Inclusionary Housing Needed for Full Recovery

Almost a decade after the housing crisis, a recently released article by the Urban Institute reports that positive economic growth among cities across the nation is seemingly not enough to ensure economic success for all residents.

Today, one of the issues facing minority homeowners is the continued barriers to accessing credit, as lending standards have become more strict. In light of this, the article highlights three major metros, Detroit, San Francisco, and Houston.

The Urban Institute utilizes its recently updated Home Mortgage Disclosure Act (HMDA) interactive map—using U.S. Census Bureau data—to reveal how the recovery doesn’t include all homebuyers in these areas.

In 2006, minority borrowers made up a large share of mortgage originations nationwide—as 25 percent of the 12.2 million mortgages originated went to black or Hispanic borrowers when the groups represented 28 percent of the population combined.

Ten years later in 2016, blacks and Hispanics represented 31.1 percent of the population, but less than 17 percent of 7.5 million newly originated mortgages went to black and Hispanic borrowers, the article reported.

In Detroit, black borrowers experienced gains in 2006. During the housing bubble peak, the black share of purchase mortgage originations was 21 percent, and the share of refinanced mortgages was 15 percent.

By 2016, supply and demand issues have been consistent in Detroit, as blight and uneven economic growth have impacted the area. In addition, 8 percent of mortgage purchases were made to black borrowers and 5 percent of refinances. However, in a predominately black city—with 84 percent of the population—Hispanic purchase and refinance rates are above 2001 levels, while white rates are above 2006 levels.

In San Francisco, mortgages made to Hispanic borrowers in 2001 made up 15 percent of purchase originations. In 2006, over 25 percent of purchase mortgages and 21 percent of refinance mortgages were made to Hispanic borrowers.

However, the Hispanic share of purchase mortgages dropped to 10 percent following the crisis. By 2010, the share of refinance mortgages also decreased to 5 percent.

San Francisco, however, has experienced economic growth, but is pricing out minority residents as the area has limited new home construction. While white shares are above 2006 levels, the Hispanic share of originations is 11 percent for purchase mortgages and less than 10 percent for refinance mortgages in 2016.

As for Houston, the market experienced increases in both black and Hispanic mortgage originations. Black share of purchase originations increased to 15 percent in 2006—compared to 9 percent in 2001.

Meanwhile, refinance share rose from 9 to 17 percent during the same time period.  Additionally, the Hispanic share of purchase originations rose from 19 to 26 percent, and the refinance share rose from 17 to 26 percent.

In 2016, the share of purchase mortgages made to black borrowers in Houston was 11 percent, and the share of refinance mortgages was 12 percent. For Hispanic borrowers, the share was 23 percent for purchase originations and 19 percent for refinance mortgages. Overall, Houston’s market is keeping up with the economy.

To view the full report, click here.