Owning a home remains the most reliable way for American families to build wealth and is often financially better than renting. But access to homeownership is not equal. Hispanic and black households have lower homeownership rates than non-Hispanic white households (46 percent and 41 percent versus 71 percent).
Many factors contribute to this disparity, and understanding their impacts can be difficult. New research helps clarify one piece of this puzzle by establishing that limited English proficiency is a barrier to homeownership.
Looking at data at the zip code level from the Urban Institute and Sloan Foundation’s Administrative Data Research Facility, we found a considerable gap in homeownership rates between neighborhoods with low levels of limited English proficient (LEP) residents and those with higher levels of LEP residents.
Neighborhoods with the lowest concentration of LEP residents had a median homeownership rate of 74 percent in 2016, but neighborhoods with the highest LEP concentration had only a 64 percent median rate—a 10 percentage-point difference. If we control for other factors that influence homeownership (e.g., income, age, and race), neighborhoods with the highest concentrations of LEP residents have homeownership rates 5 percentage points lower than rates in neighborhoods with the median concentration of LEP residents. Limited English proficiency has a considerable impact on homeownership rates.
We are not sure why and how limited English proficiency interferes with homeownership, but this research establishes that it is a barrier on top of other, more researched barriers. This finding suggests that we might expand homeownership by better serving the LEP community.
Last October, the Federal Housing Finance Agency announced it would add a preferred language question to the redesigned Uniform Residential Loan Application. This new question will allow lenders and regulators to gather data to help them size the market of potential LEP homeowners and determine how they can best serve these populations. Our new findings suggest that the addition of a language variable on the loan application is a move in the right direction.
Spanish-language speakers compose 62 percent of the LEP population, and 42 percent of Spanish speakers do not speak English “very well.” Focusing on this group may be the best way to start addressing this problem, but we need to reduce all forms of limited English proficiency as a barrier to homeownership.
The evidence is now clear that limited English proficiency is a barrier to homeownership and that gathering data so we can address this barrier should be a top priority. We need further research to determine how the housing finance industry can better support the LEP population and which institutions are best able to do so.