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Black homebuyers face larger issues when it comes to credit scores and a lack of generational help that would assist in a downpayment.
The American dream .supposedly includes owning a home — though for many that is far from reality.
Historically, Black families face more barriers when taking the very big step of buying a home. These setbacks are generally not the same as for White families.
"It's important that we don't talk about these things as unfortunate, like a car accident, but we really lean into the fact that they are unjust, that inequality doesn't just happen. It is manufactured through choices," said Rashad Robinson, president of racial justice organization Color of Change.
The Urban Institute says the disparity between White and Black homeownership is about 30% now in 2023. It was about 27% in the 1960s, and that number should have gone down after the Fair Housing Act was passed in 1968. The act was supposed to ban racial discrimination in housing sales and rentals, but it continues to be a significant issue.
"But if you don't have the right level of implementation, enforcement and evaluation, you don't actually get to a different type of outcome, and this is what we see in terms of public policy around race in particular," Robinson said.
Robinson says there are multiple reasons behind the gap. For instance: Black students are disproportionately burdened by student loan debt more than White students. This affects debt to income ratio and the potential to save for a down payment.
The National Association of Realtors finds 43% of Black households are more than twice as likely than White households — 21% — to have student loan debt.
Credit score is another factor banks use to determine who is eligible for a mortgage. According to Robinson, the process is deeply discriminatory as it relies on choices and opportunities and does not account for the resources that people were born into.
"There's not enough accountability and evaluation of the credit industry, and they're able to operate in ways and block people, exclude people, from opportunities as private entities, as entities that are not accountable and responsible for the decisions that they make," Robinson said. "All of us end up being responsible and accountable for them."
According to Jung Choi, senior research associate for the Urban Institute, housing disparities don’t just present themselves in the current market but can be traced back generations.
"You need more down-payment assistance to buy your first home, so a lot of young adults who have home-owning parents and have a huge housing wealth, they have a greater opportunity to buy their home at an earlier age in life and accumulate wealth," Choi said.
Homeownership is one of the most important sources of building generational wealth. If you buy a home early in age, you’re more likely to have higher wealth when you retire.
"What we found from a study is that when we look at like 20 years ahead and what will happen to the Black-White homeownership gap, we saw that the trend would be also, unfortunately, persistent over time," Choi said. "So we'll still probably see around 30 percentage point gap between Black and White homeownership unless some kind of policy is implemented to close that gap."
"We can't just be in a just conversation about stopping the harm but also fixing the harm that was done," Robinson said.
In order to close the racial homeownership gap, Robinson says it must include more public policy and clear plans as well as accountability and real consequences for those exploiting the system.
"That will require investment," Robinson said. "It will require us really looking at … how do we fix these problems and provide opportunities for communities at scale to deal with the the unforgivable past we have of exploitation of communities of this country, reneging on its commitments and in its compact of redlining, of exploitation, of targeting of banks."
"We do collect information in our annual survey, and we ask about experiences in the housing market, such as steering, which still may take place even though it is illegal to discriminate based on race in housing," said Jessica Lautz, deputy chief economist at the National Association of Realtors.
Lautz says that if the current discriminatory practices continue to go on, future generations will feel the impacts.
"For their children, for their grandchildren, moving forward, they may not be able to rely on intergenerational transfers of wealth," Lautz said. "That's what we see for successful homeowners and buyers is to be able to transfer down that wealth to future generations, and so that's lost out on."
All of the experts Scripps News spoke to agreed on one thing: A way to help people who want to buy a home, especially Black families or other people of color, is to increase affordable housing and to increase regulation over the credit industry.
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