The historic decline in black homeownership doesn’t have a single cause. It’s an outcome of broad-based challenges in economic and social well-being that undermine black people’s wealth. Approaches to revive black homeownership need to make it easier for renters to become owners, sustain established owners, and invest in predominantly black neighborhoods.
Goal 1: Make it easier for renters to become homeowners.
The Urban Institute has presented consistent evidence that the credit box is tighter now than it was in 2000, after gains had been made in access to credit but before bad loan products (e.g., subprime mortgages) flooded the market.
Tight credit is a key reason why only 29 percent of black households in their late thirties owned homes in 2016, compared with more than 42 percent in 2000. These young households have been further delayed in their transition into ownership by high rents and by setbacks their parents and grandparents experienced in the recession and foreclosure crisis.
But it’s not just young households whose ownership has slipped. More than half of black households headed by people born in the 1960s—who are now mostly in their fifties and nearing retirement age—rent their homes, compared with just 40 percent of black households in their fifties in 2000.
Many of these older black renters became homeowners between 2005 and 2007, when mortgages were at their riskiest, and lost the most in the foreclosure crisis and the recession from 2008 to 2011. Their credit records may still be distorted by the ripple effect of loans that should never have been allowed.
Many initiatives could build a path to homeownership for first-time owners and for previous owners who currently rent. For example, a new mortgage rule from Fannie Mae would support black and Hispanic homebuyers who have no credit score by incorporating nontraditional credit data from potential homebuyers, such as a person’s rent payments or utility bills.
Local programs like the Detroit Neighborhood Initiative—a partnership between the City of Detroit, the Neighborhood Assistance Corporation of America, Bank of America, and Opportunity Resource Fund—offer above-loan-to-value loans to borrowers who need to renovate low-value properties that have been credit starved because of the decline in small-loan lending. Low-value loans also help stem the recent rise in land contracts, which need greater regulation, oversight, and transparency.
Goal 2: Sustain established homeowners.
Black homeownership has also slipped because black people who already own homes have shorter spells of ownership than white homeowners.
Sustaining homeownership has received less attention than helping renters become owners, but it’s at least as important, because the loss of a home usually involves displacement of an older household who may have too little time before retirement to recover from losing their home. The loss of a home also takes away a fallback option for other members of an extended family when they experience housing instability or homelessness.
State and local governments could stave off further losses by reforming their policies on tax foreclosure and land contracts. In many communities hardest hit by the home mortgage crisis, tax foreclosures are emerging as a second foreclosure crisis that is further contributing to the loss in black homeownership. To respond, state and local governments should reduce punitive interest rates and fees on property tax debt and allow payment plan options and abatement programs.
States with tax foreclosure epidemics could also follow Michigan’s 2014 example, when its state legislature authorized Wayne County to cut interest payments for unpaid taxes from 18 percent to 6 percent and allow homeowners to set up payment plans to spread unpaid taxes. The Wayne County treasurer announced that 36,000 Wayne County residents, primarily in Detroit, were on repayment plans by September 2017.
To protect homeowners who are in unsustainable land contracts, state legislatures could follow Texas’s 2015 example and pass legislation requiring land contracts to transfer the title to the homebuyer and encouraging legal recording of titles, which establishes ownership of the residence. Other initiatives could be modeled on the NeighborWorks National Foreclosure Mitigation Counseling Program, which connects owners in foreclosure with counselors who help restructure their debt and reduce their risk of default.
Over the long run, shared-equity solutions like those pioneered by the Durham Community Land Trustees can sustain ownership. They also increase renters’ access to homeownership and stabilize neighborhood property values.
Goal 3: Protect and reinvest in predominantly black neighborhoods.
Actions must address systematically low housing values, the lack of small-dollar housing finance, and disinvestment in public and private services in black neighborhoods. With high property assessments and low appraisal values, many of these neighborhoods suffer from the worst of both worlds and are almost certain to remain vulnerable to cycles of property loss, displacement, and wealth destruction.
Comprehensive approaches are necessary to improve conditions in these neighborhoods, learning from place-based initiatives that community development practitioners, policymakers, and philanthropies have built and improved over the past few decades. With the decades-long black-white homeownership and wealth gap that persists across the country, communities would be served by added protections, renewed investment, and targeted policy action.