A pandemic that in the past year has changed every American's way of life also has illuminated and exacerbated shortcomings in the U.S. economy and housing.
"We Can’t Wait 114 Years to Close the Diversity Gap in Housing"—it's the central theme of an essay from Kenneth Imo, VP of Diversity and Inclusion at government-sponsored enterprise Fannie Mae.
"Over the past year, social unrest and the pandemic have cast a glaring spotlight on the persistence of systemic racial and socioeconomic inequity, including the widening wage gap between White and People of Color households," Imo wrote. "For most of America, sustainable homeownership has been a main driver of generational wealth accumulation. However, laws mandating segregation, and policies and practices such as redlining, which prevented Black homebuyers from accessing credit for home and business mortgages, created inequitable access to homeownership and the financial rewards accompanying it."
He points out that the housing sector is further behind when it comes to inclusion and diversity than the country as a whole.
The Brookings Institute in 2019 showed Whites, Hispanic or Latino, Blacks, and Asian Americans currently represent 60.1%, 18.5%, 12.5%, and 5.9% of the U.S. population, respectively.
When it comes to the population of Americans working within housing-finance and related areas, those numbers shift to 71.6% White, while Hispanic or Latino, Blacks, and Asian Americans represent 9.1%, 7.5%, and 9.4%, respectively.
"It is imperative that the industry reflect the country it serves to more effectively address the inequities ...," he noted.
And this ostensibly impacts the share of Americans who own homes. The rate of Black homeownership today is 29 percentage points lower than for White households, according to the U.S. Census Bureau.
The median wealth of White households ($162,800) in 2016 was ten times higher than Black households ($16,300), and eight times higher than Hispanic households ($21,400), which is partially attributable to historically lower homeownership rates among these groups, as reported by the Joint Center for Housing Studies of Harvard University.
A separate report from Redfin just showed that despite the "substantial home-equity uptick" in 2020, Black Americans who bought in 2019 still have a median of $89,000 in equity, much lower than $113,000 for white Americans.
“Black homeowners benefited from 2020’s hot housing market, and the trend is continuing into this year as Americans remain intensely interested in relocating and buying homes and home values continue to rise,” Redfin's Chief Economist Daryl Fairweather said. “But less than half of Black Americans own the home they live in, so most of the Black community didn’t benefit from the enormous wealth homeowners have gained in the past year. Especially compared with the three-quarters of White Americans who own their homes, the total benefit for Black families across the country is relatively small. With higher unemployment rates and less overall wealth, Black families were not as likely as White families to buy homes even when prices were comparatively low.”
Redfin's economist echoes the idea that COVID-19 illuminated and exacerbated the problems of inequitably and inequality.
"Now that prices are so high and the pandemic has contributed to high unemployment, especially for Black workers, it’s even more difficult for people who don’t already own homes to break into the housing market,” Fairweather continued. “There is a major need and a big opportunity for policymakers to enact programs like down-payment assistance and zoning reform to help narrow the homeownership gap and enable more Black families to build wealth through home equity."
Racist housing policies like redlining and racial covenants, which have been illegal for decades, continue to contribute to homeownership and wealth gaps between Black and white Americans, she added.
Imo and Fannie Mae are floating a solution to the dilemma, which feels overwhelming when one examines the numbers, saying, "We must act with intentionality."
"It is daunting to take on a representation gap so huge that it would take over a century to close without intervention," he said.
In 2018 Fannie created Future Housing Leaders (FHL) to use its position in the housing ecosystem by rallying its customers in a concerted effort to diversify the housing industry. The program involves partnering with university-backed initiatives to connect college students to paid summer internships and early career opportunities in the housing industry, with an emphasis on recruiting where historically underrepresented groups can be made aware of these opportunities.
"While this undertaking is not an easy feat, it is exciting to tackle this challenge with steadfast partners who share Fannie Mae’s commitment to promoting diversity, equity, and inclusion," Imo said. "If we succeed, our efforts will have a resounding impact on the housing industry, homebuyers and renters, and the careers of Future Housing Leaders participants."