The homeownership gap between Black and White Americans has widened to a canyon. Just 44 percent of African-Americans owned homes as of early 2020, a level that’s down over the past decade. By contrast, 74 percent of White Americans own their homes, according to the U.S. Census Bureau.
Lisa Rice, president and chief executive officer of the nonprofit National Fair Housing Alliance, says the U.S. mortgage system needs a dramatic overhaul if this pattern is going to be reversed. She spoke to Bankrate about inequalities in the housing market.
Why has the homeownership gap between White Americans and African-Americans stayed so stubbornly wide?
Rice: The gap between Blacks and Whites is back to where it used to be in 1890. Since 1890 — that’s a long period of time. You might wonder why the gap hasn’t gotten better with the passage of multiple civil rights laws. We had the Fair Housing Act, the Community Reinvestment Act and the Equal Credit Opportunity Act. Part of the challenge is actually rooted in the reasons you’re seeing people protesting across our cities, and that is structural, systemic racism. After the Civil War, we passed a bevy of laws that created residential segregation, created a bifurcated lending market, created school segregation.
We established these systems of segregation and apartheid that are rooted in racism. We passed the Fair Housing Act, but we left residential segregation in place. We passed the Equal Credit Opportunity Act, but we left the bifurcated credit system in place. We passed the Community Reinvestment Act, but we didn’t tell banks, “Instead of redlining communities of color, you have to reestablish your offices in those communities that you fled once they become Black and Brown.” We left the structures that are driving inequality in place. Those systems are doing what they were created to do. So that’s why the gap is growing. What we have to do is dismantle those systems and structures.
What are some ways to remake the housing system so it works for everyone?
Rice: There’s a ton of stuff that has to be done. Revamping our credit scoring system. Any of the technologies we’re using in the financial services space perpetuate biased outcomes. Automated underwriting systems, risk-based pricing systems, credit scoring systems — they’re all perpetuating biased outcomes. We have to completely revamp those systems. Until we do that, we’re going to continue to see the disparities that we’re seeing. There’s massive redlining that’s still going on. This isn’t anything new. We get the same results year after year after year when the Home Mortgage Disclosure Act data is released.
We also have to address the systemic disinvestment of communities of color. Today, people of color disproportionately live in areas that lack resources and are toxic. People of color disproportionately live near areas that are hazardous facilities. If you look at the temperature of white neighborhoods in the District of Columbia, and measure the temperature, Black neighborhoods are on average 15 degrees hotter. They don’t have green space. Lots of concrete instead of green. Brownfields instead of healthy living spaces.
Where do you start? Is it legislation through Congress? Rules through HUD or some other agency?
Rice: We actually don’t need any more rules or laws to effectuate these kinds of changes. We can use our existing laws to do it. For example, if our federal regulators — the Federal Reserve, the Office of the Comptroller of the Currency, the Federal Housing Finance Agency — required institutions to make these changes, they’d make these changes.
What’s the biggest challenge?
Rice: Culture. There has been this long-term belief that a one-size fits all system, a system that works well for White America, is going to work well for Black and Brown America. And that’s just not the case. Structural inequality and structural barriers are driving disparate outcomes for people.
Are you concerned that the coronavirus is going to make the housing gap even more pronounced?
Rice: Undoubtedly. That is why we are pushing for remedies. We don’t want Black and Brown communities to bounce back to where they were before. We want them to come back better.
You mentioned Black and Brown communities. The numbers show that the homeownership rate for Hispanics has gone up significantly over the past quarter-century, whereas the numbers for African-Americans have been stagnant.
Rice: That’s accurate. First of all, you’ve got to remember that a lot of Hispanics are White. The Hispanic community is not homogeneous. It’s very, very diverse. There are a lot of White people who are Hispanic. One of the things we’ve been trying to do is disaggregate those numbers that we see in the Latino population. I guarantee you that Black Latinos don’t have the same access as White Latinos. A Latino from the Dominican Republic is not getting the same access to opportunity as somebody from Colombia or Spain. It’s just not happening. People who have different skin hues are not treated the same.
For an individual African-American who’s trying to get on the homeownership ladder, what advice would you give?
Rice: I feel like I have to put context around this response. We’re talking about systems that are holding people back. In many cases, it might not matter what you do as an individual, the system just might not let you in. There are some things you can do. You can educate yourself about the financial markets, about homeownership opportunities. You can educate yourself about how credit scores work. You can try and position yourself so you’re doing whatever you can, and you’re not accessing credit in the fringe market. A lot of people don’t know. This isn’t taught in schools. We don’t educate people about financial services. People learn things like that from their family. And if your family doesn’t own a home, then how are you going to learn about that process?
The numbers indicate the housing system is working pretty well for White Americans. Does that make it hard to persuade people that change is needed?
Rice: Absolutely. Only 44 percent of African-Americans get to learn about how you buy a house, how you open a checking account. The overwhelming majority of White Americans get the benefit of this training from people they trust and know. Communities of color just don’t have the same opportunities.
The other thing to remember is that this is not just a question of economics. Before the crisis, high-income African-Americans were getting predatory loans at higher rates than low-income White Americans. It’s not income. As we speak, banks are closing their branches in high-income African-American neighborhoods at a higher rate than in lower-income white neighborhoods.
Do you see anything on the horizon that could improve the picture?
Rice: No. If we do not change our systems, if we do not change our culture, no, it’s not going to turn. It’s been 100 years and it hasn’t turned around. We don’t have anything in place to make it better. The definition of insanity is to keep doing the same thing and expecting a different result. I’m paraphrasing Albert Einstein. You can’t just keep using the same system that is spewing out discriminatory results, and every year when the data comes out, clutch your pearls and say, “Oh, my God, how are we here?” We’re here because we haven’t changed anything.
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