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What’s Behind Racial Disparities in Homeownership?

The homeownership gap between black and white homeowners has widened to its largest level in over 50 years, according to the Urban Institute. In a new research report from Urban’s Housing Finance Policy Center [1], Researchers Jung Hyun Choi, Alanna McCargo, Michael Neal, Laurie Goodman, Caitlin Young, analyze what has caused these disparities.

According to the research, just 17% of the homeownership gap remains unexplained by observed variables and could be caused by differences in parental wealth, information networks or the vestiges of policies and structures that have made it difficult for black households to obtain and benefit from homeownership.

At the national level, median household income for black households is substantially lower than for white households ($38,183 versus $61,363 in 2017).

Urban also notes that Marital status has a strong association with homeownership rates. Income is one of the largest disparities in homeownership. The gap is large among low-income households but is less than 10% percentage points for households earning more than $150,000. The gap jumps to 27% for households earning less than $25,000 and 28% for households earning between $25,000 and $50,000. Low-income white households are more likely to be homeowners, and white households at the lowest income levels still have a higher overall homeownership rate than black households, at over 50%.

Another key disparity is credit scores. According to the study, 50% of white households have a FICO credit score above 700, compared with only 20.6% of black households. Renting is one factor driving this difference.

“The data show that black people are disproportionately more likely to have thin credit histories and no credit scores,” Urban states. “This is a key point because in the housing context, we know that most black households are renters and that rental payments are largely unreported to traditional credit bureaus.”

Marital status is an important barometer for homeownership. Compared with white households, black households are less likely to get married. If black households were married at the same rate as white households, the black homeownership rate would increase 9 percentage points.

Find the complete Urban Institute report here. [2]