In the Black community today, just one in every five households can afford to shift from renting to buying the median priced U.S. home. That’s according to the National Association of REALTORS®. NAR says Black homeownership is down over the past decade, and lagging behind that of other groups.
The trend will not reverse itself on its own. Why not? Because the real estate wealth gap between minority and non-minority residents is tied to a historically uneven playing board. It was tilted on purpose (more on that below). So, the industry needs to be just as purposeful in ensuring that the board becomes level.
Redfin Finds Reasons for Hope, and Room for Improvement
In 2021, Redfin’s chief economist pointed out that Black households own $2.2 trillion worth of U.S. real estate, and that’s a record high. The actual equity – in other words, the home’s value, after subtracting the owners’ mortgage debt — stood at an all-time high of $1.4 trillion.
Of course, a major factor was the amazing rise in property values for all homeowners in 2020 – 2021.
☛ Home equity is wealth built up by a homeowner over time. Equity is the paid-off amount of the owner’s property value.
That said, Redfin notes that the portion of real estate wealth held by Black homeowners is still small: it’s just 6%. Recall that 13% of the U.S. population is Black. And Redfin also says the white non-Hispanic population holds approximately 76% of U.S. real estate value.
After the big housing market crash, Black homeownership suffered greatly. During the financially bleak few years starting in 2007, minority homeowners experienced double the rate at which white households were foreclosed. Many of the defaulting homeowners had risky, high-interest mortgages that were difficult to pay off when values sank.
Their crushing losses are reverberating down through generations. To this day, most Black households rent. After the housing crash came lawmaking to prevent any repeats. Since then, most lenders use a very rigid set of criteria to approve mortgage applicants. The applicants who haven’t built up any home equity have the most difficulty when trying to get home loans.
Homeownership Equality Varies – State to State, City by City
In much of the southern region of the United States, large Black populations have helped ensure a fairer situation. But in some other states, the disparity in ownership statistics is striking:
- In Maine, the Dakotas, Minnesota, or Wisconsin, Blacks are less likely to be homeowners — by more than 40%.
- The disparity is greatest in North Dakota. There, Blacks are less likely to be homeowners — by more than 50%.
- NAR points to homeownership gaps of fifty-percent-plus in a few cities, too: Arden-Arcade CA, Torrance CA; Bethlehem, PA; Mesa, AZ; and Rochester, MN.
- In contrast, ownership equality is strong in Washington, DC — where there’s less than a one-percent difference.
At this point, what’s the average gap between African-American and white real estate ownership, nationwide? It’s more than 29 percent. That means the country as a whole is showing substantial inequality in real estate wealth. To put this inequality in context, consider this. In 1960, the gap was smaller, at 27%.
Enforcing Fair Housing Law: It’s Now Very Much a Thing
In 2022, the Department of Justice and the Consumer Financial Protection Bureau secured the first-ever redlining settlement, against the Trident Mortgage Company and the company’s affiliated agency Fox & Roach LP. The companies, which operate in the mid-Atlantic United States, are owned by the high-profile Berkshire Hathaway corporation.
What’s redlining? It’s a violation of the law, related to excluding certain people from mortgage services because of the demographics where they live. A federal case claimed that the Trident Mortgage Company did exactly that. And that the pattern continued for years.
The parties settled. As part of the court settlement, the Trident company is investing more than $20 million to expand mortgage opportunities in and around Philadelphia.
Settlements for redlining by Lakeland Bank and City National have also been achieved, as announced by the Justice Department in January 2023.
☛ You can read more about how the Department of Justice has confronted mortgage discrimination here.
Appraisers and Agents Wanted – To Take On Bias
Industry professionals now know that it’s not enough to try to avoid bias. Bias has to be actively examined and confronted. Otherwise, it’s often invisible, because real estate practices have been skewed for so long.
For example, segregation persists around areas that long had racial covenants in real estate deeds. Race-based language on deeds deliberately, explicitly, kept minorities from buying in certain areas.
Low-ball appraisals are another issue.
Lydia Pope is president of the National Association of Real Estate Brokers, which advocates for Black housing professionals. Pope points out that appraisers have a major role to play in promoting equality in the real estate world. Pope is pressing the industry to enlist Black appraisers, as the New York Times recently reported. And through the Appraiser Diversity Initiative, Fannie Mae and Freddie Mac, together with the National Urban League, have also set out to boost the recruitment of underrepresented people into appraisal careers.
☛ Read about how the White House is shaping policy to make the playing board level for all U.S. households.
The National Association of REALTORS® in late 2020 launched the site Fairhaven.Realtor. It’s an online platform that simulates bias as it comes into real estate situations, informed by real peoples’ life experiences. “The training,” NAR explains, “provides customized feedback that learners can apply to daily business interactions.”
NAR offers free access to the platform to its 1.4 million member agents and industry partners. The Association believes a real estate agent must become “an advocate for fair housing and the future of our industry.”
In All Aspects, There’s Plenty of Work Ahead
So, where does the U.S. real estate industry stand in 2023? With much work ahead. The lack of progress since the 1960s is troubling. After all, the Fair Housing Act is a product of the 1960s. It was supposed to make housing equality the norm.
It would be nice to say equality really is coming, given the various initiatives aiming to support it. But we also know the financial turbulence in a pandemic’s wake will complicate the work even further.
Supporting References
REALTOR® Magazine, a publication of the National Association of REALTORS®: Black Homeownership Remains Disparately Low (Feb. 23, 2022; citing NAR’s 2022 Snapshot of Race and Home Buying in America).
Daryl Fairweather for the Redfin Blog: Three Reasons To Be Optimistic About Black Real Estate Wealth (Feb. 11, 2022 citing data from the Federal Reserve).
Lora Shinn for TheBalanceMoney.com (Dotdash Meredith): Addressing the Racial Homeownership Gap in America – How Gaps in Home Equity Reveal Larger Disparities (updated Jan. 13, 2023).
Shadi Bushra for Homeowner Media via TodaysHomeowner.com: Are Black Americans Being Locked Out of the American Dream of Homeownership? (Winter 2022-23; citing data from the Census Bureau’s American Communities Survey).
U.S. Department of Justice, Office of Public Affairs, Press Release: Justice Department and Consumer Financial Protection Bureau Secure Agreement With Trident Mortgage Company to Resolve Lending Discrimination Claims Settlement Provides Over $20 Million to Increase Credit Opportunities in Neighborhoods of Color (Jul. 27, 2022); see also U.S. Department of Justice, Housing and Civil Enforcement Section, Press Release: The Trident Mortgage Redlining settlement Is First Redlining Settlement Against Mortgage Company; Second Largest Redlining Settlement in Justice Department History (updated Aug. 3, 2022).
Debra Kamin for The New York Times: Real Estate – How Three Black Women Hope to Change the Home Appraisal Industry (updated Jan. 18, 2023); see also Jillian-White.com: About Me.
And as linked.
Photo credits: Agung Pandit Wiguna and Ekaterina Bolovtsova, via Pexels.