The fact that housing and mortgage rates have done nothing but rise over the last year has hampered affordability across the board, but the impact on Black renters in particular has been particularly harsh—the share of Black renter households who could afford the median-priced home fell by 44%.
Raheem Hanifa, a Research Analyst at the Joint Center for Housing Studies at Harvard University, notes that a favorable buying environment in 2020, highlighted by ultra-low interest rates, helped many first-time buyers qualify for mortgages and allowed a sizeable portion of the population to refinance their notes with more favorable terms. While many Black households did take advantage of this, the homeownership rate for Black households has grown 0.6% from the beginning of 2021 to the first quarter of 2022, twice the rate of 0.3% for white households.
But Hanifa cautioned these gains are being put in severe risk due to decreasing affordability as the median price monthly home payment increased 35% from $2,100 to $2,800 between April 2021 and April 2022.
Looking at that figure another way in April 2021, a household would have to have earned $79,570 to afford a median house priced at $340,700; this number ballooned to $107,500 in April 2022 for the same median-priced house which also increased to $401,700.
“This change resulted in 4 million fewer renter households who could afford a median-priced home,” Hanifa wrote. “Home price and interest rate increases over the last year cut the number of Black households who could afford a home in half. Indeed, the number of Black renter households who could afford the median-priced US home declined from over 1.2 million to just under 600,000 Black renter households, a 52% decline. In April 2021, 14.2% of all Black renter households could afford a home and by April 2022 just 6.9% of all Black renter households could afford the median-priced home. While Black renter households were not the only group to face declining affordability, the share of Black renter households who could afford the median-priced home declined most by race/ethnicity.”
Hanifa added that the number of Hispanic renter households who could afford the median-priced US home declined 50% from 1.8 million to 900,000 over the time period. White renter households who could afford the median-priced home declined from 5.9 to 3.4 million renter households, a drop of 42%. Asian renter households had the smallest decline in affordability decreasing by 35% from 986,000 to 642,000 renter households.
As a result, 20.6% of Hispanic renter households could afford a home in 2021, but by 2022 just 10.3% could. For white renter households, 25.8% could afford a home in 2021 and by 2022 just 14.9% could, and 40.3% of Asian renter households could afford the median-priced home in 2021, while just 26.3% could by 2022.
Hanifa concluded by saying that the expansion of the housing supply and development of moderately-priced housing will be “pivotal” in preserving affordable homeownership for all.
To read the full text of Hanifa’s blog post, click here.