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Published: Mar 11, 2024 9 min read
Illustration of a man and a woman building a house together with a jigsaw puzzle.
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Homeownership may be key to the so-called “American dream,” but it’s harder for some to achieve than others.

According to a recent report from the National Association of Realtors, or NAR, more than 10 million people became homeowners in the decade between 2012 and 2022. The overall homeownership rate, or the percentage of people who own and live in their homes, increased from 63.9% to 65.2%. But break it down by ethnicity, and there are clear discrepancies, especially between white and Black households.

In 2022, more than 72% of white households in the U.S. owned homes. Only 44% of Black households could say the same. While the latter group saw some improvement between 2012 and 2022, adding about 950,000 homeowners during that period, the Black homeownership rate has never been above 50%. It’s also the lowest when compared to white, Asian and Hispanic households.

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The persistence of the racial homeownership gap is rooted in many factors, which makes bridging it difficult. But some issues stand out more than others, and the Biden administration is actively tackling them with an eye towards equity and fairness in housing, according to Marcia Fudge, secretary of the U.S. Department of Housing and Urban Development.

It's an ambitious but worthwhile endeavor.

“[Progress is] not going to happen overnight,” she tells Money in an interview conducted last month. “The problem has been around so long, and it’s been so deep, it just takes time to turn around.”

Income and wealth disparities keep ownership rates down

One of the main reasons for the gap is the disparity in income levels among different ethnic groups, which makes affordability a considerable challenge (especially with today’s high home prices and interest rates).

According to the U.S. Census Bureau, in the decade between 2012 and 2022, the median household income for all races increased from $63,350 to $74,580. In that decade, each ethnic group increased its median household income, but not at the same pace: White households jumped from about $71,000 to $81,000; Asian households went from about $85,000 to $109,000; and Hispanic households went from about $48,000 to nearly 63,000.

By contrast, the median income for Black households has gone from about $41,000 to $53,000 — lower than any other group in terms of both start and end points. That gap means many Black households have a harder time with housing affordability because they have less income with which to cover all their expenses.

According to NAR, 47% of low-income households owned a home as of 2022, compared to 69% for median-income and 87% for upper-income households. Another stat indicates that 33% of Black households spend more than a third of their income on housing (whether it be rental or ownership costs). That’s the highest among all ethnic groups.

Racism still affects homeowners

Another roadblock to Black homeownership is institutional racism, according to HUD’s Fudge, who spoke to Money in February.

“It existed then, it exists now,” she says.

Practices such as redlining, in which financial services like mortgages are withheld from neighborhoods with a high number of racial minorities; the undervaluing of Black-owned properties; and the lack of construction in these areas are among the forms of discrimination faced by Black households. Fudge says the Biden administration continues to actively encourage interdepartmental cooperation to work on these and other issues.

In a public letter last year, real estate listing site Zillow supported HUD’s initiatives to achieve a more equitable housing market, including its efforts to expand the Fair Housing Act, which protects against discrimination in housing based on color, race, national origin, sex, religion, family status or disability.

These efforts include proposing new rules requiring any government entity that receives HUD funds to study and report on the barriers to equitable housing in their jurisdictions and to develop strategies to ensure compliance with the law.

Reached in late February, Will Lemke, Zillow spokesperson for housing policy, also points to several additional changes current HUD leadership has made, including allowing on-time rental payments to be considered in the loan underwriting process and lowering mortgage insurance premiums, as steps that have allowed HUD to better serve minority homebuyers.

“This kind of advocacy is important as we find ways to build, finance and change laws to make housing more affordable,” Lemke tells Money.

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How HUD is working to close the gap

To address the disparity between the number of white and Black homeowners, HUD is focusing on diminishing hurdles faced by Black communities. For instance, Fudge says that HUD — via Federal Housing Administration loans — has provided more than three times the number of loans to Black households than conventional lenders over the past few years.

Another way HUD is working to improve the Black homeownership rate is by increasing educational resources and counseling programs that can help borrowers, especially those in underserved communities, get a foot in the front door — literally. HUD boasts more than 4,000 housing counselors nationwide, accessible online or by phone, who can provide homebuying resources such as down payment assistance and information about fair lending practices. (Although these resources are available to all borrowers, they are geared towards communities facing difficulties in gaining entry into homeownership.)

HUD is also tackling appraisal bias, a form of discrimination that undervalues a home based on the owner’s race or the racial makeup of the area. According to NAR’s report, 15% of Black homeowners said they experienced appraisal bias in 2022: more than double the number of white households that did.

Home appraisals are important in determining the amount of equity (and, indirectly, the amount of wealth accumulated over time) a homeowner gains. Discriminatory practices against Black households and other underserved communities can play a significant part in a homeowner’s ability to use equity to either improve their financial position or weather a financial setback.

To solve the appraisal bias issue, President Joe Biden established an interagency task force in 2021. The task force is co-chaired by Fudge and has representatives from 13 federal agencies, including HUD, the White House’s Domestic Policy Council, the Consumer Financial Protection Bureau and the Department of Justice. Its purpose is to evaluate and determine the causes of appraisal bias — and come up with an action plan to remove it from the home valuation process.

So far, that plan has included launching an independent review of the standards required to become a professional appraiser and reviewing barriers that could prevent members of underserved communities from becoming appraisers.

Beyond the Biden administration, other organizations are working toward the same goals, including the National Fair Housing Alliance, a group composed of more than 200 private nonprofit organizations, plus state and local civil rights groups. The alliance aims to eliminate bias in the algorithms used by housing and financial companies, as well as to enforce fair housing laws, among other initiatives.

Despite the difficulties presented by decades of discriminatory practices, Fudge says she is optimistic that a more equitable housing market is achievable. As attention on the issues increases, she adds, more people want to fix them.

“If I did not believe we could really make a difference, it would not be worth me doing this work,” Fudge says.

More from Money:

8 Best Mortgage Lenders of March 2024

Here's the 'Magic' Mortgage Rate That'll Nudge Many People Into Buying Homes

This Year May Be 'Tough' for Housing Affordability — But Help Is on the Way: HUD Secretary

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