How Centuries of Discrimination Keep African Americans Out of the Housing Market
In 2002, President George W. Bush proclaimed June National Homeownership Month. This year, the nineteenth day of that month also marks the 150th anniversary of the first Juneteenth celebration. The holiday commemorates the total emancipation of slaves in Texas, and the United States more generally, following the end of the Civil War, and celebrates the common heritage of and progress made by African Americans over the past century and a half. But it's also a day of painful reflection, given the social and economic inequality that persists in our country and the failure to create an opportunity economy that works for African Americans. This failure is readily apparent in the housing market, as the 2016 Assets & Opportunity Scorecard clearly illustrates.
Home equity makes up a greater share of household wealth for African Americans than it does for the majority of other racial or ethnic groups, yet homeownership rates among African Americans lag behind not only white households, but every other racial or ethnic group. Nationally, only 41% of African-American households are homeowners, compared to 71% of white households. In only four states — Mississippi, Delaware, South Carolina and Wyoming — do more than half of all African-American households own their homes; for comparison, only in the District of Columbia do less than half (48%) of white households own homes. In fact, data from the Scorecard reveal that only two additional states — Alabama and Maryland — have African-American homeownership rates that are higher than the nation's lowest white homeownership rate. For comparison, there are 21 such states for Latino households, and 42 such states for Asian households.
Even for the African-American households that do own their residences, homeownership is not enough to erase the racial wealth gap and this country's legacy of discrimination. Not only is the average African American-owned home worth only two-thirds the value of the average white-owned home, but four in 10 African-American homeowners are cost-burdened, meaning that they pay more than 30% of their income on their mortgage and associated housing costs. Only 28% of white homeowners are similarly burdened. The relatively high rate of housing cost burdens among African-American homeowners is partly attributable to discrimination in the credit and lending markets. African-American homebuyers are steered toward high-cost mortgages at rates far exceeding those of comparable white homebuyers. The housing crisis that precipitated the Great Recession left a greater share of African-American homeowners at every income level underwater or foreclosed upon, compared to white homeowners. Moreover, the housing market recovery, slow as it has been in coming, has failed to reach the African-American households that the crisis hit hardest.
As a result — and a symptom — of this inequity, median household net worth varies from nearly $111,000 for white households and $95,000 for Asians, to barely over $7,000 for African-Americans, a divide that has only widened as the recovery has taken effect. African Americans are less likely their white peers to receive intergenerational transfers and gifts that can be used for a down payment on a home; plus, with lower average incomes than their white counterparts, African-American renters hoping to make the move to homeownership are subject to greater relative housing costs, making it even harder for them to save to reach that milestone. As a result, African-American households purchase homes on average eight years later than white households. African-American households, irrespective of income, are regularly targeted for predatory lending products, including high-cost and subprime mortgage loans and contract for deed lending, a practice with roots in the discriminatory lending climate of the early 20th-century and redlining of the mid-20th century, which has seen a resurgence in the post-recession housing market.
These shortfalls in access and outcomes not only limit the amount of wealth and credit available to African-American families, but also restrict access to safe and affordable health care, gainful employment and quality K-12 education, all of which are closely tied to property value and location. Continued racial discrimination has effectively closed off the foundational elements of opportunity to many of America's racial and ethnic minority groups, African Americans foremost among them.
Yet, this cultural moment, more than perhaps any in the past 20 years, has stripped the thin veneer of deniability from the fa?ade. The disparate impact of federal, state and local policy on the outcomes of African-Americans has been widely known for years. But more data than ever have now become available to serve as testimony, as have the collective activist movements given life in communities across the country, from Baltimore and Chicago to Ferguson and Oakland, and amplified through social media. This discrimination continues to pervade every American economic and social system, however, suggesting that there is no silver bullet to eliminating the homeownership gap, let alone the entire racial wealth divide.
This is why Prosperity Now, through its Racial Wealth Divide Initiative, recommends that the next presidential administration conduct a comprehensive racial wealth audit, in order to more fully understand both the breadth of the problem and the policy change required to reverse it. State and local governments can facilitate greater access to the pathways to homeownership by targeting first-time homebuyer legislation directly to its communities of color. They can also help to protect the wealth gains made by African-American homeowners by instituting strong legislative restrictions against predatory mortgage lending and foreclosure servicers.
Until the racial disparity in economic outcomes is addressed openly and deliberately, at every level of government and by every citizen and stakeholder, and until redress is made a priority, our country will continue to leave its dual promise of opportunity and freedom — made explicit in our annual celebrations of emancipation and independence — unfulfilled.