Ebony Jones thought she was one of the lucky ones. Jones, a Black woman in her 30s, inherited a home her grandfather, a World War II veteran, had bought nearly seven decades earlier with the help of his GI Bill benefits.
But when Jones and her two children moved into the house in Compton, California, which was paid off almost 40 years ago, they soon discovered that sewage sometimes backed up in the living room and that the plumbing needed to be repaired. The distressing process of securing a home equity loan introduced Jones to an American reality.
Despite Jones' good credit score, low debt-to-income ratio, better-than-average income and several thousand dollars of savings, lenders who immediately expressed interest stopped or went quiet when they got to two questions.
What was her ZIP code? Answer: 90220. That's Compton, 29 percent black, 68 percent Latino.
Was she married? Answer: No.
Federal law prohibits lenders from using the answers to those questions to determine a borrower's ability to repay a loan.
"When I initially apply for a loan online, without fail, I get no problem," said Jones, 37. "They bombard me with emails and letters. Then they see the property address or ask me if I'm married, and everything changes."
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The United States is in the midst of a racial reckoning as protests that began in the wake of George Floyd's death in Minneapolis police custody, as well as high Black unemployment due to the coronavirus pandemic, have prompted some Americans to contemplate the ways institutionalized racism and discrimination have constrained Black lives for centuries.
Advocates, scholars and officials say one of the clearest examples of that ongoing discrimination exists in the housing market, where the gap in homeownership rates between Black and white Americans is wider than it was before the Civil Rights movement.
Seventy-six percent of white households owned their homes at the end of the second quarter of 2020, compared to just 47 percent of Black households, according to the Census Bureau. That 29-percentage-point gap, perpetuated by decades of housing and economic policies favorable toward white buyers and designed to exclude Black buyers, has only been exacerbated by the pandemic and before it the 2008 financial crisis. Homeownership is the prime driver of America's ongoing wealth gap.
Gap begets gap
The homeownership gap between Blacks and whites is greater now than it was when the Fair Housing Act was signed into law in 1968 …
… and since fair housing advocates say the biggest store of value for most households is home equity, the homeownership gap is the main driver of the wealth gap.
"We have a housing market with different components, including rentals and purchases and financing and insurance, that is really built on a structure that was explicitly racist," said Debby Goldberg, vice president of housing policy and special projects at the National Fair Housing Alliance, a consortium of nonprofit anti-housing discrimination organizations. "It shouldn't be a surprise to anyone looking around to see how segregated we remain. To see this enormous homeownership gap. And hand in hand with that to see the enormous wealth gap that exists."
In Jones' case, being able to live reasonably required access to a home equity loan. Ultimately, just one bank, Navy Federal Credit Union, offered her a loan, but only after making her wait eight months — supposedly to see whether any additional heirs would lay claim to the house, she said — and with the condition that her boyfriend co-sign. Even then, the credit union offered her only $185,000. That's far less than $248,000, or up to 80 percent of the equity Jones had in the home after earlier repairs. That's what lenders typically allow a person with good credit to borrow.
Navy Federal declined to comment on Jones' case, citing its obligation to protect borrowers' privacy. The credit union is "committed to serving all of our members as a trusted financial partner," a Navy Federal spokesperson said by email.
The consequences of not owning a home or of becoming a homeowner later in life are enormous, experts say. It often leaves a family unable to reach other pillars of the American dream, like tapping into home equity to start a business, survive a job loss or a medical emergency or pay for a child's college education. It is part of the reason a higher percentage of Black households owe student loan debt than white households. And experts say not owning a home makes it harder for Black children to become adult homeowners.
"Black Americans are locked in a vicious cycle," said Andre M. Perry, a fellow in the Metropolitan Policy Program at the Brookings Institution who is author of "Know Your Price: Valuing Black Lives and Property in America's Black Cities." "It is the lack of wealth that is the first and most fundamental barrier to homeownership for Black people in this country."
America's housing gap ballooned after the New Deal, experts say, when the federal government rolled out a suite of programs to boost homeownership and construction-industry employment in the wake of the Great Depression. Many of the programs, such as the Federal Housing Administration, an agency that oversees federal backing of private mortgage loans, the introduction of the 30-year fixed-rate mortgage and a tax credit for those with mortgages, made buying a home much more affordable for white families.
But Black households were often left out of the homeownership boom because of redlining, a practice in which the Federal Housing Administration refused to back loans in areas that were occupied predominantly by people of color. Those areas, often lined or shaded red on agency maps, were considered too risky.
Other discriminatory policies also proliferated. In several cities, including Minneapolis, St. Louis, Seattle and Chicago, it wasn't uncommon to see housing deeds that forbade the sale of specific properties to people of color.
As a result, by 1950 only about a third of Black households owned their homes, compared to more than half of white households.
"Housing is a story about wealth. Access to housing is one of the ways to generate wealth," said Skylar Olsen, senior principal economist at Zillow, an online real estate information platform that regularly analyzes market trends. "Not having access to housing in the past because of redlining, that really, really impacted generations of wealth building."
The 1968 Fair Housing Act outlawed redlining. But experts say the barriers between Blacks and homeownership didn't evaporate with the law. A Northwestern University study of bias in the housing market published in January found that while overt forms of discrimination — a real estate agent who won't return a phone call or who will deny that a listing is available — have decreased over the past four decades, discrimination in the mortgage market showed little change from 1968 to 2016.
And Minneapolis, one of the cities where racially restrictive deeds were prominent during the early 20th century, to this day has the largest homeownership gap in the United States.
Experts say the reasons for the lack of change are baked into the financial system. Black neighborhoods are less likely to have bank branches in them, depriving many households of a chance to build a personal relationship with a banker that can lead to loans and positive credit histories. On-time rent payments aren't tallied into credit scores, while late payments are, creating a system that punishes misfortune while ignoring positive behavior. Rent payments and lower incomes also make it difficult for Black households to save for down payments.
Soaring home prices and lagging incomes make it hard for many Black families to afford a mortgage down payment. How many years a household making the median income by race would need to save for a 20 percent down payment.
And Olsen said that in an era when nearly half of young homebuyers needed gifts from their families to purchase homes, the lack of existing home equity from Black parents makes it harder for their children to purchase homes.
Since the Great Recession, bank lending standards have tightened in a way that bars many moderate-income buyers and those looking to purchase low-cost homes from the world of homeownership, Perry said.
Even when they make it to the mortgage market, Black homebuyers are more likely to be denied mortgages than any other racial group, according to a 2019 report by the Consumer Financial Protection Bureau, or CFPB.
Black homebuyers are denied mortgages at a higher rate than any other group.
When they are approved for mortgages, Black buyers remain more likely than any other racial group to be charged higher interest rates and to be steered toward predatory loans. And when unemployment rises, as it has during the COVID-19 pandemic, Black households are more likely to lose their jobs and homes. Black Americans were twice as likely to be foreclosed upon during the 2008 financial crisis, Olsen said. They were also far more likely to have been offered high-cost and therefore high-risk loans. Between the second quarter of 2004 and the second quarter of 2019, the Black homeownership rate fell 9.1 percentage points while the white homeownership rate fell 3.1 percentage points.
The homeownership gap between Black and white Americans on the cusp of retirement reached a 30-year high, according to a 2019 Harvard University Joint Center for Housing Studies Report. And among those ages 50 to 64, the Black/white homeownership gap is even larger, at 27 percentage points.
"Let's be clear about what those numbers really mean," said Odette Williamson, a staff lawyer who oversees the Racial Justice and Equal Economic Opportunity project of the National Consumer Law Center, a nonprofit advocacy group. "Not only is this a generation of Black people who have less than some before them, less to help cover medical and other expenses at the end of life, less to live on in retirement. This is yet another generation where many will have absolutely nothing to pass on."
During the Great Recession, a 2007 Rasmussen poll found that 54 percent of Americans believed greedy, dishonest borrowers were to blame for the last housing crisis. The idea, along with racism and a declining sense of white American power, helped to bind the tea party together. But Sen. Elizabeth Warren, D-Mass., who proposed a wave of financial regulations before and after that crisis, blamed banks and Washington lawmakers.
"Part of the reason for the confusion is that the lenders first peddled their products in communities of color," Warren said in an interview. "They perfected their cheating ways by taking advantage of African Americans and Latinos all across this country. And that just didn't raise anybody's attention.
"The fact that Black families were being stripped of their homes didn't feel like an urgent problem to the regulators in the Bush administration," said Warren, who first proposed the Consumer Financial Protection Bureau in 2007. It became a reality during the Obama administration. "The lenders … figured out the most effective ways to cheat people and then sold those products in every community. And that's when they brought down the whole economy."
Banks also packaged and sold groups of high-risk, high-cost mortgages like securities.
Those who manage to buy their homes also face a gulf in how their home prices will grow. According to the most recent Federal Reserve Survey of Consumer Finances, the mean net housing wealth for Black households was $94,400 in 2016, less than half the $215,800 mean for white households. And an NBC News analysis of home value estimations from May 2020 on Zillow found that homes in ZIP codes that were predominantly Black were valued at just 60 percent of the value of homes in predominantly white neighborhoods.
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And prices of Black-owned homes have appreciated far more slowly, as well. An NBC News analysis of home valuations from Zillow from 2010 to 2020 found that price growth of homes in predominantly Black ZIP codes was about half of the growth in predominantly white ZIP codes.
Experts say the same fundamentals that prevent would-be homeowners from getting mortgages keep Black homebuyers from getting loans to perform maintenance on properties and make retailers less interested in setting up shop nearby. Even parks and other public facilities tend to be more common and better maintained by governments in predominantly white areas.
"So now, not only do I not have as much of an income boost, I also have a limited ability to improve the capital stock," said Olsen, of Zillow. "The quality of the homes becomes more and more disparate between Black and white communities."
Perry, of the Brookings Institution, said: "The long-standing narrative in America is that the conditions of Black neighborhoods and cities are a direct result of the residents in them. People are so ahistorical that they forget there has been a policy violence leveled against Black people that comes out in the wash of research. There has been violence in practice from the nation's appraisers, which are almost 90 percent white. You cannot discount that violence happening on paper and in communities, year after year after year."
As in many other American industries, The Appraisal Institute, an industry trade group, has maintained a "Diversity Pipeline Initiative" and has committed to expanding the profession in January.
In Compton, Jones said, a regular topic of conversation is how happy people are that Compton has its very own big-box store, part of a national chain. That's a meaningful convenience that Jones said she still can't believe people in other parts of the Los Angeles area have the luxury and gall to protest.
While the Black homeownership rate has increased since mid-2019, advocates worry that the homeownership gap will only grow, not only because the pandemic has sent Black unemployment to its highest level since the 1980s, but also because federal agencies have walked back Obama-era efforts to combat discrimination.
The CFPB, the government financial watchdog created under President Barack Obama and proposed by Warren, has drastically scaled back its discriminatory enforcement actions against bank lenders. The agency filed 11 such actions during the Obama era. The actions reclaimed what former Director Richard Cordray, an Obama appointee, described as $12 billion for consumers. After substantial resistance, they created conditions in which lenders knew the agency was watching and behaved accordingly, he said. The agency has filed just one enforcement action since then.
In July, the Department of Housing and Urban Development terminated a 2015 regulation connected to the Affirmatively Furthering Fair Housing section of the Civil Rights Act. The rule, which required local governments and jurisdictions receiving HUD funding to analyze systemic barriers to fair and equal housing, was deemed "unworkable and ultimately a waste of time" by HUD Secretary Ben Carson, the only Black member of the Trump Cabinet.
In its place, HUD introduced a rule that lowered the requirements for jurisdictions, allowing them to continue certification as long as they take an "active step" toward promoting the agency's new definition of fair housing.
Goldberg, of the National Fair Housing Alliance, said the new rule disregards segregation and other systemic factors in housing.
"You look around us at what's been going on in this pandemic and you can see the conditions of neighborhoods of color that have been disinvested have put them in harm's way," Goldberg said. "This rule was one of the tools we had to try to tackle the inequalities. To take it away now is just inexplicable and inexcusable."
A senior HUD official said that fair housing remains a vital goal to the department and that freeing jurisdictions from paperwork compliance burdens would allow them to continue making progress in promoting fair housing.
But President Donald Trump in a series of tweets last week appeared to confirm that rescinding the rule was about preventing further racial and economic integration of suburban neighborhoods. Trump, who has repeatedly returned to the racist theme that the American way of life is under assault from Black protesters since the George Floyd protests began, said the rule change was aimed at protecting the "Suburban Lifestyle Dream" from "low income housing built in your neighborhood."
"In the time we were building new suburbs after World War II, we made low-cost credit available to white families and explicitly did not to people of color," Goldberg said. "This is how we thought about the American Dream at that time. That's the image the president is trying to conjure up."
Cities and states have tried to address parts of the gap. Minneapolis voted in 2019 to increase housing density and, with it, likely residential integration by eliminating single-family home zoning. That will allow apartments, condominiums and townhomes to be built in many more neighborhoods. A similar bill is pending in the California Assembly.
But advocates say real change must come from the federal government.
"The benefit of the federal action is that it can be larger-scale," Goldberg said. "It sets a floor for everyone. Everyone has some basic level of protection."
Without leadership from the government, advocates and regulators say, the gap will continue.
"What I fear," said Rep. Maxine Waters, D-Calif., chair of the Financial Services Committee, which regulates banking, "is that in the absence of so many cops on the beat, now that Trump has installed his people over at the CFPB, at HUD and all the agencies, is that redlining may have returned, that new forms of discrimination are taking shape."
That possibility could distort the lives of generations of Black Americans to come.
"I think the issue for us is that we don't come from generations of wealth. Most Black people can't say that — they cannot say their parents and their grandparents, aunts and uncles all owned homes," Jones said. "So, to this day, our American Dream looks like an isolated hope."
"I'm trying to break cycles," Jones said. "I'm trying to assure that my children's goal is not survival but to thrive and flourish in a world full of possibilities that remain easier for some people, white people, to access."