Accessibility (or Lack Thereof) in Today's Housing Market
Is the American Dream of homeownership really just a pipe dream?
As our nation continues to struggle to ensure equitable opportunities for all Americans, there is one major stumbling block in the pursuit of economic equality: the lack of access to homeownership.
The Fair Housing Act of 1968 was implemented to create a fair and equitable real-estate system for all people. Unfortunately, 53 years later, homeownership remains more elusive than ever, blocking the creation of wealth for millions of families.
The ugly truth
Today, the disparity between the percentage of homeowners in the white community and those in the Black community is greater than it has been in the last 50 years.
Sadly, we can now say, without a doubt, that the intention behind the 1968 Act has not been fully achieved. There is currently a 30.1 percentage point disparity between the number of white and Black homeowners. In some parts of the country like southern Nevada, the gap is at its highest level since the final days of segregation.
For other minority groups, the picture is no prettier. In the Asian American community, only 60.7% are homeowners, and in the Hispanic American community, that number is just 48.1%. However, inequality does not end at race.
Discrimination against potential property buyers due to their sexual orientation or identity is only illegal in fewer than half of the states in the U.S. The current system doesn't do enough to dissuade inequality and is obstructively difficult to navigate, with two out of three home buyers or sellers saying the process was unnecessarily complex.
Why is this important?
What is important to understand is that this is not just about allowing people of all races and backgrounds equal access to homeownership, which is, of course, imperative. It's about what that home means for financial stability and opportunity for those families. Homeowners are, on average, 40 times wealthier than renters.
With every family that isn't able to own a home, there's a multi-generational snowball effect. The likelihood of their children owning homes remains low, continuing a chain of economic inequality that could have been avoided by a more fair and equitable real-estate system.
The key factors
While it's clear historical inequality and systemic racism have played a role in getting us here, there are a few key factors that have disproportionately contributed to this disparity in homeownership. According to a 2019 research report titled "Explaining the Black-White Homeownership Gap: A Closer Look at Disparities across Local Markets," the variables that require the most focus to implement real change include income, educational attainment, credit score and marital status.
Being able to qualify to purchase a home and afford the repayments is probably the biggest contributor here. In 2017, the median income for a white household was $61,363, compared to the median for Black households of $38,183. Even in households where the income is the same, the rate of homeownership is still far lower for Black Americans.
Research also shows that education levels have a high correlation with income. Fewer than 24% of Black households have any members with tertiary education while in white American households, that number is almost 39%. Again, even when we compare equally educated households across the race spectrum, minority groups still own fewer properties.
There is very little research available about how credit scores correlate in different racial groups, but it is a factor that is vital in the underwriting of mortgages. One study, conducted in 2016, indicates that while more than 50% of white Americans in the credit system had a score of higher than 700 points, only 20% of Black Americans had the same score.
Marital status improves the chances of owning a property, along with the added benefits that come with it. Household income is higher and married couples are far more likely to qualify for a mortgage than single applicants. Black households are more than 50% less likely to be married than white households, stacking the lot further in the majority's favor.
How do we fix this?
There is no doubt that a change in fair housing legislation needs to happen; however, legislation is just a starting point.
There are both economic and educational barriers to every American enjoying the financial stability and wealth creation that comes with owning a home.
We believe it starts with education:
- Better financial education and literacy. Income, debt and creditworthiness are key factors in a buyer qualifying for a mortgage. Therefore, the process of buying a home starts long before the loan application. We need better financial education in our K-12 schools. Let's teach about FICO scores alongside algebra. Let's teach the power of interest and investments alongside social studies.
- Better home-buyer education. The process is unnecessarily, and maybe intentionally, complex. No one ever teaches you about earnest money, what a title policy is for, or the process of making an offer on a home. Most buyers actually have no idea that they are indirectly paying their agent thousands of dollars to help them find and buy a home. Often first-time home buyers rely on their parents, family and friends when they begin the process. For some first-generation home buyers, they are at a disadvantage, and the dream of homeownership often seems like a pipe dream. We'd love to see real-estate associations partner with public educators to develop programs that demystify homeownership and the process of purchasing property.
- Better promotion of programs that provide resources, coaching and downpayment assistance. We need increased awareness of existing programs available to assist homeowners, such as Make Homes Possible, which provides Black families access to payment assistance, housing coaches and educational resources. There are at least 12 other programs for U.S. citizens funded by the federal government, nonprofits and private businesses that are not often publicized. Let's make sure every prospective home buyer knows where to start and where he or she can find financial assistance.
Moreover, let's change the status of agents from contractors to W2 employees. This will make them less reliant on commissions and more likely to provide non-discriminatory, high-quality service in the best interests of all, and not some, clients.
This is not an easy problem to solve. It's not solely the government's responsibility to solve it. It will take many mission-driven companies, associations and communities to get serious about removing the barriers that prevent many Americans from owning a home. It starts with awareness and education. Knowledge is power, even home-buying power.
Regardless of who you are, where you were raised, your socioeconomic status, race, culture or identity, you should have a path towards owning your own place. A place where you can dream. A place where you can grow. A place where you can build a financial foundation that will impact your children and your children's children's future. Individual financial stability and economic prosperity is at stake. Everyone should be able to own a home.
This is a crisis. We need integrated solutions, and we can start today — right now. Let us start to make homeownership possible for all Americans, not just those for which the current system works.
With a handful of changes, we can begin making housing more accessible for everyone. By engaging all stakeholders in a push toward equality for every prospective homeowner, we can make it possible for more people than ever to begin building wealth through affordable housing.
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