The Scotsman Guide - Victor Whitman - 01 March 2017
After fair housing legislation was passed in 1968 during the Civil Rights era, the black homeowership rate increased for 30 years and reached nearly 50 percent in 2004, but all those gains have been erased in the last 12 years.
The homeownership rate for black households ended 2016 at 41.7 percent, near a 50-year low, according to the U.S. Census Bureau. Black homeownership hasn’t been this low since the time when housing discrimination was legal.
Equally troubling to advocates is a widening gap between black homeownership and other major ethnic groups. The black homeownership rate is now 30.5 percentage points lower than non-Hispanic whites (72.2 percent) and 22 percentage points lower than the national homeownership rate of 63.7 percent. It is also 4.6 percentage points lower than the Hispanic homeownership rate, the group with the next-lowest homeownership rate among the major ethnic groups, at 46.3 percent as of year-end 2016.
The falling homeownership rate has deep social implications for future African American communities and neighborhoods, according to advocates.
“Homeownership is the number one way for African Americans to build wealth,” said Ron Cooper, president of National Association of Real Estate Brokers (NAREB). “There are so many other things tied to it.”
NAREB is an African American-led group that was founded in the 1940s to promote black homeowership and recently set a goal of creating 2 million new black homeowners within five years. Cooper acknowledged that target is highly ambitious.
“We lost a trillion dollars worth of wealth that we must regain,” Cooper said. “For America in general, if 2 million black homeowners bought homes, that raises the economy. America does well.”
Cooper said NAREB has been advocating for policies changes that would boost access to conventional Fannie Mae and Freddie Mac loans. He pointed to Pew Research Center studies reporting that blacks accounted for less than 4 percent of the conventional loan applications in 2015, and blacks were denied conventional loans at much higher rates than other ethnic groups. He also said the standard credit-scoring systems are “antiquated” and “unfair” to minorities.
One of the problems contributing to the low homeownership rate for African Americans is fear. African Americans were a primary target of predatory lending a decade ago. In many cases, African Americans refinanced with exotic loan products, draining out all of the equity in their homes. After housing values crashed, they lost their homes to foreclosure in even greater numbers.
“African American people are not applying for home loans,” Cooper said. “We believe that is a problem with the devastation that the downturn caused.The devastation and what was seen in the community, African American people were just afraid. They were victimized.”
The reasons for the decline in the black homeownership rate are many and complicated, however. Various studies have shown that African Americans as a group, compared with whites, have lower credit scores, lower incomes and lower education levels. The lower homeownership rates contribute to these social problems because blacks are denied a primary wealth-building tool. A Pew study determined that the wealth of white households was 13 times greater than that of black households in 2013, up from eight times the wealth in 2010.
It could potentially take ageneration to boost back the black homeownership rates, said Rolf Pendall, co-director of the Metropolitan Housing and Communities Policy Center at the Urban Institute. Pendall also said black households continue to face illegal discrimination and subtle forms of “legal” discrimination that have shut them out of the housing market.
“It is going to take a lot more than simply making it easier for people to get mortgages to really overcome the long history,” Pendall said. “It is a 75-year history, more than that, hundreds of years of a legacy of discrimination.You can’t just undo that by making mortgages easier to get.”
The homeowership rate has been on a declining trend generally for the past dozen years, particularly among the two youngest homebuying generations. This is especially true among black households, where young people also aren’t buying homes at the rate their parents did.
Pendall said he doesn’t agree that African Americans are less eager to own homes today, however.
“If people think that African Americans don’t want to own homes, that is a misconception,” Pendall said. “Instead, it is because they can’t access homeownership.”