More than half a century has passed since the landmark Fair Housing Act was implemented by Congress at the tail end of the civil rights movement. Yet in many ways, it remains difficult to measure the progress achieved by this historic bill.
The struggle to create equal housing opportunities across a wide array of demographics is evident in a single statistical comparison: As of first-quarter 2021, the U.S. homeownership rate for whites stood at 73.8% while the rate for Blacks was 45.1%. This gap of nearly 30 percentage points is considerably larger than it was in 1968 as the gains for Blacks over the past 50 years have been outstripped by those of whites.
Research and analysis of these types of divides are produced on a regular basis, so the lack of progress shouldn’t be a surprise to mortgage industry professionals. Still, they provide a present-day snapshot of the challenges that hamper prospective homebuyers and the loan originators who seek to provide equitable financing opportunities.
Take, for example, the most recent home attainability index released this past March by the Urban Land Institute (ULI) Terwilliger Center for Housing. The report analyzes 112 U.S. metro areas, and one of its key takeaways is that there are very few areas of the country where income, inventory and costs align to create a truly affordable environment for either rental or owner-occupied housing.
“Ultimately, what it means to have housing that’s broadly attainable across income levels is that households and families have choices,” says Christopher Ptomey, executive director of the Terwilliger Center. “The truth is, right now, lower-income households — and particularly lower-income minority households — struggle to find housing in those neighborhoods that provide the things that we all want: good schools, good jobs, good access.”
Of the nation’s 50 most populous metros, ULI found that only two (San Antonio and Pittsburgh) performed better than the median on at least two-thirds of the study’s metrics. Across all 112 metros, only three (Las Vegas, Honolulu and Colorado Springs, Colorado) were classified as having low levels of segregation.
In another report released this past March, the National Community Reinvestment Coalition (NCRC) discussed the steps needed to achieve a Black homeownership rate of 60%, which would vastly exceed the peak rate of 49.7% seen in 2004. Assuming the current rates of Black household formations and losses remain constant, an additional 165,000 Black families would need to buy homes each year to reach a share of 60% by 2040, NCRC reported.
“Mortgage originators should care about these issues because the future of the mortgage market is people of color,” says Jesse Van Tol, the organization’s CEO. “Because of a history of racial discrimination in this country, there’s a racial wealth gap, and the homebuyers of today and tomorrow are going to be less financially capable of buying a home.”
For many years, mounting evidence shows that wage growth has not kept pace with home-price growth. This past April, insurance-services provider QuoteWizard reported that the median U.S. home price has jumped by 70% since 2012, but median income has increased by only 29%.
For cost-burdened renters, it can take many years to save for the all-important downpayment. ULI reported that for renters earning 80% of the area median income, it takes a median time of more than 14 years to save enough (assuming a 10% downpayment and 3% closing costs). In 23 of the 112 metros analyzed, it takes 20 years or more.
“It seems like 10 or 15 years is way too long,” Ptomey says. “The federal government certainly can’t build a 10-year budget and I think it’s pretty difficult for most households to do that, too.”
Originators can do their part to combat issues of equality and affordability by offering low-downpayment loan products and connecting clients to downpayment-assistance programs. There are bigger issues in play at the policy level, however, that could help create a friendlier economic environment to spur homeownership.
One is access to mass transit. As part of its $2 trillion infrastructure proposal, the Biden administration is looking to invest $85 billion in transit systems. ULI’s attainability index includes a transit component, and it scored major metros such as Boston — as well as smaller cities such as Spokane, Washington — high for transit access while having high shares of users with long commutes.
A second policy component involves zoning. To create more housing and de-escalate price growth, more jurisdictions could follow the lead of Minneapolis (which eliminated single-family zoning) and Oregon (which ended the practice in most areas of the state). These policy decisions do not prevent single-family construction, but they allow multiunit homes to be built in every neighborhood.
“Allowing accessory dwelling units, or other ways to change or remove zoning requirements, are all aimed at increasing density and increasing housing supply,” Van Tol says. “Candidly, the country needs a major investment in housing supply.” ●