Bruce Murphy
Murphy’s Law

The Racial Gap in Homeownership

Milwaukee’s black/white gap is a dismal 40.7%. It’s even worse in 8 other cities.

By - May 1st, 2018 01:46 pm
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Houses in Milwaukee.

Houses in Milwaukee.

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.

The gap in metro Milwaukee was better than that, but nothing to brag about: the homeownership rate is 69.7 percent for whites and 29 percent for blacks, a 40.7 percent gap. Milwaukee’s black-white homeownership gap is higher than all but 8 of the 100 metro areas. Among the big cities ranking worse than Milwaukee were Albany (48.8 percent gap; 1.2 million metro population) Buffalo (44.5 percent; 1.1 million metro population) and Pittsburgh (41.6 percent; 2.4 million metro population).

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.

That economic disparity was noted by Mike Gosman, executive director of ACTS Housing in Milwaukee, which works to help low income, mostly minority families buy distressed homes and repair and rehabilitate them. “Just from the clientele we see, there are not enough family supporting jobs in the city. We have many families where a parent is piecing together several jobs.”

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.

William Tisdale, longtime President and CEO of the Metropolitan Milwaukee Fair Housing Council, points to the fact that African Americans here have one of the lowest surbanization rates.

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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13 thoughts on “Murphy’s Law: The Racial Gap in Homeownership”

  1. A Bus Driver says:

    Yet there are people that say “systemic racism” doesn’t exist it’s just an excuse. We’re a post racial society after all we’ve had a Black man as POTUS.The hard facts tell the truth. Thank You Mr. Murphy for putting the truth out there. I am sick & tired of those that want to bury it in rhetoric bull crap.

  2. Wisconsin Conservative Digest says:

    fact: Education in schools does not prepare kids for something as simple as home ownership economics and how to achieve them. Kids cannot read.
    if you want to work understand how to read, do simple math I can teach kids in 2-3 months how to acquire proerty and fix it up.

  3. Troll says:

    A personal perspective from 53209 zip code. In 2009, I purchased a home for $150,000. If I sold the home in 2018 I would get about $110,000-$120,000 with home improvements. Bruce, not all white people made out from home ownership. A lot of subprime homes in Milwaukee affected my home purchase. I don’t blame Milwaukee residents for being fed up and mailing their keys to the bank. They made a rational decision. The prime rates moved up and it was cheaper to break a contract with the lender then to pay the higher mortgage. If you purchase a home it is no different than buying a stock, soy futures or gold. Bruce gives the assumption there is no risk and only reward for whites. Do you think replacing windows or a new roof is cheap? Don’t fall for the magicians racial illusion.

  4. A Bus Driver says:

    ” Don’t fall for the magicians racial illusion.” Still want to deny the truth or maybe you didn’t read the article. I’ll put here closer to your eyes so you can see it better. “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.”

  5. Timothy J Haering says:

    Now, Bruce, I”d like to see analysis of the renter-owner gap, what establishes the gap, what/who maintains the gap, is there a recognized economically healthy gap. Thanks.

  6. steve rides bus too says:

    It seems to me that the Housing Gap is mostly just a reflection of the wealth gap, not housing per se.
    (I just drove by a Milwaukee house for sale for 19k.) As an educator I see many studnts of color with
    high academic skills who are not able to dig deep enough in their family’s wealth to pay the cheapest
    state college tuitions, even with financial aid. They are (wisely) very wary of any debt. Yet, like
    home ownership, college is out of reach.
    Your article notes the median income of 18k. I would point out that such households are getting zero
    benefit from the huge tax give away as a household at less than 30k will (and has) not even owed federal
    taxes. With a significant raise in the Minimum Wage (which Conservatives say we somehow can’t afford), a large
    segment of the poorest households including urban and rural whites, would be able to afford payments
    for college tuition, or a starter house, and even a little federal tax! 30k assumes married standard deduction
    and 2 child exemptions, by the way..

  7. Troll says:

    Bus Driver, have you ever thought maybe most African Americans may not want to be burden by home ownership. Many milenials don’t seem to want to own a home, vehicles or corporate stocks. Upkeep on homes are not cheap.

  8. A Bus Driver says:

    I am fully aware that home upkeep is not cheap. I own one in California. The point is mmany even if they want it can’t get it. STOP trying to avoid what the article is about. “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.”

  9. Thomas says:

    A Bus Driver makes many good points. Bruce’s statistical analysis reinforces what should be obvious to most Milwaukeeans: African Americans are mush less likely to live in their own homes in this city than their European American counterparts. A major cause of this discrepancy is of course the fact that good jobs are harder to find here for African Americans than they are for European Americans. Milwaukeeans need to take actions to get more African Americans employed and living in their own homes in this city,- lest we become like one of those southern cities that appear to foreclose on black properties as soon as they can do so – the sooner the better after conning them into buying properties at obvious risk of imminent foreclosure.

    Hey, white people, we must share some of our wealth in this city with our African American brothers and sisters while our property values are still strong. If we let this city become a Cleveland or a St. Louis, it may be too late for positive change.

  10. Wisconsin Conservative Digest says:

    To get homes you need jobs so we need Foxconn so naturally the Left, Murphy, Dems are opposed to jobs when they can keep peoel on welfare.

  11. A Bus Driver says:

    Comment on the topic & save the rhetoric bullshit for the appropriate place. This article is not that subject.

  12. Wisconsin Conservative Digest says:

    CBS just named Milwaukee 6th most dangerous city.

  13. A Bus Driver says:

    Off topic still. Dangerous because people like you live there?

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