The relationship between income, housing, and wealth accumulation is interconnected. As Choi et al. (2019) note, “there is a well-documented persistence of income inequality by race, a key factor contributing to the homeownership gap. Household income is a key input for mortgage underwriting determinations, and income is used in various calculations required for mortgage approval, such as the debt-to-income ratio.” [i] While the median income differences between white and Black households plays a major role in explaining the current differences in homeownership,[ii] research finds that “even among Black and white households in the same income cohort, there is a noticeable homeownership gap.”[iii] Evidence therefore points to the intergenerational impact of homeownership, and not income alone, as the accumulated inheritances and parental support that accompany home ownership, are “crucial in helping low-income households attain homeownership.”[iv]
Rather than narrowing, the gap in homeownership rates by race has grown steadily over the last century. In 1900, the gap between white and Black homeownership was 27.6%,[v] that gap has not improved in the last 121 years with U.S. Census Bureau data from April 2021 showing a 29.6% difference between white and Black homeowners. [vi],[vii] The difference in median wealth has been attributable almost entirely to homeownership and the passing of resources through inheritance. Shapiro (2006) explains that homeownership acts as a vehicle for savings and for growing capital over the life course: “Homeownership and housing appreciation are the foundation of institutional accumulation. Indeed, for most Americans, home equity represents the largest reservoir of wealth: home wealth accounts for 60% of the total wealth among America’s middle class.”[viii]
Black homeownership peaked in 2004 at 49.7%, but fell as a result of the foreclosure crisis in which “black families were hit particularly hard, housing data show, forcing many out of their homes and pushing black homeownership rates to record lows.”[ix] In all, over 240,000 Black families or eight percent of Black homeowners lost their homes in the 2005-2008 period.[x] The impact of the housing recession of was largely the result of predatory lending which, while increasing the number of minority homeowners, did so at higher interest and with worse lending terms for borrowers. Dey and Brown (2020) note, “at the center of the Great Recession was a subprime mortgage crisis that disproportionately affected Black and Hispanic homeowners. New mortgage originations declined whereas foreclosures and other reversals in homeownership increased, wiping out gains in minority homeownership rates.”[xi] Following the recession, Black households did not see the rebound in homeownership that white households experienced.[xii] In fact, between January of 2000 and January of 2019, Black homeownership fell 6.3% overall.[xiii] More importantly, “half of the wealth owned by Black households in the United States was destroyed.”[xiv]
Solution #1: Increase minority homeownership
- Expanded down payment assistance programs in minority communities.
- Address bias and disparities in appraisals.
- Expanded emergency mortgage assistance/foreclosure prevention programs to ensure that a low income household doesn’t lose their home.
- “Ban the box” on NC Standard Offer to Purchase that asks if the borrower is receiving down payment assistance.
Solution #2: Provide more affordable housing options for those making less than 80% AMI
- Expand the number and amount for Low Income Housing Tax Credits (LIHTC).
- By-right zoning of multifamily, including small-to-medium-sized multifamily like duplexes, quadplexes, and ADUs.
- Provide seed funding for Community Land Trusts in major urban markets.
- Promote permanent supportive housing for those under 30% AMI.
Solution #3: Promote Affordable Housing Development in High Opportunity Areas
- Increase incentives to landlords to accept HUD Housing Choice Vouchers.
- Enact statutes allowing mandatory Inclusionary Zoning, not just in conditional programs.
- Expand Affirmatively Furthering Fair Housing rule and require Fair Housing Equity Assessments.
- Promote the use of publicly owned property for affordable housing or mixed-use development.
Download the printable Research, Policy, and Impact Agenda Part 2 Increase Housing Options
[i] Choi J., McCargo A., Neal M., Goodman L., Young C. (2019). “Explaining the Black-White Homeownership Gap: A Closer Look at Disparities across Local Markets.” Urban Institute. https://www.urban.org/sites/default/files/publication/101160/explaining_the_black-white_homeownership_gap_2.pdf
[ii] Choi, Jung Hyun. (2020). “Breaking Down the Black-White Homeownership Gap.” Urban Wire: Housing and Housing Finance. https://www.urban.org/urban-wire/breaking-down-black-white-homeownership-gap
[iii] Choi et al. ,2019
[iv] Choi, 2020.
[v] Olsen, Skylar. (2018). “Black and White Homeownership Rate Gap Has Widened Since 1900.” Zillow. https://www.zillow.com/research/homeownership-gap-widens-19384/
[vi] U.S. Census Bureau. (2021). “Homeownership Rates by Race and Ethnicity: Non-Hispanic White Alone in the United States [NHWAHORUSQ156N].” retrieved from FRED, Federal Reserve Bank of St. Louis; https://fred.stlouisfed.org/series/NHWAHORUSQ156N
[vii] U.S. Census Bureau. (2021). “Homeownership Rates by Race and Ethnicity: Black Alone in the United States [BOAAAHORUSQ156N].” retrieved from FRED, Federal Reserve Bank of St. Louis; https://fred.stlouisfed.org/series/BOAAAHORUSQ156N
[viii] Shapiro, Thomas. (2006). “Race, Homeownership and Wealth.” Journal of Law and Policy 20:53-74. https://openscholarship.wustl.edu/law_journal_law_policy/vol20/iss1/4.
[ix] McMullen, Troy. (2019).” The ‘heartbreaking’ decrease in black homeownership: Racism and rollbacks in government policies are taking their toll.” Washington Post. https://www.washingtonpost.com/news/business/wp/2019/02/28/feature/the-heartbreaking-decrease-in-black-homeownership/
[x] Gruenstein Bocian, Debbie, Li, Wei & Ernst, Keith. (2010). “Foreclosures by Race and Ethnicity: The Demographics of a Crisis.” Center for Responsible Lending. https://www.responsiblelending.org/mortgage-lending/research-analysis/foreclosures-by-race-and-ethnicity.pdf
[xi] Dey , Jaya & Brown, Lariece. (2020). “The Role of Credit Attributes in Explaining the Homeownership Gap Between Whites and Minorities Since the Financial Crisis, 2012–2018.” Housing Policy Debate. DOI: 10.1080/10511482.2020.1818599
[xii] Choi et al. 2019.
[xiii] U.S. Census Bureau. (2021). “Homeownership Rates by Race and Ethnicity: Black Alone in the United States [BOAAAHORUSQ156N].” retrieved from FRED, Federal Reserve Bank of St. Louis; https://fred.stlouisfed.org/series/BOAAAHORUSQ156N
[xiv] Markley, Scott, Hafley, Taylor, Allums, Coleman, Holloway, Steven, & Chung, Hee Cheol. (2020). “The Limits of Homeownership: Racial Capitalism, Black Wealth, and the Appreciation Gap in Atlanta.” International Journal of Urban and Regional Research. DOI: 10.1111/1468-2427.12873