Discrimination in every aspect of homebuying for Black Americans
A Black loan applicant in the United States is more than twice as likely to be denied a home mortgage than a white applicant, aggravating the homeownership gap between Black and white Americans, according to a new report.
Although loan denials for both Black and white applicants have slowed since the 2008 financial crisis, the gap in denial rates for Black and white people applying for home loans has widened significantly. Today, 15% of Black applicants are denied mortgages, while 6% of white applicants are denied the home loans, according to a report by the National Association of Real Estate Brokers, an advocacy organization for Black real estate professionals. The housing market remains persistently and disproportionately challenging for Black prospective homebuyers, the report’s writers say, although Black homeownership has been inching forward since the passage of the 1968 Fair
Housing Act, which made it illegal to discriminate based on race or religion in all aspects of home sales and rentals.
Nearly 45% of Black households own their homes, compared with more than 74% of white households. But in 1970, the gap in homeownership between Black and white households was about 24%. Today, it is 30%.
The disparity in homeownership
rates, as well as widespread appraisal discrimination, are compounding the massive income gap between Black and white households and thwarting Black Americans’ efforts to create generational wealth, the report notes. In 2020, the average white family held 12 times the wealth of the average Black family, and home equity is the largest source of wealth for both
Black and white households, the report says.
Since 2012, the real estate association has been compiling an annual report on the state of Black housing. The research is primarily based on information from the Home Mortgage Disclosure Act, which requires banks and other lenders to release details, including race, gender and income, of the people who apply for and obtain their loans. It is supplemented by census data, academic journals and media reports.
But the report, which relies on data from 2021, also outlines some gains: Black millennials made up the largest segment of Black homebuyers in both 2020 and 2021, a surge attributed to low interest rates, reduced personal spending and the newfound ubiquity of remote work, which allowed homebuyers to purchase homes in less expensive markets. These same factors also increased homebuying among white millennials over the same period, but while mortgage applications from both groups dipped in 2021 after peaking in 2020, white millennials experienced a steeper decline in mortgage applications last year than Black people of the same generation.
And Black female prospective homebuyers are applying for home loans — and being approved — at higher rates than previous years. In 2021, the number of applications from Black women, which has been climbing since 2010, jumped 14%. Applications from Black male prospective homebuyers, in contrast, have been declining since 2017. The report did not speculate as to why.
Still, overall, Black applicants trailed white applicants in securing mortgages. For all borrowers, the most common reason a home loan was denied in 2021 was debtto-income ratio, followed by credit history. Among Black applicants for whom the reason for denial was reported, about 34% of Black applicants were rejected because of debtto-income ratio, versus
29% of white applicants.
“Black (people) are making progress in slowly obtaining homeownership,” said Jim Carr, the report’s co-author and a housing finance and urban policy expert. “But the barriers are so substantial and so multifaceted that they’re never going to come anywhere near to closing the gap unless the federal government takes action that repairs the damage which the federal government did.”