For more than a century, economic exclusion and racist and discriminatory public policies and practices in the private sector have led to a persistent racial wealth gap in the US. Evidence suggests clear structural barriers and discrimination remain to building wealth through homeownership, including predatory lending, appraisal bias, and bias in automated valuation models. In fact, the Black-white homeownership gap is wider today than it was before the Fair Housing Act passed in 1968.

Yet homeownership remains a potential wealth-building tool and typically allows people greater residential stability, which is associated with better life outcomes for families and children.

Most data on wealth are available only at the national level, but community organizations, advocates, and policymakers need data about their communities to develop solutions that address wealth inequities, like the homeownership gap, that account for neighborhood context.

The Urban Institute, in its role as a national partner in the National Neighborhood Indicators Partnership (NNIP), collaborated with the Black Wealth Data Center (BWDC) to equip stakeholders in Detroit with the local data they needed to explore the gap between mortgage demand and supply by neighborhood. Other cites seeking to increase Black homeownership in similar markets can consider adopting NNIP’s approach: helping local communities use data to shape strategies and investments so all neighborhoods are places where people can thrive.

Local data illuminate barriers to homeownership

NNIP and BWDC selected NNIP Partner Data Driven Detroit and their collaborator Detroit Future City to explore an issue that many cities and neighborhoods with lower home values face: the availability of “small-dollar” home purchase mortgages.

In Detroit—a city where in 2020 and 2021, more than 8 in 10 residential transactions were between $500 and $100,000 and where 78 percent of the population is Black—understanding the demand for and accessibility of small-dollar mortgages is critical for supporting Black wealth building and residential stability through homeownership.

Using home sales data from the Wayne County Register of Deeds and data from the Home Mortgage Disclosure Act, Detroit Future City and Data Driven Detroit found that only 19 percent of all homes sales in the city in 2020 to 2021 were financed with a mortgage. Of the sales with mortgages, only 35 percent were small-dollar mortgages, even though the vast majority of all sales were small-dollar, between $30,000 and $100,000. Moreover, only 47 percent of applications for small-dollar mortgages were originated, with the rest denied or withdrawn.

Their report provides case studies of three neighborhoods’ housing markets to explore the issue. These neighborhoods were similar, with near-middle-class communities, improving housing markets, and majority Black residents, but they found differences in the demand for and use of small-dollar mortgages among them.

There was stronger demand for small-dollar mortgages, as evidenced by more mortgage applications and originations, in the two neighborhoods closer to where new public and private investments had been made. These two neighborhoods are also closer to some of Detroit’s historically more-stable neighborhoods. Continued investment in Detroit’s neighborhoods to support commercial corridors and provide amenities will help increase buyer demand and boost low housing values.

The analysis and interviews with community development organizations and lenders also highlighted the lack of awareness of existing loan products and move-in-ready homes priced under $100,000. Potential buyers of houses that need extensive repairs are less likely to obtain mortgages because the property may not qualify as loan collateral or meet federal loan programs’ habitability standards.

Local context helps inform effective solutions

Now that local partners understand many of the reasons behind neighborhood-level homeownership gaps, they can use the data to make the case for investments to address the problem. The collaboration shows how critical granular data can be for understanding the factors that fuel local trends. And as each locality implements solutions and can advocate for systemic policy change, the nation will ultimately get closer to narrowing the racial homeownership gap.