Svenja Gudell is the chief economist of Zillow Group. The opinions expressed in this commentary are her own.
Systemic racism is deeply rooted in our nation’s housing market. Redlining and other forms of housing discrimination, going back to slavery, have laid the foundation for a deeply unequal housing experience. To begin to address these inequities we need to put measures in place to increase the volume of affordable housing, improve access to credit for black and brown buyers and expand and better enforce fair housing laws.
The black and white homeownership gap remains as wide today as it was at the dawn of the 20th century. Nearly 75% of white households own their homes, compared with just 44% of black households. While we should be encouraged that there has been a recent surge in growth in the black homeownership rate, especially after the black and Latinx (49% homeownership rate) communities were hit disproportionately hard during the Great Recession and ensuing foreclosure crisis, the fact that fewer than half of these households have achieved homeownership by 2020 — after decades of fighting systemic racism — is disgraceful.
There are other shameful signs of this country’s lack of progress in creating a truly level playing field. In the mid-1990s, black mortgage applicants were roughly twice as likely to be denied as whites. In 2016, blacks were 2.6 times as likely to be denied a conventional mortgage as whites. In two decades, the situation didn’t simply fail to improve — it got worse.
The effects of this gap have devastating consequences for both the financial wealth and health care of non-white Americans. Homeownership is and always has been a stabilizing force in communities. Roughly half of the total wealth accumulated by the typical US homeowner is tied up in a primary residence — and that share is even higher for black and Hispanic homeowners. This is wealth that is passed down among generations and that helps ensure upward mobility for children and grandchildren.
In the rental market, too, inequity is rampant. Black and Latinx renters are more likely than whites to pay application fees and security deposits, adding to the upfront costs of renting and decreasing mobility. They’re also the least likely to have a deposit returned. Nationwide, renters in minority communities spend a much larger share of their income on rent each month. And when more income is devoted to rent, less income is saved for a down payment or nest egg that might otherwise help to ensure long-term wealth for future generations.
Examining this unequal housing ecosystem invariably leads us to discuss injustices in other areas. When we talk about the homeownership divide, we turn to disproportionately high mortgage denial rates among borrowers of color. To talk about high mortgage denial rates, we turn to income and savings disparities. To explain income disparity, we turn to disparate employment outcomes. To explain differences in savings, we can point to unequal rent burdens. Before that, education disparities. And on and on. There is always another layer to peel back.
But even if the data behind these systematic inequalities do not lend themselves to simple statements of truth — that people have been left behind because they are black or brown — the truth is staring us in the face. Mortgages are often denied to black applicants for reasons of “insurance denied” or “lack of credit history.” When examined against instances of white mortgage denials for the same reasons, it is obvious what these codes really represent.
We may never see a document that says: “Reason for denial: systemic racism.” But at its root, that is exactly what it is.
In our current moment, knowing how to right these deeply rooted wrongs feels daunting. But there are obvious places to start the conversation. For example, policies to encourage more affordable housing — such as California’s AB-3040, which would amend existing laws to incentivize city and county governments to allow four units on single-family parcels — would help diversify neighborhoods.
The National Fair Housing Alliance and Zillow have asked Congress to pass the Equality Act to prohibit discrimination based on sex, sexual orientation and gender identity in public accommodations, education, federally funded programs, employment, credit and housing. Other steps in the right direction include bills like New York’s SB 7073, which would establish a toll-free housing discrimination complaint hotline and allow an individual’s real estate license to be revoked or suspended for unlawful housing discrimination. HUD’s fair housing education and enforcement efforts are also underfunded, which needs to change.
Reforming our credit scoring systems (including allowing rent payments to be positively reflected in credit scores) can expand access to capital to underserved communities of color. And we must continue holding up research that clearly illuminates how deeply wrong things are beneath the surface of the housing market — relaying what the data say, while remaining clear-eyed about what they ultimately mean.
Clearly, there are steps we can take today to begin working toward a truly equal playing field. But these are only the first steps of a long journey — this fight has been going on for decades and will not be resolved quickly or easily. But we cannot wait any longer to commit ourselves to solving these problems equitably and sustainably. These are hard problems, but not impossible ones, and this moment demands that we rise to them.