A House is a Home
Dear Leading Ladies,
Turning a key for the first time to open the door of a house that is all yours — not a rental, not your parents’, not a pad shared with roommates — well, that feels pretty special.
Indeed, owning your own home is a big part of the American Dream.
But to get that key, we all need to have good credit ratings, money in the bank to cover a down payment, income to prove we can make mortgage payments, and/or generational wealth inherited from parents or grandparents.
After World War II, the GI Bill promised all veterans low interest mortgage loans and access to an education. Unfortunately, the promise of mortgage loans and classrooms didn’t work for everyone. White men fared well, but Black men and all women were left behind. Since banks still held the ability to decide to whom they would grant loans, more often than not they denied Black applicants. In addition, restrictive covenants prevented Blacks from purchasing houses in certain neighborhoods, even when the prospective buyers had been given loans. Redlining, the systemic denial of bank loans and government resources to residents of specific neighborhoods, was rampant.
Linda Huang, NYTimes
As for education, the GI Bill was administered by the Veterans Administration (VA), a group run primarily by white men. Chair of the House Veterans Committee, Mississippi Congressman John Rankin, made sure the bill was administered by individual states so that the racism he and others supported could be enforced in many areas. African American veterans were often directed to vocational training and away from higher education. Many had received poor preparation for college, but those who did choose to attend were confronted with quotas on African American students. If they turned to historically black colleges (HBCUs), they faced overcrowding and long waiting lists in the South where most of the underfunded schools were established. In the North, there were few HBCUs.
Thus, rather than jump-starting a rise in the African American middle class in our country, exponentially increasing the number of Black homeowners and laying the foundation for generational wealth among Black families, the GI Bill became a tool of bias and discrimination.
The racist applications of the GI Bill helped spur the growing discontent that erupted into the Civil Rights Movement. The Fair Housing Act of 1968, which made it illegal for anyone to be discriminated against when renting or buying a home, made matters somewhat better for Black and brown Americans.
Obstacles to homeownership today
But the problems haven’t ended. “According to 2020 data from the Home Mortgage Disclosure Act, lenders deny mortgages for Black applicants at a rate 80% higher than that of White applicants,” CNBC reported. That is, in part, why the Black home ownership rate of 43.4% compared to the White homeownership rate of 72.1%. A dwindling housing supply hasn’t helped. The recent burgeoning of build-to-rent housing communities is further compounding the situation by using land that could accommodate houses built for sale, encouraging people to rent instead of buy, preventing them from amassing any equity or generational wealth.
Keep in mind that homeownership is one of the key ways to build wealth, and the primary way to pass on generational wealth, in the U.S. “The Federal Reserve reports that the average homeowner in 2016 had a household wealth of $231,400, compared to the average renter having a household wealth of just $5,200,” according to CNBC. Home ownership also stabilizes communities while providing access to education and employment opportunities. For example, schools in low-income, rental areas often receive less real estate tax money, resulting in fewer resources for students.
The pandemic has dealt another blow to Black homeownership. Many people lost jobs, either permanently or temporarily, or had to suddenly pay for childcare or stay home with children, making it difficult to meet mortgage payments. Help for owners of small businesses provided by the first round of Paycheck Protection Program (PPP) loans (part of the CARES Act, the federal COVID-19 relief package) gave relief only to employer firms. This disproportionately excluded Black businesses since 95% of Black-owned firms are non-employer (no employees) businesses.
Even when Black Americans do own houses, there are inequities. “The devaluing of houses in predominantly Black neighborhoods, or even at times, homes owned by Black people in predominantly white neighborhoods, is a systemic problem,” according to a study at the Brookings Institution. Examples of lower values being given when a Black person versus a white person is on site at the same location for an inspection have been frequently reported.
Furthermore, 54% percent of minority populations are underbanked. This means that some may have bank accounts, but they also use alternative financial services such as money orders, check cashers, and same-day lenders to manage their finances. These are high cost, low-quality services that tend to trap users in cycles of debt while preventing saving. Access to mainstream financial services is an important factor in accumulating savings that many Black Americans lack, the Brookings report concludes.
Moreover, Black people are more likely to encounter discriminatory lending practices that negatively impact credit scores. Unequal access to lending is not the only thing that hampers efforts by Black people to establish financial security and accrue lasting wealth. The legacies of redlining, underinvestment, and a prevalence of alternative banking within these communities that make Black people more likely to encounter discriminatory lending practices also impact credit scores. Without bank accounts, families often cannot generate the data that helps establish creditworthiness.
What can be done?
It is clear that home ownership is key to building wealth equality. The Brookings study concludes that increasing homeownership among African Americans requires policies and initiatives that attack centuries of racial inequity. Specifically, the authors recommend:
Increase support for small dollar mortgage loan programs, which are mistakenly often considered less reliable investments for lending institutions.
Reduce uneven costs of mortgages for Black homeowners.
Extend credit and down payment assistance to borrowers impacted by discriminatory housing and lending practices. “Past injustices must be redressed by helping to develop areas left behind by racist policies.”
Adopt credit scoring practices with less discriminatory impacts. “Current metrics of credit scoring do not account for regular payments from rent and utilities, instead they prioritize loan and credit card payments. Expanding notions of credit-building can dispel the myth that Black homeowners are risky investments.”
Increase diversity in the appraisal profession. “Nearly 9 in 10 property appraisers are white, while 2% are Black, according to Urban Institute analysis of 2019 Census data. With the numerous instances of appraiser bias making headlines on a consistent basis, better representation in the profession which holds sway over much of the valuation process could go a long way to mitigating the effects of societal bias against Black neighborhoods.”
“Continue stimulus and relief efforts for homeowners and buyers in the wake of the COVID-19 pandemic” which disproportionately affected Black homeowners and business owners.
Habitat for Humanity also recommends:
Increasing access to down payment insurance.
Increasing access to affordable credit.
Expanding government grants that finance affordable home construction.
Retargeting the mortgage interest deduction as a tax credit to make it more accessible to low-income homeowners.
We also encourage support of Habitat for Humanity and other like-minded organizations that aid homeownership among Black Americans. Forty percent of Habitat homeowners are African American families who build their own homes with volunteers and then pay affordable mortgages.
Many of us are lucky enough to take owning a house for granted. Many of us had parents who helped with our first down payment, or an inheritance that may have financed an addition. Some of us will help our own children with their first down payment. And many of us also have parents or grandparents who grew up with nothing and never owned a home of their own. Oh, how happy they are — or would be — to know their children and grandchildren have garnered at least one piece of the American Dream. It’s past time for this rite of passage — home ownership — to be achievable for everyone.
Election Day is just three weeks away!
Therese (she, her, hers)
Judy (she, her, hers)
Didi (she, her, hers)
Mackenzie (she, her, hers)
Leading Ladies Executive Team
leadingladiesvote.org
ladies@leadingladiesvote.org