Black Americans face greater financial barriers in the homebuying process than their white counterparts, a recent Redfin report showed.
White homeowners were 23% more likely to make no financial sacrifices to buy their first home, while only 14% of Black homeowners could say the same, according to the Redfin survey, which was based on more than 1500 responses from homeowners.
“African Americans are much less likely to come from families, communities that have strong homeownership,” said Dedrick Asante-Muhammad, chief of membership, policy and equity at the National Community Reinvestment Coalition. “They're going to get a lot less assistance through generational wealth.”
Whites are more likely to benefit from generational wealth when they're purchasing a home, since they are more likely than Black borrowers to have parents and grandparents who are homeowners, according to the report.
About 74% Black respondents in the survey said their parents were homeowners, versus 84% of white respondents. And 67% of Black respondents had grandparents who were homeowners, versus 72% of white respondents.
The Redfin survey, conducted in the first week of June 2021, found that 21% of Black homeowners earned $150,000 or more when they bought their first home, versus 11% of white homeowners, suggesting Black Americans need to earn more money than their white counterparts to become homeowners.
“That sticks out to me because I think it just reinforces the primary challenge, in my estimation, around Black homeownership is the low wealth and lower income in the community,” Asante-Muhammad said. “But as a whole, the kind of strong-asset poverty in the community obviously makes it harder to get a mortgage.”
Even though overtly racist lending practices were made illegal with the Fair Housing Act of 1968, their legacies persist in housing, contributing to a growing modern-day disparity, according to a report by the Urban Institute. If left unaddressed, Black homeownership rates will continue to fall for every age group younger than 85.
The Department of Housing and Urban Development has moved to strengthen rules under the Fair Housing Act to provide affordable housing options and avoid housing discrimination.
The decline in the Black homeownership rate will be particularly pronounced for Black households headed by 45-to 74-year-olds, the report said. If current policies stay the same, the Black homeownership rate will fall well below the rate of previous generations at the same age and result in an unprecedented number of Black renters over 65.
“I think all of these things are highlighting the key challenges in Black homeownership and why Black homeownership has barely moved since 1970,” Asante-Muhammad said.
