A Housing ‘Black Tax’
A Housing ‘Black Tax’
By Lee A. Daniels
If home ownership is, overwhelmingly, the foundation of individuals’ and families’ economic security in America, Black Americans face a profoundly difficult predicament. For when it comes to that signal marker, the wrenching economic shocks of the past half-decade have wiped out at least 14 years of Black Americans’ climb up the homeownership ladder.
That’s the inescapable assessment to be drawn from a series of recent reports on discrimination in the home buying market, and on homes foreclosed on as a result of the Great Recession.
These developments point to a “perfect storm” of individual, institutional and structural racism that – along with such largely race-neutral economic developments as the new surge of all-cash deals for home purchases in some metropolitan areas and the nation’s growing income inequality – will undermine many Black Americans’ ability to become homeowners for years to come.
That prediction is rooted in the stunning recent decline of Black homeownership. From its peak of 49.1 percent in 2004, it fell to 44.9 percent in 2011 (compared to 46.9 percent for Latinos; nearly 59 percent for Asian Americans; and more than 74 percent for whites), according to diversitydata.org, a research project of Brandeis University’s Institute for Child, Youth and Family Policy. There’s every reason to think that since then it’s slipped below its 1997 level of 44.8 percent.
What happened between then and now illustrates how powerfully the “Black tax” – the greater economic and social cost the society’s ingrained racism forces Black Americans to endure – has operated the housing sector?
The prosperity that marked the 1990s brought unprecedented job and wage gains to Blacks along with other Americans. That, in turn, fueled steady rise of Black homeownership.
But far too often the price many Blacks, Latino- and Asian Americans had to pay for home loans was unjustifiably steep. During the last decade study after study has shown that Black, Latino-, and Asian American homebuyers were forced to accept subprime mortgages far more often than their white counterparts. Those mortgages, which carry significantly higher interest rates and other costs than conventional, prime mortgages, are typically for buyers with substandard credit ratings. But the studies established that in many instances, banks and mortgage lending institutions forced these loans – which reap higher fees for the lender – on prospective home buyers of color despite their being qualified for conventional mortgages.
One result of that, according to a new report by a national coalition of community organizations and housing groups, was that when the Great Recession hit, the housing bubble burst, and job layoffs mushroomed, many new Black and Latino homeowners found themselves awash in debt and bereft of resources – and thus, a target for foreclosure.
The report’s title, “Wasted Wealth: How the Wall Street Crash Continues to Stall Economic Recovery and Deepen Racial Inequality in America,” underscores its point that because Blacks and Latinos are far more likely than whites to have their home as their major source of wealth, these two groups have experienced collective loses of billions of dollars of wealth and depressed neighborhood property values.
In other words, more than a decade of effort to accumulate wealth has been wasted – and a greater loss may be imminent because there remain millions of homeowners who owe more on their mortgages than their homes are now worth.
It’s also likely the damage these developments have already wrought will be compounded by the persistent racial or ethnic discrimination prospective homebuyers of color face today.
Unlike the situation of decades ago, people of color seeking to buy homes meet little overt discrimination: no doors slammed in their faces.
But the study the federal Department of Housing and Urban Development (HUD) released earlier this month – which used white, Black, Latino, and Asian-American “testers with the exact same financial credentials – found that subtle discrimination in the housing market remains widespread.
The report, “Housing Discrimination Against Racial and Ethnic Minorities 2012,” was conducted by the Urban Institute, a Washington, D.C.-based think tank.
Such tactics as realtors not showing prospective buyers of color the full portfolio of homes in their price range, steering them to neighborhoods or streets with predominantly minority populations, and not offering them the full range of financial assistance are not only morally wrong, but continue the economic penalty discrimination imposes on Blacks and other Americans of color.
Both reports offer focused recommendations.
The HUD report urges closer government and private-sector scrutiny of housing market practices in order to combat today’s more subtle forms of discrimination. The “Wasted Wealth” study contends the key to solving the foreclosure crisis lies in allowing owners of so-called underwater mortgages to write down, or reset their current mortgages to 30-year, fixed rate loans.
The savings they would realize would have the added benefit of constituting a de facto economic stimulus. But, first and foremost, adopting that approach would establish a fire wall that could prevent billions more of the “wealth” of America’s homeowners, especially its homeowners of color, from being wasted.