The Racial Gap in Homeownership
Milwaukee’s black/white gap is a dismal 40.7%. It’s even worse in 8 other cities.
A recent study by the Urban Institute computed the black-white homeownership gap in the nation’s 100 metro areas with the largest black populations and found that not one has a black homeownership rate close to the white homeownership rate.
“Even in places where black households are the majority, like Albany, Georgia, the gap persists,” the study noted.
It found the metro area with the smallest disparity is Killeen-Temple, in central Texas, “where the black homeownership rate is 48.5 percent among just over 26,000 black households, while the white homeownership rate is 63.0 percent—a 14.5 percent gap.”
The biggest gap was found in Twin Cities, where the white homeownership rate is very high, 74.8 percent (compared to 71 percent nationally) and the black homeownership rate is very low, 24.8 percent (compared to 41 percent nationally), resulting in a stunning, 50 percent racial gap in homeownership.
Homeownership is one of the main ways the American middle class builds wealth, so this gap constitutes a huge economic disadvantage for African Americans. In 2016, the median wealth for black families was $17,600, compared to 171,000 for white families, the Center for American Progress reports.
“In 2007, immediately before the Great Recession, the median wealth of blacks was nearly 14 percent that of whites,” the report noted. By 2016, blacks owned less than 10 percent of whites’ wealth.
And a key reason for that was probably a decline in homeownership caused by the Great Recession. Another analysis by the Urban Institute found that between 2001 and 2016 the homeownership rate for African-Americans declined about five percentage points, to 41 percent, but fell just one percentage point for whites, to just over 71 percent, creating a national homeownership gap of 30 percent.
Of the 100 cities reviewed, the study found “northern cities tend to have larger gaps in than cities in the South and on the West Coast.” Charleston ranked third best, with a black-white homeownership rate of 18.1 percent, and Austin, Texas was fourth at 21.5 percent.
Still, there were big cities in all parts of the nation that had a gap lower than the national average, including Washington (23 percent). Los Angeles (23.4 percent), San Antonio (24.3 percent), Philadelphia (26.3 percent) and Miami (26.6 percent).
In the case of Los Angeles, the gap is low not because of a higher black homeownership rate — its only 33.5 percent — but because of a low white homeownership rate, of 56.9 percent. Homes are so expensive there that everyone is having trouble affording them.
The low rate of black home ownership has historic roots, that include African Americans being shut out of “the all-important New Deal mortgage insurance system that generated the mid-20th-century homeownership boom,” a New York Times analysis has noted. Blacks were also largely excluded from the GI bill, which helped build America’s post-WWII middle class by providing veterans low-cost, zero-down payment loans.
But racial bias has continued to impact potential black homeowners in powerful ways. One study found that during the housing boom that led up to the Great Recession, “black borrowers in Baltimore, especially those who lived in black neighborhoods, were charged higher rates and were disadvantaged at every point in the borrowing process compared with similarly situated whites. Had black borrowers been treated the same as white borrowers… their loan default rate would have been considerably lower…Over the life of a 30-year loan… these racial disparities would cost the average black borrower an extra $14,904.”
Why is Milwaukee’s black-white gap so much worse than the already dismal national average? One reason would be the poverty rate: the city ranks eighth worst in that category. Another would be the low median income of blacks — 42.3 percent — compared to whites.
Experts have also pointed to the fact that Milwaukee is ranked as one of the most segregated cities in America, where blacks are concentrated in neighborhoods where banks may not want to lend money. Gosman says that issue has changed: “Because of the (federal) Community Reinvestment Act, banks have good incentives to finance loans in more challenging neighborhoods.” But he adds, “they’re all looking for the same buyer,” someone with a 640 or higher credit score.
In that regard, county by county statistics by the National Association of Homebuilders are interesting. They show the black-white homeownership gap was 46.9 percent in Waukesha County, 36.8 percent in Washington County, 33.2 percent in Milwaukee County and just 12.6 percent in Ozaukee county. Of course, Ozaukee County has only 346 black households, compared to 94,326 in Milwaukee County.
Still the much lower black-white homeownership gap for Ozaukee County than Waukesha County, with just 1,895 black households, and Washington County (387 black households), is very interesting. The statistic suggests Ozaukee County might be a friendlier place for well-to-do African Americans seeking a suburban home.
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