Understand and Fight the Homeownership Gap

In theory, homeownership should be an option for everyone. In reality, we know that’s not quite the case. Historically – and even today – homeownership is unequally distributed across minority lines. Narrowing the homeownership gap is critical to ensuring fair access to wealth and well-being.

What is the Homeownership Gap?

The homeownership gap refers to the vastly different homeownership rates between White and minority households across the nation. Before the global COVID-19 pandemic in 2020, Black homeownership rates had reached record-lows, with only 40.6% of Black Americans owning their home. That figure increased to 47% later in the year, but is still in stark contrast to the rate of White Americans, the racial group with the highest homeownership rate, at 76% (CNBC, 2020). Latinos, Native Americans and many other minority groups have struggled with the gap as well. 

This disparity of nearly 30 percentage points is dire. In fact, it’s larger than the 27-point difference that existed in 1960, when housing discrimination was still legal (CNBC, 2020).

Why Does the Homeownership Gap Exist?

The homeownership gap is closely tied to the racial wealth gap, in which funds and resources in the United States are disproportionately distributed between Black and White households. Even at similar levels of education, this reality means less opportunity, lower income brackets, diminished economic mobility, and far slimmer chances of building generational wealth for Black families (Center for American Progress, 2018). In 2019, Black households possessed only 1/10 of the wealth their white counterparts experienced (Washington Post, 2019), preventing many Black Americans from becoming homeowners.

The homeownership gap is also a result of the United State’s long history of racially-motivated policies and systematic discrimination, including Redlining. Redlining is “a discriminatory practice that puts services (financial and otherwise) out of reach for residents of certain areas based on race or ethnicity” (Investopedia, 2020). This practice allowed banks to offer higher-rate loans in minority neighborhoods, effectively withholding homeownership from many minority families. The households that could afford a loan may have been required to live in designated areas, as well as pay much more over the life of their loan. The discriminatory practice of Redlining was completely legal until the Fair Housing Act passed in 1968 (Center for American Progress, 2018), but the drastic repercussions are still felt today.

Efforts to Fight the Homeownership Gap

Since the 1960s, the federal government has taken various steps to address and combat inequality in homeownership. Federal laws that prohibit discrimination in housing and community development were passed, outlawing discrimination based on race, color, religion, sex, national origin, familial status, and disability (U.S. Department of Housing and Urban Development). Home seekers with these identities are now offered federal protections but, with Black homeownership rates reaching record-lows just last year – and with other minority groups lagging behind (due, in large part, to systemic practices and regulations) – it’s clearly not enough.

Federal fair lending laws

There are two major federal laws in place designed to protect home seekers from discrimination:   

• The Equal Credit Opportunity Act (ECOA), prohibits mortgage professionals from discriminating against credit applicants on the basis of race, color, religion, national origin, sex, marital status, age or because an applicant receives income from a public assistance program.
• The Fair Housing Act (FHA), which protects people from discrimination when they are renting or buying a home, getting a mortgage, seeking housing assistance, or engaging in other housing-related activities. The Fair Housing Act prohibits discrimination in housing due to race, color, national origin, religion, sex, familial status or disability.

What is considered discrimination?

According to the U.S. Department of Housing and Urban Development, examples of lending discrimination, or FHA violations, may include:

• “Denying a mortgage or charging a higher interest rate because the property is located in a majority-minority neighborhood.
• Providing a different customer service experience to mortgage applicants depending on their race, color, religion, sex, familial status, national origin or disability.
• Refusing to consider a mortgage applicant’s disability-related income, such as Social Security Income or Social Security Disability Insurance.
• Steering a borrower to a loan with less favorable terms because of his or her race, color, religion, sex, familial status, national origin or disability.
• Targeting a minority community for fraudulent home loan modification assistance.
• Refusing to provide mortgages to women on maternity leave.” 

Examples of ECOA or FHA violations, per the Federal Trade Commission, can include:

• “Imposing different terms or conditions, like a higher interest rate or higher fees, on a loan based on your race, color, religion, national origin, sex, marital status, age, or because you receive public assistance.
• Asking if you are widowed or divorced. A mortgage professional may use only the terms: married, unmarried, or separated.
• Considering the racial composition of the neighborhood where you want to buy, refinance or improve a house with money you are borrowing.
• Refusing to consider reliable public assistance income the same way as other income.”

Like most legal issues, housing discrimination is not always cut and dried. Many states have housing and housing finance anti-discrimination laws that provide more expansive protections than federal law. If you suspect your fair lending rights have been violated, it is critical to take action.

Steps to take in case of suspected discrimination

1. First, submit a formal complaint to your mortgage professional. Depending on the nature of the complaint, the mortgage or real estate professional may work to right the wrong.
2. Contact an attorney of your choice, your local Attorney General’s office or your state housing finance authority regarding federal and state laws. State laws vary across the U.S. and a legal expert can offer more insight on potential violations and recourse.
3. Consider taking appropriate legal action, as advised by a legal or regulatory professional.
4. Report any suspected violations to the appropriate government agency. Complaints are accepted for both FHA and ECOA violations.

Lending discrimination is a serious offense and should be treated as such. If you believe you’ve been a victim of discrimination, take action now.

How We Can Narrow the Gap?

Closing the racial homeownership gap will take all of us. At an individual level, seek to support minority-owned businesses and ventures whenever possible, and report any discriminatory practices you may observe. At the community level, urge your elected representatives to support legislation that can help bolster minority wealth and promote homeownership. Homeownership is a major piece of the American dream, and it will truly take all of us to ensure it’s accessible for everyone.