The black homeownership rate is not vastly different now than what it was when the 1968 Fair Housing Act became law, according to an article by economist John Wake in Forbes. Wake notes that black homeownership increased by 20% from 1950 to 1970, before housing discrimination was outlawed. Since the Act, however, the rate has remained flat. Wake offers some possible explanations.
Wake notes that, as a form of compromise, the Fair Housing Act did not include strong enforcement powers.
“Just four months after the Fair Housing Act was signed into law, the Housing and Urban Development Act of 1968 was signed into law,” Wake said. “It included the soon to be infamous Section 235 program from FHA that let lower-income people who couldn't qualify for other mortgages get these new subsidized mortgages with down payments as low as $200 and subsidized, below-market interest rates as low as 1%.”
On top of a lower homeownership rate, black and hispanic neighborhoods have also experienced a higher rate of foreclosure, on average, especially in the years following the financial crisis. A recent report from Zillow stated that, based on the gap in housing between communities of color and white communities, homes in black and Hispanic neighborhoods are 2 and 2.5-times more likely to experience foreclosures than those in white communities, respectively.
What has led to the flat black homeownership rate, even in recent times? According to Wake, the answer is an “inelastic supply,” over-stretched homeowners, high foreclosure neighborhoods, and what Wake calls a “Super Slo-Mo Feedback Loop.”
“Sometimes things happen so fast they’re hard to see. With real estate, sometimes things happen so slow they’re hard to see,” Wake says.
Bridging the Black Homeownership Gap
A recent report by the Urban Institute suggested five possible solutions to help increase homeownership rates among African-Americans. According to the report, bridging this gap will require several approaches:
- Advancing policy solutions at a local level
- Tackling housing supply constraints and affordability
- Promoting an equitable and accessible housing finance system
- Outreach and counseling for renters and mortgage-ready millennials
- A focus on sustainable homeownership and preservation
Earlier this year, the American Mortgage Diversity Council (AMDC) also presented a webinar delving into the topic, entitled "The State of Housing in Black America." During that webinar, Charmaine Brown, Director, External Outreach and Engagement, Office of Minority and Women Inclusion at Fannie Mae, pointed out that "African-American homeownership rates are the same as it used to be in 1968, whereas the number of incarcerations in the community as well as the wealth gap between black and white families tripled between 1968-2016."
Click here to view that webinar.