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For Many Minorities, Home Ownership is Only a Dream Something HUES BOA Strives to Change

Homeownership is one of the hallmarks of the American dream. It’s a beacon in our country, the land of opportunity. The U.S. is supposed to be the country where anyone, regardless of background or social status, can build a business and earn the money to own a home. But over time, it has become clear that home ownership has remained virtually out of reach for a significant sector of the US population: minorities. It turns out that the American dream of home ownership has been only a dream and not a reality for many people.

 

Minorities in this country experience a much lower percentage of home ownership than their white counterparts. In 2022, only 45% of Blacks and 48% of Hispanic households own a home. When you compare that to the 74.4% of White households who own their home, it is eye-opening.

 

And even though the number of homeowners overall has climbed since 2015, Black Americans have had the smallest share of this increase, leaving this population with a 29% homeownership gap.

 

What happened in the U.S. to create this glaring gap is complicated. But the reality is that the financial lending and credit systems governing the home purchase process have perpetuated inequalities. Without intentional changes, many minorities could remain shut out of real estate ownership for years to come.

How Did We Get to this Situation Where Minorities Have a Lower Percentage of Home Ownership?

There are many factors contributing to this glaring disparity: historical prejudice, redlining practices, and blatant mortgage lending discrimination. According to the National Association of Realtors (NAR), there are other challenges, too, such as the high cost of home ownership and the disproportionate financial burden it places on Black home buyers. But first, well look at the most impactful practices that have led us to where we are today.

Historical Discriminatory Practices Against Minority Home Ownership?

There are unfair historical practices that set the stage for decades of lower minority homeownership. One is redlining, a practice of denying housing loans or credit to residents of specific neighborhoods based on race or ethnicity. The term started in the 1960s when the HomeownersLoan Corp. used maps to mark out minority communities in red as financially “hazardous” to invest in. This legal” method of racial profiling in mortgage lending solidified economic disadvantages for generations.

While now illegal, the impacts of historical redlining continue to perpetuate the racial wealth gap we see today. Without investment in specific neighborhoods, primarily minorities, access to education and services is lower, economic advantages are absent, crime is higher, and neighborhoods remain undesirable.

By systematically blocking access to home ownership and credit, past redlining policies have kept minorities from owning property at the same rate as other groups. The effects are seen clearly across American cities, even decades later.

But What About the Federal Fair Housing Act?

 

It’s been more than 50 years since the Federal Fair Housing Act ended discrimination in housing based on race, and yet policies that informally and formally lockout minorities from homeownership are still active today.

For example, steering is the illegal practice of excluding buyers from a neighborhood based on any protected classes under the Fair Housing Act: race, color, religion, sex, national origin, age (40 or older), disability, and family medical history. This practice has blocked minority families from buying in white neighborhoods. So, a realtor may not give access to a potential home when Black families inquire about property for sale in a historically White neighborhood. And although it is frowned upon, the steering still happens today.

Higher Interest Rates and Lower Loan Approval for ALL Minorities

Historically, it is clear that the legacy system of lending has never given minorities equal access to mortgages.  A University of California at Berkeley analysis reveals that Black and Hispanic applicants face 0.08% higher interest rates on 30-year mortgages compared to White borrowers. That may not sound like a huge difference, but on a mortgage, it means an additional $765 million in extra interest.

And when it comes to mortgage approvals, a Zillow report in 2022 revealed Black applicants are denied a mortgage at a rate 84% higher than White applicants, an increase even since 2019. The most common reason for denial is credit history.

 

The Home Ownership Divide Has an Effect of Excluding Minority Families From Accumulating Wealth

After generations of these unfair practices, the effects are profound regarding wealth accumulation and savings. First, millions of minority Americans have never made it onto the property ladder by buying a starter home and then reaping the benefit of profit by selling after the home appreciates in value. The current generation of young adult minorities has also had fewer homes handed down to them from parents and grandparents, which is a traditional method of transferring wealth from older generations to younger generations.

Discrimination in housing practices hugely impacts personal wealth, as homeowners in previously redlined neighborhoods have gained 52% less, or $212,023 less, in personal wealth from property value increases than those in greenlined areas, as reported by Redfin.

Altogether, these factors shed light on the challenges that prevent fair and equitable access to homeownership and financial prosperity for millions of minority Americans.

 

How Do We Close the Home Ownership Gap between Whites and Minorities?


Standing together

Most Americans believe that everyone, regardless of race, should have equal access to owning a home. This is important because it means that in great numbers, we are united in the cause to close the homeownership gap. This means together, through grassroots advocacy and pressuring our government officials for policy changes, we can help close the homeownership gap.

Regulatory and Policy Changes

Lending institutions are gradually introducing more fair lending practices. The government has introduced some policies to reverse the effects of past discrimination. For example, in 2023, a regulatory change to the Community Reinvestment Act means that banks must broaden the areas where lenders will be required to extend mortgage loans and other services to low-income Americans. Banks will be rated on their loans in these formerly “redlined” areas and face penalties if they fail to comply.

There are also several down payment assistance programs: government and nonprofit programs to help low- and moderate-income individuals, including minorities, overcome the enormous financial barrier of a down payment. This can open home ownership to many individuals who can afford monthly loan payments but lack the up-front cash initially needed for traditional mortgage loans.

Lenders Changing Their Standards and Acknowledging Racial Bias

One of the recent programs to address the homeownership gap is Bank of America’s Community Affordable Loan Solution program, introduced in 2022, allowing no money down and no credit check to purchase a home. Instead of these typical qualifiers that disproportionately affect minorities, the bank will look at whether or not an applicant has paid their rent and bills on time. This is meant to support first-time home buyers who could not save for a mortgage down payment.

Government Programs to Support Home Ownership

There are also Government programs and local initiatives that focus on increasing the availability of affordable housing. These can contribute to more significant homeownership opportunities for minorities—for example, The U.S. The Department of Housing and Urban Development (HUD) offers programs like the Section 8 Housing Choice Voucher Program to assist low-income earners and minorities in buying a home.

United, We Can Support Home Ownership For All

 

As individuals, we can advocate locally to end segregation in our neighborhoods. We can vote to reform zoning laws in our areas and to allow mixed-income communities to exist and thrive: this means allowing multi-family homes, like duplexes and triplexes, and lowering minimum lot size. By allowing homes of all kinds in communities, our neighborhoods become more inclusive.

We can also vote for propositions allowing more investments in affordable homes in non-segregated communities. And vote for policies on a local level that incentivize mixed-income housing and make land available at a lower cost so people can invest in building affordable homes.

As we know, minorities face enduring challenges in achieving homeownership. Historical discriminatory practices and ongoing financial systemic issues contribute to a glaring gap in ownership rates. While acknowledging these challenges, we also want to highlight a collective desire for change.

 

HUES BOA and Supporting Grassroots Advocacy through Our Clothing = Our Voice

 

HUES BOA wants to encourage individuals to engage in grassroots advocacy, which is always a good place to start for matters affecting our communities’ hearts! Ensure you are informed about who your local government leaders are since these are the people who make policies that support equal access to home ownership. Write to and call them to make your voice heard on these issues.

Educating yourself on local and state elections matters is critical since these significantly impact zoning laws. Seek to understand what policies in your area may help build stronger mixed-income communities and which policies can support more investment in formerly redlined areas.

United through collective action and a desire to see all people have equal access to owning a home, we can help make homeownership a reality, rather than just a dream, for all.

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