Homeownership has long been understood as one of the most impactful opportunities for building intergenerational wealth in the United States—but it’s never been an even playing field for all Americans. Black Americans have faced—and continue to face—systemic discrimination at every stage of the home-buying process, resulting in a 30 percent Black homeownership gap.
This racial chasm remains staggering with no real improvements since the 1970s and requires radical, inventive policy changes—alongside meaningful partnerships at the national and local levels—to bridge Black and white homeownership and wealth inequality.
Understanding the Black Homeownership Gap Today
The gaps between Black homeownership and white homeownership in the United States have worsened over the past few decades to reach record highs—and the rate of Black homeownership today is lower than it was in the 1960s when race-based discrimination was legal.
According to U.S. Census Bureau data, Black homeownership rates continue to decline. In the second quarter of 2019, the Black homeownership rate hit its lowest ever at 40.6 percent (Quarterly Residential Vacancies and Homeownership, U.S. Census Bureau, 2022). In 2021, the average rate of Black homeownership was 44 percent, and in the first quarter of 2022, the Black homeownership rate stood at 44.7 percent (Quarterly Residential Vacancies and Homeownership, U.S. Census Bureau, 2022).
With white homeownership rates remaining consistently around 73 percent, there is a persistent 20–30 percentage point gap between white homeowners and Black homeowners ((Quarterly Residential Vacancies and Homeownership, U.S. Census Bureau, 2022).
Barriers to Black Homeownership
Black-White Income and Wealth Gaps
According to the Economic Policy Institute, the median Black household earns 61 cents for every dollar earned by a comparable white household (“Racial disparities in income and poverty remain largely unchanged amid strong economic growth in 2019,” Economic Policy Institute, 2020). The median household income in Black households is $38,183, and in white households is$61,363 (Breaking Down the Black-White Homeownership Gap, Urban Institute, 2020).
Beyond household income, household wealth is another vital statistic to examine. Due to decades of systemic racism and discrimination, there is also a substantial wealth gap between Black and white households. The Brookings Institute reported that the net worth of a typical white family is $171,000, nearly ten times greater than that of a Black family at $17,150 (Examining the Black-white wealth gap, Brookings Institute, 2020).
Unfortunately, low rates of income and wealth and homeownership are deeply intertwined, reflecting an American legacy of inequality and discrimination. These practices continue to leave Black households far behind in purchasing their own home, one of the key building blocks to amassing intergenerational wealth.
Increasing access to homeownership for more Black Americans will help boost their overall wealth: in 2016, it was estimated that if Black homeownership rates were to equal those of white Americans, the median Black household wealth would more than double to $39,226 (The Racial Wealth Gap: Why Policy Matters, Demos, 2016). Though this still leaves a vast level of wealth inequality between Black and white households in the US, it would help to catalyze a continued narrowing of the gap.
Housing and Mortgage Market Discrimination
Many Black Americans still face housing and mortgage market discrimination today. In 2021, Black Americans were 2.5 times more likely to be rejected for a home loan compared to white borrowers (“NAR Finds Black Home Buyers More Than Twice as Likely to Have Student Loan Debt, Be Rejected for Mortgage Loans Than White Buyers,” National Association of Realtors, 2021).
And, Black Americans were also three times more likely than white and Asian Americans to tap into their 401(k) or pension funds as a source of liquidity for their down payment (“NAR Finds Black Home Buyers More Than Twice as Likely to Have Student Loan Debt, Be Rejected for Mortgage Loans Than White Buyers,” National Association of Realtors, 2021). Reliance on a retirement or investment fund as a down payment source for a home purchase can often negatively impact future wealth and liquidity which can set a family back for years.
Of those surveyed, 41 percent of Black respondents said they face stricter real estate requirements because of their race and one-third of Black homebuyers said they witnessed or experienced discrimination with the type of loan product offered (“NAR Finds Black Home Buyers More Than Twice as Likely to Have Student Loan Debt, Be Rejected for Mortgage Loans Than White Buyers,” National Association of Realtors, 2021).
Even when Black Americans successfully purchase a home, they still generally pay higher mortgage interest rates for home loans compared to white homeowners. One study found that Black homeowners with incomes between $75,000–$100,000 paid higher interest rates than white homeowners with $30,000 or less in household income (“High-Income Black Homeowners Receive Higher Interest Rates Than Low-Income White Homeowners,” Joint Center for Housing Studies of Harvard University, 2021).
Continued discrimination within the housing and mortgage markets consistently impedes Black Americans’ access to homeownership and the resulting intergenerational wealth.
Closing the Gap: How We Help Increase Black Homeownership in the U.S.
The National Community Reinvestment Coalition has developed an initiative with a goal of reaching 60 percent of Black homeownership, reversing the decline in Black homeownership, and boosting the economic stability of families in the process.
At Smith NMTC Associates, we’ve pioneered a New Markets Tax Credits funding model to bring affordable, for-sale housing opportunities to many underserved—and predominantly Black and Brown—communities in the U.S.
The impact of adding 3 million new Black homeowners by 2030 would bring the rate of Black homeownership in the U.S. to 57.5 percent—assuming that the population increase, Black homeownership rates, household formation rates, and Black homeownership loss rates remain consistent (60% Black Homeownership: A Radical Goal for Black Wealth Development, National Community Reinvestment Coalition, 2021).
This radical increase in new Black homeowners requires affordable, for-sale homes, particularly in communities with larger Black populations. The magnitude of this goal is sizable—and requires an intentional effort. For nonprofit developers, investors, and lenders within the NMTC space, we see a significant opportunity to use this program as a tool to yield new housing opportunities for Black Americans.
At Smith NMTC Associates, we’ve pioneered a new approach to using the NMTC program to fund affordable homeownership. The NMTC program presents a one-of-a-kind opportunity to increase access to homeownership for Black households, strengthening a new pathway to residential stability and creating consequential wealth for Black Americans.
To learn more about how the NMTC program can help your community and your constituents, reach out to us. We’d love to hear from you.