A significant part of the traditional American Dream includes buying your first house as a cumulative result of hard work and steady income. For many people, a home is where you lay down roots, establish a family and a community. However, as a result of redlining — real estate discrimination and limited access to mortgages — there has been a large gap in homeownership when comparing white families to Black, Hispanic and Asian family units. The rate of homeownership among white communities in the first quarter of 2020 was 73.7 percent — almost 10 percent higher than the whole country’s average of 65.3 percent. Meanwhile, the rates for Black, Hispanic and Asian communities were much lower: Black communities had 44 percent; Hispanic communities had 48.9 percent; and Asian, Native, Hawaiian and Pacific Islander had 59.1 percent. The effects of these disparities go far beyond home owning, as this ownership is often a gateway to wealth building through better public education, — for which the level of funding is determined by property taxes — tax benefits, etc. The homeownership gap has existed since the end of slavery but was only exacerbated by events such as the Great Depression and the 2008 Housing Crisis. While homeownership rates, in general, have risen, the gap among white people and Black and other POC has remained drastic. There are several reasons for this gap:

Real Estate Discrimination

Real estate discrimination can arise for many reasons and in many forms. Some of the major reasons include race, sexuality, disabilities, language barriers, gender or marital status. It is illegal to discriminate against a potential homebuyer for these reasons. Some common forms  of discrimination include refusing to return phone calls, providing false information about the cost or availability of a unit or falsifying eligibility requirements. In numbers, 26 percent of Black people report having been treated differently due to their race during the homebuying process, while Asian and Hispanic people report 19 percent and 16 percent respectively. Another extension of this is realtors are more likely to assume a higher income status for potential white homebuyers, whereas they are more likely to assume a lower income status for non-white potential homebuyers. A study conducted by a professor at Northwestern University produced data — which supported data from the Department of Housing and Urban Development — that stated in “about 10% audits in which a white and an African-American auditor were sent to apply for the same unit after 2005, the white auditor was recommended more units than the African-American auditor.” Similarly, “about 16% of Latinxs say they’ve been treated differently in their search for housing because of their race.” There are several other studies asserting similar claims: People of color are notably discriminated against when it comes to potential home ownership. Other studies include a Housing Discrimination Study in 2000 by the Office of Policy Development and Research, the Complexities and Process of Racial Housing Discrimination and Breaking Down the Black-White Homeownership Gap. All of these studies prove the same thing: Black people are often quoted higher rental rates than white people, shown fewer properties and intentionally kept in minority heavy communities that are more commonly void of equitable resources. 


Mortgage Denial

Applying for a loan is a major stress factor when it comes to owning a home — and for Black, Hispanic and Asian people, the prospect of being denied is much higher than white people. When it came to all types of loans in 2017, white people were rejected at a rate of 8.8 percent, while Black people were rejected at a rate of 18.4 percent (more than double that of non-Hispanic white people), Hispanic people at a rate of 13.6 percent and Asian people at a rate of 10.6 percent. An extensive study conducted by The Center for Investigative Reporting that examined 31 million home loan applications between 2015-2016, found that the trend of higher rejection rates for Black and Hispanic Americans persisted across the country, especially in 61 large metro areas including Detroit, Mich. Many organizations, including the Equal Justice Initiative and the Chicago Tribune, all claim that these high rates of denial are a modern form of redlining


Historical Access to Wealth

The racial wealth gap in America is a huge contributor to the homeownership gap as well. While Asian Americans have been prosperous in this regard, Hispanic and Black Americans continue to be left behind: The average household income for Asian Americans is $87,243; for Black Americans $41,511; for Hispanic Americans $51,404; for white Americans $67,937. The 2008 recession hit Black Americans the hardest, and they were already the most financially vulnerable. The average income for a Black household was $55,265 in 2007 and $50,654 in 2010. The impact on Black communities was much heavier as they already had one of the highest unemployment rates of any racial demographic which was only increased  by the recession. 

The racial wealth gap is a cycle. Since so many Black families had low incomes (20 percent of Black households earned less than $15,000 in 2008), were unemployed and owned fewer assets as a result of redlining — the recession left so many families struggling, clinging to the little bit they had to spare. It has been even harder for Black and Hispanic Americans to bounce back from the recession because of discrimination in the workplace and the continuation of racial discrimination present in housing. In fact, a study showed that 33 percent of Hispanic people felt that they had been personally discriminated against when it came to applying to jobs on account of their race, and 32 percent felt the same when it came to being paid/promoted at the same level as their other peers. 


Potential Impacts of the Homeownership gap

The homeownership gap is a major factor in continuing the cycle of the racial wealth gap in America. As a result of racial housing discrimination, people in communities of color are granted less financial and social mobility, less academic opportunities as a result of lower standard public schooling, — which are funded based on property taxes — a higher chance of accumulating student debt, etc. Black Americans are more likely to live in neighborhoods lacking adequate access to traditional banks which limits access to quality credit — 46 percent of Black Americans access credit from “non-traditional, more high-cost lenders,” as opposed to 19 percent and 18 percent for Asian Americans and white Americans respectively. Racial housing discrimination takes away from the potential benefits that people of color could experience — such as the ability to accumulate wealth through asset appreciation, the ability to have greater control over their living environment, a more stable environment in which to live and raise families and strong relationships and increased investments in communities. 

This issue has been present for so long, and COVID-19 has only worked to highlight and widen the gap; in a situation where we must stay safe at home, it’s important to notice who doesn’t have the luxury of having a home. It is important to recognize that racism has many forms in our society and we must work to dismantle them all. Despite the Fair Housing Act, these situations continue to persist. If you experience racial housing discrimination, don’t be afraid to speak up! By speaking out, we can work to ensure that everyone gets an equal opportunity to access such a crucial piece of the American Dream. 

Prisha Grover can be reached at prishag@umich.edu.

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