The Value Gap: Most Black Americans aren’t homeowners — how can we change that?

And over the past year, matters have gotten worse for Black Americans. Research has shown that layoffs amid the COVID-19 pandemic were more likely to cause housing instability among Black and Latino workers than among white workers. People of color were far more likely than their white peers to face challenges making their monthly rent payments throughout the coronavirus emergency.

Owning a home is one of the main drivers of wealth in this country, particularly across generations, which makes increasing Black homeownership a critical goal in addressing the overarching racial wealth gap. A new report from the National Community Reinvestment Coalition calls for setting a goal of 60% Black homeownership over the next 20 years.

As part of MarketWatch’s Value Gap series, MarketWatch spoke with Dedrick Asante-Muhammad, chief of race, wealth and community at the National Community Reinvestment Coalition, and Joshua Devine, the organization’s director of racial economic equality, to gain insight on what factors have contributed to the lower rates of homeownership among Black Americans and what policies could address them. The interview has been edited for length and clarity.

MarketWatch: How did you all come up with the 60% target for Black homeownership? Why that number?

Asante-Muhammad: African-Americans really haven’t hit a 50% homeownership rate. So we wanted to have a goal that would not just get us over the edge of being majority homeowners, but would kind of get you to a level where you’re firmly at the space of being majority homeowners.

White homeownership is at 73% to 74%, so it’s not even trying to get to where whites are. Even to get to something that’s far distant from white homeownership rates requires a tripling of new Black homeowners every year for 20 years.

Devine: We felt like 60% was measurable, reasonable, and we could really have some policy and pragmatic solutions around it.

MarketWatch: To what extent is the pandemic making homeownership that much harder to achieve for Black Americans?

Devine: There are already a number of Black Americans who are not financially stable, and there are reports that suggest that many of them didn’t even have enough savings or financial safety net to weather an economic disruption like COVID. So not only has the financial insecurity of Black Americans hindered their progress towards buying a home, now it’s even worse.

We’re not just thinking about the impact that COVID has had on Black homeowners, or those seeking to buy homes. We will also have to understand that recovery has to center and respond to the decades of financial insecurity that Black Americans have faced pre-COVID, and you need to think about solutions to those issues.

Asante-Muhammad: We don’t know the effects of what I’ll call the COVID-recession yet — we’re still trying to figure that out. But what’s concerning is that we’ve seen Black homeownership pretty much decreasing since 2000, and between 2015 and 2019, as the report notes, we have kind of been stagnant at around 42%.

So the fact that we weren’t on an up-crease before the COVID recession — we were just kind of treading water and keeping our heads above water at 42% before the COVID recession — has me concerned that we could go even farther back.

We’ll see what happens over the next year or two. We’re hoping we’re getting past the worst of the COVID crisis. We think it’s pretty clear it’s disproportionately hurting Black entrepreneurs and that could have a serious effect on homeownership.

Oftentimes Blacks and Latinos hit the worst of a crisis after the crisis is supposedly over — we had the worst of the Great Recession a couple years after the Great Recession was already declared over. I think that could also be true with the COVID recession. We might by July say it was over, but the Blacks and Latinos might be still dealing with the worst aspects of it in 2021, 2022 and 2023.

MarketWatch: Even before the pandemic, Black homeownership was falling — and has been falling for over a decade, dropping to the lowest levels since the Civil Rights Act was signed. How significant is that?

Asante-Muhammad: We are past having an outright legal Jim Crow society. But what you have to remember though is that, yes, there were a lot of barriers for Blacks to buy homes in white neighborhoods, but there weren’t as many barriers for Blacks to buy homes in Black neighborhoods. And so if you had a strong economy, which you did in the 1960s, that would allow for some Black homeownership to be maintained.

What we’ve been dealing with since the 1980s is a regressive economy where Blacks never saw the economic rewards that people were hoping would go with a post-segregation society. So now we have a segregated society by wealth and by income, which is reinforcing what was the outright Jim Crow segregation of the past. Until there are substantial increases in wealth and income, it’s going to be hard to see any changes in homeownership.

Just like it took radical transformation of mortgages and strong government subsidies to move whites into majority homeownership status in the ‘40s and ‘50s — we’re going to need something like that again.

MarketWatch: It’s not just become more difficult for Black Americans to become homeowners, but also for Black Americans to keep their homes. Why is that?

Asante-Muhammad: We know Blacks don’t have the same type of savings as whites have and as much wealth. So obviously when they fall into negative economic situations they have less to fall back upon, which can make them lose a home that much faster. And usually during economic crises Blacks are more likely to lose their job and lose it for longer periods of time.

Because Blacks do have less income and less wealth, they have to buy homes at lower price points. There has been, over the last 20 years, less and less affordable homes. The homes that are being constructed are more and more high-cost homes, and so that must also be a ongoing barrier for Blacks, Latinos, for those who are moderate-income, low wealth to enter into this 21st century housing market.

MarketWatch: Do you see reparations playing a role in advancing Black homeownership?

Asante-Muhammad: If we do want to address homeownership, we have to address the overall economic conditions of African-American people and bridge this income and wealth inequality. A targeted approach like reparations is something that probably will need to occur, meaning we can have some changes in different types of mortgages but if there aren’t changes in the Black economy as a whole it’s going to be hard to move things forward.

Reparations can be a thousand different things, so maybe there would be some type of homeownership component where you could have a no-interest, 30-year loan with no down payment or you could make VA loans also open to all African-Americans. That could be a part of reparations.

Devine: When folks use the term reparations, it’s really to denote the need to make bolder systemic interventions to support housing access or housing equity for Black Americans, but also for Black Americans to generate wealth.

So, what we hope to do in this report is to really hold, for example, financial institutions and mortgage lenders accountable to how many loans they provide to Black Americans, to reconsider their products, to be more accessible to Black Americans. Or for communities to think about their tax system or their flow of money and how revenue, for example, can be used towards increasing homeownership rates for Black Americans.

When you talk about the system of money there are a number of opportunities where communities and institutions can galvanize and redirect money to support a common goal. That goal of increasing Black homeownership actually benefits not just Black homeowners or Black Americans but broadly the entire community and global economy.

MarketWatch: In the report, you addressed the role that lending practices and getting access to mortgage credit should play in advancing Black homeownership. What steps do lenders and other financial institutions need to take?

Asante-Muhammad: One thing again about the 60% number — and highlighting that we would need to triple the amount of new Black homeowners every year for 20 years in order to get to 60% Black homeownership — I’m hoping that can be a signal to major lenders about the level of [increased lending] they need to do if they do want to make sure that African Americans are strongly majority homeowners.

That means they’re going to have to do much more to create affordable mortgage products for the middle. The median income for Black households is like $44,000. So, [these] mortgage products, they have to hit the majority of African Americans and Latinos.

Devine: There are some lenders who have already made some specific targets in terms of how many loan originations they want to make towards Black homeowners to increase the homeownership rate. What we hope to also do in our report is to think about this in a more geographic context. So, where do we feel like lending investments should be made across the country to serve this critical mass? Is that the Deep South? Is that the Atlanta market, for example? How can we get to 60% even quicker? That’s something that we hope to figure out as we move along.

Asante-Muhammad: You do need to look at where the Black population is growing and where the opportunities to hit that market are. Because in cities usually there’s greater racial income inequality than outside of the city. And with that oftentimes housing can be more expensive, so that can be a challenge.

But there are places like Baltimore and Detroit, places that have actually a lot of houses that need to be renovated or that can be very cheaply bought. But oftentimes there aren’t really good lending products out there. I’ve had bankers tell me they’ve had a hard time finding a mortgage for a $70,000 property. If we’re trying to do affordable homes, we have to — whether through government subsidy or mandate — ensure that there are these mortgages, and there are these renovations for homes where there are much tighter margins. And that’ll make homeownership open up.

MarketWatch: Under the Trump administration, changes were made to fair-housing rules and regulations, which President Biden has said he will reverse. What role do you envision the federal government playing here?

Asante-Muhammad: Trump was going the wrong direction. And Obama was going in the right direction radically too slow, because we weren’t having a boom in homeownership during the Obama years.

I look back more toward when there were strong increases in Black homeownership — and there were strong increases in Black homeownership in the ‘40s and ‘50s. We weren’t bridging homeownership inequality. It was just whites were increasing at a similar rate. It was a time of massive government subsidies and creating affordable homes. It does point to the fact that if you want radical increases [in Black homeownership] it’s going to require some type of strong government subsidies to do this.

We’re at a time where every three months we have another near $2 trillion bailout, so clearly there are funds available there. So how can we use these funds to actually do long term financial stability versus patchwork — which is really what the multi-trillion dollar bailouts of the last year have been. I think some type of mass investment in homeownership can really strengthen African Americans and neighborhoods in general for decades to come.