The national home ownership rate fell to 63.4% in 2016—the lowest yearly average in 50 years, according to the business data firm CoreLogic. And there may not be a rebound anytime soon. But the largest factor holding down the home ownership rate could be racial inequality. The rate among white Americans is more than 30 percentage points higher than among black Americans, according to Trulia, a real estate site. One recent study found that 72% of all household growth from 2015 to 2025 will be from groups other than non-Hispanic whites. So if these groups face hurdles to buying homes, it could harm the overall growth of the market.
Historic Housing Policy
For decades institutional racism has harmed minority borrowers ability to own an affordable home. An analysis by the The Wall Street Journal found that only 5% of mortgages were offered to African Americans in 2014, down three percentage points from seven years earlier. Hispanics were offered 9% of mortgages in 2014, down two points compared to 2007. Meanwhile white Americans saw their percentage rise by five points during that span.
The legacy of discriminatory housing laws, like the National Housing Act of 1934, which “redlined” predominantly black neighborhoods and shut out minorities from bank loans, continues to have lasting damage as well. African Americans and Latinos suffer from residential segregation, resulting in less value for their homes. If there were no racial disparity in homeownership rates, the overall gap in wealth between black and white American households would decline by nearly a third, according to a recent study from left-leaning public policy group Demos.
Black Home ownership Gains Erased
The Black community got hit harder by the housing crisis than other groups. In general, African Americans bought homes at the peak of the bubble at higher rates than whites and were often offered costly subprime loans, even when they qualified for prime loans with lower interest rates. Also, black families did not benefit as much as white families, overall, from the post 9/11 recovery.
According to Nextavenue homeownership has historically been the best way to build wealth by far. The average wealth of homeowners versus renters. The average wealth for black Americans who are homeowners is $90,000, with $50,000 of that in home equity. The average wealth for black Americans who are renters is $2,000.”
Home ownership declines have affected African Americans of all ages, but among the most alarming are the trends for African American Gen X’ers and Millennials, according to the Urban Institute. The home ownership rate for blacks aged 35 to 44 fell from 45% in 1990 to 33% in 2015, half the rate of whites in the same age group. If these trends continue, people born from 1965 to 1975 [now age 42 to 52] will likely to be the first generation from the 20th century that reaches retirement age with more renters than homeowners.
Action must be taken quickly in the private real estate market to reverse these trends or our community will find itself in deeply immersed in a form of economic serfdom. Home ownership builds wealth and wealth is a cushion against economic instability. But the problem is deep-rooted and there is no easy solution.
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