Rebuilding black homeownership

Posted by on June 15th, 2018

After the Fair Housing Act passed in 1968, black homeownership in the U.S. increased steadily for 30 years, reaching nearly 50 percent in 2004.

But those gains have all but disappeared since. The homeownership rate among African-Americans has tumbled below 43 percent in 2018, more than 20 percentage points lower than the national rate of 63.7 percent.

While young people of all races are buying homes at lower rates than their parents, this is particularly true of young blacks. Fear and distrust of the system may be a motivating factor.

Studies show African-Americans were disproportionately targeted by predatory lending practices in the run-up to the Housing Crisis, resulting in higher percentages of foreclosures and other adverse financial situations affecting credit. Market dynamics have made it difficult for many black households to regain a foothold.

Today, only 20 percent of African Americans aged 30 to 34 own homes, compared with 34 percent in 2000. Despite higher education and income, many are wary after seeing the hardships suffered by parents, older friends and siblings.

In a 2017 analysis, the Urban Institute said narrowing these gaps should be a priority for securing equality of opportunity and financial security for all Americans, and called for an expansion of credit scoring options to right the imbalance.

Many agencies have already begun that effort.

The Federal Housing Finance Authority (FHFA) is working with the government sponsored enterprises (GSEs) Fannie Mae and Freddie Mac to assess current credit score requirements, possibly incorporating rent and utility payments into mortgage evaluation. The GSEs say they plan to replace the classic Fair Isaac Corporation (FICO) model at some point in 2018 – possibly with a re-tooled version FICO created.

Both GSEs have engaged in extensive community outreach to raise awareness of low down-payment options, and Fannie Mae launched a marketing campaign with the African-American National Association of Real Estate Brokers to support its “Black Homeownership Matters” initiative.

Homeownership is a vital tool for building wealth and community, and has deep implications for a more equitable future.