Urban Wire Black Homeownership Increased Slightly during the Pandemic, but High Interest Rates Threaten to Further Widen Racial Homeownership Gaps
Jung Hyun Choi, Amalie Zinn, Aniket Mehrotra
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The Black-white homeownership gap is no accident. Decades of intentional, government-sponsored exclusionary zoning, redlining, and predatory lending schemes have kept many Black people from buying and sustaining a home. At the same time, government policy and practice subsidized and protected white homeownership and wealth building. Though the Black homeownership rate climbed after the Fair Housing Act passed in 1968, the 2008 subprime mortgage crisis reversed these gains and worsened homeownership disparities.

When interest rates reached historic lows during the COVID-19 pandemic, more Black households bought homes. The Black homeownership rate increased 2 percentage points between 2019 and 2021 (from 42.2 to 44.2 percent), and the most recent data for 2022 indicate continued growth. But the gains are too modest to recover the Black homeownership losses following the Great Recession, let alone reduce the significant racial homeownership gap. Today, the Black homeownership rate is lower than it was in 2000 (44.3 versus 45.7 percent), and the Black-white homeownership gap is wider than it was when segregation was legal.

To help more Black families buy homes and reverse the ongoing barriers to homeownership they face because of past discriminatory actions, we need policies and programs intentionally focused on those goals. We must also understand and acknowledge the nation’s long history of using factors rooted in systemic and structural racism to determine a person’s access to a mortgage. In observance of Black History Month, we discuss the increasing obstacles to homeownership for Black families in a high-interest-rate environment and offer strategies to sustainably increase Black homeownership. 

Mortgage applications from Black families are decreasing, and their mortgage denial rates are increasing

Though not fully reflected in the most recent data, rising interest rates in 2022 and 2023 have presented significant obstacles to homeownership for Black families.

In 2022, mortgage originations to Black households dropped more than 16 percent, and the Black mortgage denial rate increased by 2.6 percentage points. The increase in Black applicants’ denial rate was larger than the increases for white applicants and all applicants (1.4 and 2.0 percentage points, respectively). More than 24 percent of Black families who applied for home purchase loans were denied in 2022, compared with 11 percent of white applicants.


With the hike in interest rates, a high debt-to-income (DTI) ratio became the most common reason for mortgage denial, accounting for 34.1 percent of Black applicants’ denials. Additionally, the share of Black homebuyers with lower incomes (below $50,000) dropped substantially. In 2019, more than 25 percent of Black homebuyers had incomes in this range, but in 2022, only 15.3 percent did. This suggests that rising interest rates are taking a greater toll on Black borrowers with lower incomes, who are more likely to have higher DTI ratios.

Many Black households lack sufficient wealth to afford increasing down payment amounts

Homebuyers in 2022 had higher down payments on their homes than those who bought homes from 2019 through 2021. Thirty percent of homebuyers put down 20 percent or more in 2022, compared with 25 percent of homebuyers in 2019, according to Home Mortgage Disclosure Act data.

A larger down payment amount can lower a homebuyer’s monthly payments and DTI ratio, which can increase their likelihood of getting a mortgage and can reduce the burden of high interest rates. Additionally, a greater down payment can make a buyer more competitive in today’s housing market, which has a severe supply shortage.

But long-standing wealth gaps have made it challenging for many Black households to afford larger down payments. Black households were the least likely racial or ethnic group to put down 20 percent or more when buying a home, with 11 percent of such households with home purchase loans doing so in 2022.

Share of borrowers who put down 20 percent or more

A greater share of Black households put more than 20 percent down in 2022 than in 2019, but fewer Black households had enough resources to put more down in 2022. That year, the median net worth of all white families was more than six times that of Black families, and Survey of Consumer Finances data show white renters had nearly five times the wealth of Black renters, who had a median wealth just above $5,000. Disparities in who receives down payment support from their parents could continue to transfer the impact of historical and structural racism across generations.

Targeted programs could help more Black families become homeowners

The racial homeownership gap remains wide, and policymakers, government agencies, financial institutions, and other changemakers in the mortgage market must all work together to significantly increase Black homeownership. The US government afforded low-interest, amortized home loans to millions of white households for decades. Similarly, programs intentionally targeted to Black families and other historically excluded groups, who still face the effects of past discriminatory housing policies and practices, could help more such families access homeownership’s benefits.

Special purpose credit programs (SPCPs) and first-generation down payment assistance programs are gaining traction and could reduce racial homeownership gaps. SPCPs are targeted programs through which lenders can legally extend credit on more favorable terms to groups who have been historically disadvantaged by discriminatory policies, such as by lowering down payment requirements or loosening credit requirements. Greater adoption of SPCPs, continued liquidity support from the secondary mortgage market, and strategic targeting of these programs could help Black mortgage applicants who have been denied mortgages because of systemic barriers receive sustainable credit and become homeowners.

Targeting down payment assistance programs to first-generation homebuyers could help more than 1.4 million Black households who do not have homeowning parents access homeownership. The idea was first introduced in the Build Back Better proposal (PDF), and Congress and the Biden administration continue to prioritize it. Numerous states and localities, including California most recently, have also championed these programs.

Making a meaningful difference in Black homeownership also requires addressing the affordable housing supply shortage. Potential solutions include subsidizing the cost of building affordable, owner-occupied housing; preserving available owner-occupied housing (e.g., in the federal Neighborhood Homes Investment Act proposal); and reducing barriers to development, such as zoning and land-use regulations.

Reducing the Black-white homeownership gap is critical to advancing racial equity in the United States, but it won’t happen on its own. Existing policies and programs need to be further expanded, better targeted, and well funded to improve Black families’ access to homeownership and opportunities to build wealth for future generations.


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Research Areas Housing finance
Tags Black/African American communities Fair housing and housing discrimination Homeownership Housing finance reform Racial homeownership gap Structural racism Wealth inequality
Policy Centers Housing Finance Policy Center
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