December 2, 2023

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· 8 min read
Contextualizing the finance news you need to know.
The white picket fence around the American dream is sporting a Do Not Enter sign these days, as the housing market continues to exclude first-time homebuyers. The barriers have never been higher, and it turns out they’re significantly worse for Black Americans.
In 1960, the homeownership gap between Black and white Americans stood at 27 points. Today, the gap is even wider at 30 points. Per Urban Institute, this means that white households are 71% more likely to own a home than Black households. It’s shameful that we are still having conversations like these more than half a century after the Civil Rights Movement and stacks of so-called fair housing legislation.
Black Americans have suffered centuries of oppression and segregation that robbed them of opportunities to secure generational wealth and economic stability. And practices perpetuating structural racism like “redlining” (which began in the 1930s with the New Deal and persisted well into the 1960s) cut off more Black Americans from the legitimate mortgage market.
To this day, racial bias is something many Black Americans deal with when looking for a home loan. This is no surprise since, per the AP, the secret algorithms behind underwriting software are based on historically discriminatory data.
Even after the ink has dried, a Black homeowner may still experience real estate-related racism. The NYT recently reported on the case of professors Nathan Connolly and Shani Mott, a Black couple looking to refinance their mortgage last summer. The initial appraiser told Dr. Connolly the home had a value of $472,000 (and thus denied a refinance loan). But then, months later, a second appraiser put the house at $750,000—a 59% higher valuation. The reason for the difference? Dr. Connolly and Dr. Mott removed all indicators of Blackness from the home and asked a white colleague to pose as the owner for the second appraisal.
Tawkiyah Jordan, senior director of housing and community strategy at Habitat for Humanity, told Money Scoop that racist systems like these—not a lack of housing supply—are the main barriers to Black homeownership. “Most of our government funding for housing goes toward [the] rental [market], into the trillions of dollars each year. So that’s about 95% focused on [the] rental [market] […] We’re not considering how we might break open that piggy bank a little bit to include a wider range of choices so people could move into homeownership rather than into rent[ing].”
According to Jordan, those funds could be used to address systemic issues like lack of access to financial and estate planning, racial discrimination in the appraisal process, predatory takeovers, and unequal access to loans.
That’s the kind of work Jordan does at Habitat for Humanity, but there’s another major obstacle that makes it difficult to funnel aid directly into Black communities: the Fair Housing Act, which prevents housing initiatives from negatively or positively targeting groups based on their race.
“You can target mortgages toward immigrant communities [and] LGBTQ+ communities as long as it’s not along racial lines,” said Jordan. “It’s just so ironic, and kind of a smack in the face.”
That smack in the face is rooted firmly in alleged colorblind programs. It’s no secret that racism doesn’t magically go poof just because we stop talking about it, but unfortunately, our institutions continue to pretend this strategy works. “The challenge with a colorblind approach is that we don’t live in a colorblind nation,” said Jordan. “So it doesn’t address real world conditions.”
Jordan has experienced discrimination in homebuying firsthand. She grew up in southeast Queens, in the home that her parents owned. She remembers the area as vibrant and diverse, with Black professionals in all industries flocking to the area and making it a strong community in the 1950s and the 1960s.
But as a result of disinvestment (i.e., when public officials prioritize predominantly white communities), Jordan’s childhood neighborhood became a center for the New York City drug trade in the 1980s and the 1990s. Homes lost value, and families were forced to move.
By the early 2000s, Jordan’s father had finished paying off his mortgage. Although his home was worth less than those in surrounding white neighborhoods, Jordan was still able to draw equity from it to buy a home for her family. But even shopping for a new home brought challenges.
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“Our real estate agent kept taking us to homes we didn’t see listed publicly that were dirty, unkempt, or in disrepair,” said Jordan. “[They were] in neighborhoods that we had already said we didn’t want to go to, and he kept explaining to us that there wasn’t much on the market in our desired area that we could afford.”
But Jordan knew there were viable options out there within her budget, so she ditched her agent and started calling the numbers on the For Sale signs she’d seen.
Soon enough, she finally found a home her family loved in Teaneck, an affluent Black community in New Jersey. Jordan said although an appraiser reviewed the property, he used smaller homes as comparisons and discounted the home valuation inappropriately. Sound familiar?
“We could have challenged the appraisal. I didn’t even know that that was an option,” said Jordan. “There I was, a master’s degree-educated woman who had been working in the housing industry […] and I had no idea that that was something I had the power to do.”
The bank ultimately rejected Jordan’s mortgage application for the Teaneck home, and it was all because the bank thought the asking price was over market value. Keep in mind, this was in 2002 when mortgage brokers were giving out risky loans like they were pizza roll samples at Costco. But not for Black homebuyers, apparently.
Jordan ended up finding another home (but not before putting a dent in her savings due to renting longer than anticipated). The new house was smaller and in a failing school district, but the bank thought it was suitable, so that’s what she got. “To this day it actually makes me sad,” she said. “I don’t know what my family’s life would’ve been like [in that home] […] It just felt like destiny, and it was taken away.”
Even when appraisers and lenders aren’t being roadblocks, and Black Americans are able to buy their dream homes, they often struggle with other obstacles. The main culprits? Predatory real estate practices and good ol’ gentrification.
From the 1920s to the 1940s, racially restrictive covenants were common in property deeds. These clauses made white homeowners promise they would never sell to Black Americans or other minority groups. And if a homeowner violated the covenant, they risked forfeiting their property. While the Supreme Court struck down the practice in 1948, there were lasting effects.
For decades, in fact, predatory real estate agents would employ a scheme known as “blockbusting.” The idea, according to NPR, was to create panic in white neighborhoods and convince white homeowners their homes would quickly lose value because of “the looming threat of Black neighbors.” White homeowners would panic and sell, and real estate agents would turn around and sell those same homes at inflated prices to Black buyers.
And then there was gentrification, which involves much more than finance bros in suits ringing doorbells and handing over lowball checks to homeowners. Even if individual homeowners were to decline an offer, chances are developers would still land a few properties nearby and drive up the cost of living in the neighborhood—from grocery prices to maintenance fees and property taxes. Swapping the corner mom-and-pop shop for a Whole Foods and flooding the streets with microbreweries that serve $15 pints can dramatically transform local spending.
As if predatory practices like redlining, racially restrictive covenants, and blockbusting weren’t enough to impact Black homebuying for generations, gentrification was the nail in the coffin.
Activist groups like Habitat for Humanity are on a mission to increase Black homeownership across the country through initiatives like favorable mortgage terms and down payment assistance, tenant purchase strategies, savings assistance programs, and generational estate planning.
According to Jordan, the nationwide response to the murder of George Floyd transformed the landscape for groups bolstering Black homeownership. “[In the 25 years I’ve worked in the sector] I have never seen the energy, investment, and intentionality from such a broad spectrum of players as I’m seeing now. It gives me a little more hope,” she said.
This energy and some big underdog victories keep the movement fired up, but there cannot be significant change without actionable legislation to open homeownership and wealth-building to everyone. Your move, lawmakers. ♟️—Isabel
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