmount other obstacles – such as lower incomes, more student debt and mortgage approval troubles – beyond what their white counterparts faced, according to the NAR data.
Home ownership rates of black and Hispanic buyers remain far below that of non-Hispanic whites, with black home ownership suffering the most since the Great Recession. Over time, this hurts these groups’ ability to build wealth that can be tapped later in life or passed down to the next generation.
“Where you live determines where your children can go to school,” said Lebaron Sims, senior research manager at Prosperity Now, a Washington, D.C.based nonprofit that advocates for lowincome communities. “Home equity can be leveraged as an asset to start a business, pay for private school or college. (Lacking) that asset to draw on leaves these households at a major disadvantage.”
The home ownership rate for whites is currently 72.9 percent, or 2.7 percent below the rate when the Great Recession began in December 2007. The Hispanic rate is currently 48.5 percent, or 3.9 percent lower. The black rate is 47.7 percent, or 12.8 percent off.
The disparity in the home ownership rates has been a longstanding problem, advocates say.
“What we see today is the result of historical policies over the past several decades,” from redlining (withholding loans from neighborhoods considered poor risks) to the foreclosure crisis that disproportionately hit minorities due to predatory lending, said Jhumpa Bhattacharya, vice president of programs and strategy at Insight Center for Community Economic Development, a national research and economic justice organization in Oakland, California.
To increase home ownership rates among minorities requires a multipronged strategy using short- and long-term solutions.
One possibility is offering ongoing financial counseling for new homeowners so they can weather tough economic times.
Bigger picture for credit: Lenders can also adopt alternative methods of evaluating creditworthiness besides just credit scores, to expand access to mortgages. But there must be consumer protections in place to keep lenders from targeting groups with high-cost, risky loans as in the run-up to the last housing crash.
Grant programs: There can also be better education about down payment assistance or grant programs that states, municipalities and nonprofits offer first-time home buyers. “Money is left on the table every year because no one knows about these,” said McCargo of the Urban Institute.
But historical issues such as discrimination and economic inequality can’t be solved with simple fixes. Advocates say more capital must be invested in minority communities to counter the lingering effects of redlining and help create better paying jobs, schools and neighborhoods.
Progress has started in Hispanic communities. The home ownership rate for Hispanics has recovered the most since its post-recession low among all groups.
“We’ve seen across-the-board general improvements in Hispanic and Latino households,” Sims said. “It has been the biggest surprise.”