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As home prices and overall living costs continue to climb, purchasing a home has become increasingly difficult for many Americans, especially younger buyers trying to enter an already competitive housing market. New data from Redfin highlights how these challenges are disproportionately affecting Black Americans, revealing a widening racial gap in homeownership among Gen Zers and millennials.
Redfin’s analysis shows that just 14 percent of Black Gen Zers and 32 percent of Black millennials own their own home. This is roughly half the rate of their white counterparts, whose homeownership rates are 31.6 percent and 66.6 percent, respectively. The findings also indicate how Black homeownership has declined slightly in recent years while it has continued to rise among young white Americans. Although the gap narrows somewhat among older generations, the data underscores persistent disparities in housing access, and wealth in general.
As we recognize Black History Month, we’re taking a deeper look into the issue and the collaborative effort working hard to narrow the gap.
Why This Gap Exists
“Today’s racial homeownership gap is the legacy of past systemic practices we have never adequately addressed,” said Bryan Greene, co-chair of the Black Homeownership Collaborative and vice president of policy advocacy at the National Association of REALTORS, to the National Housing Conference. There’s a long history of redlining, racial discrimination, and the denial of access to credit. Here are some of the historical and current reasons for this discrepancy:
- High Home Prices. The overall home buying landscape has been difficult over the last few years due to high home prices and high mortgage rates, even though mortgage rates have been trending lower over the past few months. The median U.S. sale price per home is $424,000, up 1.3 percent from a year ago, and house prices are 28 percent higher than they were 5 years ago.
- Housing Shortage. Since Black millennials and Gen Zers have reached homebuying age, the country has faced a major housing supply shortage. This scarcity is another reason why housing prices are elevated.
- Discriminatory Policies. Past policies like redlining and discriminatory housing covenants caused generations of Black families to miss out on gaining wealth through owning property. Today, there are still systemic barriers to homeownership for Black families. Black homebuyers, for example, are more likely to have their mortgage applications rejected than white homebuyers, according to a LendingTree study.
- Racial Wage and Wealth Gaps. For every $100 in wealth held by white households, Black households only have $15, according to a Brookings Analysis of Federal Reserve’s Survey of Consumer Finances. That makes it harder to save money for a down payment and to afford monthly mortgage payments.
- Employment Gap. An analysis of unemployment data from the Bureau of Labor and Statistics shows that the average unemployment rate is approximately 7.1 percent for Black men, which is almost double the 3.7 percent rate for white men. Similarly, the unemployment rate for Black women is 6.7 percent and 3.2 percent for white women.
- Family Money Gap. Black families are less likely than white families to have generational, inherited wealth, which makes it more difficult to purchase a new home.
- Credit Scores. Race is legally prohibited from influencing credit scores. However, statistics show that the median credit score for Black Americans is lower than it is for white Americans, which makes it more challenging to get a mortgage.
How the Black Homeownership Collaborative is Addressing This Issue
After the homeownership rate for Black Americans fell to historical lows in 2019, a group of housing and finance organizations—including the National Association of Realtors, NAACP, Mortgage Bankers Association, National Fair Housing Alliance, National Association of Real Estate Brokers, National Housing Conference, National Urban League, Urban Institute, and more—came together to take action to close the gap. Now a coalition of more than 100 organizations and individuals, the Black Homeownership Collaborative has the goal of creating 3 million new Black homeowners by 2030, which they call “3by30”. If they reach this goal, the Black homeownership rate will have increased by more than 10 percentage points and will be at its highest point ever.
Through a seven-point plan, the group is focused on developing new policies to help more Black Americans become homeowners, including programs geared to aiding first-generation homeowners and cost-burdened renters, which are disproportionately high among Black households. They are also developing tools and resources to break down the barriers that Black Americans face on the path to homeownership. The collaborative views this effort as much bigger than simply helping more Black Americans own a house; it is about shifting the narrative and building a foundation for community resilience and intergenerational wealth.
How the 7-Point Plan Works
The Black Homeownership Collaborative’s plan identifies a set of seven tangible, actionable, and scalable steps that will make it possible to increase Black homeownership by 3 million net new homeowners by 2030. Here are the details of the plan:
- Homeownership Counseling. Pre-purchase counseling is essential for overcoming barriers to homeownership, such as credit challenges, student loan debt, and limited resources, especially for those who have already been denied a mortgage. Post-purchase counseling is also critical to help prevent payment delinquency, particularly for first-time and first-generation homebuyers.
- Downpayment Assistance. A substantial, sustainable, and targeted down payment assistance program will help address financial disparities, strengthening the wealth building capacity for millions of Black Americans.
- Housing Production. Housing supply shortages are greatest for entry-level and lower-priced homes that are affordable to first-time homebuyers. Without economic interventions in distressed communities, land use reforms, and public investment in dedicated affordable homes, the shortage of decent, affordable entry-level homeownership opportunities will continue to pose a major barrier to Black homeownership.
- Credit and Lending. Innovation in mortgage credit scoring and mortgage products like special purpose credit programs (SPCP) and specified pools for mortgage securitization are essential for this plan to work.
- Civil and Consumer Rights. To address the perpetuation of housing and lending discrimination against Black Americans, the federal government must fully enforce the nation’s fair housing and consumer-protection laws.
- Homeownership Sustainability. Black Americans also tend to own homes for a shorter length of time than white homeowners. Loss of a home impacts not only the family experiencing foreclosure, but the expectations for homeownership of their friends and family. Early intervention and assistance are essential components of sustaining homeownership.
- Marketing and Outreach. The first step to successfully reaching mortgage-ready Black homebuyers is to complete a comprehensive marketing study to develop a targeted advertising and marketing campaign, which will be followed by a major national advertising campaign.
Additional Resources
The following websites offer more support, tools, and tailored assistance for aspiring Black homeowners.
- Learn more about the Black Homeownership Collaborative’s goals and plans at 3by30.org.
- Use the 3by30 mortgage calculator that provides detailed, easily navigated options for determining mortgage affordability based on actual borrower savings and closing cost estimates.
- Receive downpayment assistance from Downpayment Resource.
- The Advancing Black Homeownership Community Fund provides eligible first-time Black homebuyers with up to $45,000 toward down payment costs.
- Habitat for Humanity’s Advancing Black Homeownership initiative offers financial coaching, estate planning, advocacy outreach, and more, to help improve equity in homeownership.
