By Jacob Passy
'Oftentimes, Blacks and Latinos hit the worst of a crisis after the crisis is supposedly over'
The Value Gap (link) is a MarketWatch Q&A series with business leaders, academics, policymakers and activists on how to reduce racial and social inequalities.
There has never been a time in America's history where a majority of Black Americans were homeowners.
In the second quarter of 2019, the Black homeownership rate dropped to 40.6% (link), down seven percentage points from roughly a decade earlier. It now hovers closer to 44%, while the white ownership rate is far higher (approximately 74%).
The Black homeownership is a significant drop in recent years. The rate rose from 41.9% in 1995 to 49.4% in 2004, an increase of 7.5 percentage points.
For more than 100 years, a racial homeownership gap ranging between 20 and 30 percentage points has existed between Black and white Americans.
And over the past year, matters have gotten worse (link) for Black Americans. Research has shown that layoffs amid the COVID-19 pandemic were more likely to cause housing instability among Black and Latino workers than among white workers. People of color were far more likely than their white peers to face challenges making their monthly rent payments throughout the coronavirus emergency.
Owning a home is one of the main drivers of wealth in this country, particularly across generations, which makes increasing Black homeownership a critical goal in addressing the overarching racial wealth gap.
A new report from the National Community Reinvestment Coalition (link) calls for setting a goal of 60% Black homeownership over the next 20 years.
As part of the Value Gap (link) interview series, MarketWatch spoke with Dedrick Asante-Muhammad, chief of race, wealth and community at the National Community Reinvestment Coalition, and Joshua Devine, the organization's director of racial economic equality.
They spoke about the factors that have contributed to the lower rates of homeownership among Black Americans and what policies could address them.
MarketWatch: How did you all come up with the 60% target for Black homeownership? Why that number?
Asante-Muhammad: African Americans really haven't hit a 50% homeownership rate. So we wanted to have a goal that would not just get us over the edge of being majority homeowners, but would kind of get you to a level where you're firmly at the space of being majority homeowners.
White homeownership is at 73% to 74%, so it's not even trying to get to where whites are. Even to get to something that's far distant from white homeownership rates requires a tripling of new Black homeowners every year for 20 years.
Devine: We felt like 60% was measurable, reasonable, and we could really have some policy and pragmatic solutions around it.
MarketWatch: To what extent is the pandemic making homeownership that much harder to achieve for Black Americans?
Devine: There are already a number of Black Americans who are not financially stable, and there are reports that suggest that many of them didn't even have enough savings or financial safety net to weather an economic disruption like COVID. So not only has the financial insecurity of Black Americans hindered their progress towards buying a home, now it's even worse.
We're not just thinking about the impact that COVID-19 has had on Black homeowners, or those seeking to buy homes. We will also have to understand that recovery has to center and respond to the decades of financial insecurity that Black Americans have faced pre-COVID, and you need to think about solutions to those issues.
Asante-Muhammad: We don't know the effects of what I'll call the COVID-recession yet -- we're still trying to figure that out. But what's concerning is that we've seen Black homeownership pretty much decreasing since 2000, and between 2015 and 2019, as the report notes, we have kind of been stagnant at around 42%.
So the fact that we weren't on an up-crease before the COVID recession -- we were just kind of treading water and keeping our heads above water at 42% before the COVID recession -- has me concerned that we could go even farther back.
We'll see what happens over the next year or two. We're hoping we're getting past the worst of the COVID crisis. We think it's pretty clear it's disproportionately hurting Black entrepreneurs and that could have a serious effect on homeownership.
Oftentimes Blacks and Latinos hit the worst of a crisis after the crisis is supposedly over -- we had the worst of the Great Recession a couple years after the Great Recession was already declared over. I think that could also be true with the COVID recession. We might by July say it was over, but the Blacks and Latinos might be still dealing with the worst aspects of it in 2021, 2022 and 2023.
MarketWatch: Even before the pandemic, Black homeownership was falling (link) -- and has been falling for over a decade, dropping to the lowest levels since the Civil Rights Act was signed. How significant is that?
Asante-Muhammad: We are past having an outright legal Jim Crow society. But what you have to remember though is that, yes, there were a lot of barriers for Blacks to buy homes in white neighborhoods, but there weren't as many barriers for Blacks to buy homes in Black neighborhoods. And so if you had a strong economy, which you did in the 1960s, that would allow for some Black homeownership to be maintained.
What we've been dealing with since the 1980s is a regressive economy where Blacks never saw the economic rewards that people were hoping would go with a post-segregation society.
So now we have a segregated society by wealth and by income, which is reinforcing what was the outright Jim Crow segregation of the past. Until there are substantial increases in wealth and income, it's going to be hard to see any changes in homeownership.
Just like it took radical transformation of mortgages and strong government subsidies to move whites into majority homeownership status in the '40s and '50s -- we're going to need something like that again.
MarketWatch: It's not just become more difficult for Black Americans to become homeowners, but also for Black Americans to keep their homes. Why is that?
Asante-Muhammad: We know Blacks don't have the same type of savings as whites have and as much wealth. So obviously when they fall into negative economic situations they have less to fall back upon, which can make them lose a home that much faster. And usually during economic crises Blacks are more likely to lose their job and lose it for longer periods of time.
Because Blacks do have less income and less wealth, they have to buy homes at lower price points. There has been, over the last 20 years, less and less affordable homes. The homes that are being constructed are more and more high-cost homes, and so that must also be an ongoing barrier for Blacks, Latinos, for those who are moderate-income, low wealth to enter into this 21st century housing market.
MarketWatch: Do you see reparations playing a role in advancing Black homeownership?
Asante-Muhammad: If we do want to address homeownership, we have to address the overall economic conditions of African-American people and bridge this income and wealth inequality.
A targeted approach like reparations is something that probably will need to occur, meaning we can have some changes in different types of mortgages but if there aren't changes in the Black economy as a whole it's going to be hard to move things forward.
Reparations can be a thousand different things, so maybe there would be some type of homeownership component where you could have a no-interest, 30-year loan with no down payment or you could make VA loans also open to all African-Americans. That could be a part of reparations.
Devine: When folks use the term reparations, it's really to denote the need to make bolder systemic interventions to support housing access or housing equity for Black Americans, but also for Black Americans to generate wealth.
So, what we hope to do in this report is to really hold, for example, financial institutions and mortgage lenders accountable to how many loans they provide to Black Americans, to reconsider their products, to be more accessible to Black Americans. Or for communities to think about their tax system or their flow of money and how revenue, for example, can be used towards increasing homeownership rates for Black Americans.
When you talk about the system of money there are a number of opportunities where communities and institutions can galvanize and redirect money to support a common goal. That goal of increasing Black homeownership actually benefits not just Black homeowners or Black Americans but broadly the entire community and global economy.
MarketWatch: In the report, you addressed the role that lending practices and getting access to mortgage credit should play in advancing Black homeownership. What steps do lenders and other financial institutions need to take?
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03-11-21 1115ETCopyright (c) 2021 Dow Jones & Company, Inc.