Homeownership is more than a mortgage. For a child, it also shapes their access to education, affects health, establishes a sense of community, enhances the chance of going to college, and promotes a happier family life. For adults, homeownership is one of the strongest tools American households use to build their wealth. Today, the average American homeowner has amassed $119,000 worth of equity in their home and that equity is increasing at a rate of about 4.8% a year.
As a wealth-builder, homeownership plays a more critical role for minorities than whites. During the last quarter-century, homeownership equity accounted for nearly half of all Black and Latino wealth, compared to about a quarter for white families’ wealth.
More than three-quarters of white households, 77.3%, own their own homes, and less than half, 44% of Black households own their own homes. The Black-white homeownership gap is 29.70 percentage points, 6.2 points greater than it was 52 years ago when the Fair Housing Act was signed.
Why Racial Homeownership Gaps Exist?
Outside factors such as affordable housing, gentrification, decreases in federal funding and programs for minorities, and discrimination in mortgage lending all directly affect the homeownership gaps amongst white, Black, and other minority households. Recent research by the Urban Institute found three correlating causes for the racial homeownership gap:
Black households are more likely to buy homes later in life than white households. The result is a lower level of equity when owners reach retirement age. Eighty-seven percent of white homeowners bought their first homes before age 35, compared with only 53% of Black homeowners. Not only are Black households less likely to buy their homes young, 18% of them never own a home before turning 60.
Black homeowners are less likely to sustain their homeownership. Among a sample of households that purchased their first home after age 44, 34% of Black homeowner households switched to rental housing, while only 9% of white households did so. Black families who sustained their homeownership carried more than $23,500 higher housing wealth into their 60s than Black households who moved from owning to renting during their lives.
Black homebuyers purchase less expensive first homes while using more debt. The average first home purchased by Black homebuyers is valued at $127,000, compared with $139,000 for white homebuyers, yet Black homebuyers, on average, have higher mortgage debt ($90,000) than white homebuyers ($75,000). Higher mortgage debt not only lowers current and future wealth, but could make it harder to financially maintain homeownership long term.
How to Combat the Racial Homeownership Gap and Identify Discrimination in Homebuying
In order to lessen the racial homeownership gaps we see today, programs and guidance need to be created and readily available to minority communities. For example, the National Association of Real Estate Brokers created the Two Million New Black Homeowners Program with the intent of helping minimize the gap and protect against homeownership discrimination. And, the NAACP provides a Fair Lending Program to help Black homebuyers receive fair distribution of credit.
Another way to combat the racial homeownership gap is to provide guidance to minorities looking to purchase the home and help them recognize the signs of potential discrimination in their homebuying journey. ConsumerAction, a website that helps consumers make informed decisions, created a downloadable document highlighting the different ways you can identify these discriminatory practices. In short, these are some things you can look for:
- A developer or agent refuses to sell to someone based on their race. This also includes if the developer or agent doesn’t return your phone calls or ignores offers you put in on the home.
- Lying about sale terms to place minority buyers out of the market. To protect yourself, always work with an agent you trust who can understand the terms and what the seller is ideally looking for before putting in an offer on the home.
- An agent who steers clients to or from certain neighborhoods because of race. If you’re a white homebuyer and an agent tells you minorities live in the neighborhood as a way to deter you, then the proper reporting should be made to the Fair Housing Equal Opportunity office.
- An agent failing to inform and show buyers all available listings in their desired area and price range. As a buyer, it’s your right to be able to view all the available properties that fall under your desired specifications. If an agent refuses to do so, discriminatory practices may be at play.
Discrimination can also come from mortgage lending and coverage practices, not just agents, landlords and developers. If you’ve found a home you love and you want to make an offer, or you’re in the process of getting pre-approved, then be sure you’re lender or insurance agent isn’t following the below practices:
- Denial of a loan or insurance due to location of the home. Lenders and agents are not allowed to deny approval due to the location or neighborhood of your home.
- Creating different terms and conditions on a loan because of race. Changes in the fees, points, and rates could all be identified as a change in the terms of a loan.
- Receiving an artificially low appraisal on your property. If you’re a minority looking to sell your home, then make sure you’re not given an artificially low appraisal, get second opinions and compare the appraisal to your home’s current value.
Education is how buyers, sellers and renters can protect themselves from racial discrimination in the housing industry. For a full list of rights and obligations from the Fair Housing Act, you can visit the Fair Housing Equal Opportunity website. If you’ve experienced discriminatory practices during your buying, selling or renting journey, then you can file an official complaint online as well.
Looking to Buy a Home?
If you’re looking to buy a home– or sell your current home in order to buy– then you can visit Homes.com’s How To section which includes free, step-by-step guides on the entire buying, selling, or renting process.