A recent report by the Urban Institute entitled “A five-point Strategy for Reducing the Black Homeownership Gap,’ pointed out that the black homeownership rate has seen the most dramatic drop of any racial or ethnic group since 2011—declining 5 percent compared to a mere 1 percent drop in white families, and with increases for Hispanic families. Data also found that the homeownership rate of black millennials stands at 13 percent today compared with 37 percent for white millennials. In the past 15 years, black homeownership rates have declined to levels not seen since the 1960s, when private race-based discrimination was legal, the report indicated.
Though homeownership is the primary mode of wealth creation and more beneficial than renting from a financial perspective, there is an increasing loss of access to this wealth-building for African-Americans.
Reducing the Gap
Based on housing industry leaders’ plans to explore areas ripe for policy intervention at both the national and local level during a planning grant from the National Association of Realtors and the National Association of Real Estate Brokers, the Urban Institute suggested five strategies to help address the issue.
Firstly, it advocates understanding forces at the local level. The report stated that most metropolitan areas experienced a drop in black homeownership in the past decade. Only 4 of the largest 31 metropolitan areas with more than 100,000 black households seeing a marginal increase in the black homeownership rate. Digging deeper into the causes of the decline as well as the environment in cities where black homeownership rates have increased, is an important step. The report also encourages examining specific market-based approaches, including removing local-level barriers related to affordability and help more renters get on a pathway to becoming homeowners.
Secondly, the report emphasized how pivotal addressing housing supply and finance challenges are in bridging this gap. “We need to understand how the housing shortage and tight credit affect people and communities of color. And we need to quantify how preservation, rehabilitation, and construction of affordable housing, as well as access to small-dollar mortgages, could improve the black homeownership rate in local markets,” the report reads.
Thirdly, the report highlighted how efforts to enable renters to become homebuyers will increase black homeownership through analyzing how income is calculated in mortgage underwriting, stabilizing and broadening the reach of down payment assistance and low–down payment lending programs.
Fourthly, the report calls for the strengthening of government mortgage programs and bringing about needed reforms and improvements. It also cited the Federal Housing Administration and the US Department of Veterans Affairs, as two government mortgage insurance programs that play an outsized role in supporting black homeownership.
Finally, sustaining homeownership through all economic cycles and keeping people in their homes after purchase is the key to building housing wealth. According to Urban Institute, there is a need to better understand how homeowners can use tools and programs to navigate all economic cycles, including taking a closer look at mortgage servicing and safe home equity lending products.
The report also pointed out that “changing the course of such an enormous and entrenched problem will require intention, a renewed knowledge base, and the partnership of many stakeholders in the housing ecosystem.”