Economics

Lending Practices Jeopardize Black Homeownership

Published

10 years ago

July 27, 2014

While historical barriers that excluded Black America from the homeowner market for decades have crumbled, there are signs that emerging types of racial inequality are making homeownership an increasingly risky investment for African-American home seekers.

A new study from sociologists at Rice University and Cornell University found that African-Americans are 45 percent more likely than whites to switch from owning their homes to renting them.

The study, “Emerging Forms of Racial Inequality in Homeownership Exit, 1968-2009,” examines racial inequality in transitions out of homeownership over the last four decades. The authors used longitudinal household data from the Panel Study of Income Dynamics for the period 1968 to 2009, with a study sample of 6,994 non-Hispanic whites and 3,158 black homeowners.

The research revealed that despite modest gains in attaining homeownership over time, the racial gap in the likelihood of changing from ownership to renting began to widen in the 1990s. During the next two decades, African-American homebuyers were consistently over 45 percent more likely than whites to transition out of homeownership.

The authors claim that their findings point to a historical shift in racial stratification in American housing markets, from a system of overt market exclusion to, more recently, one of market exploitation.

“The 1968 passage of the Fair Housing Act outlawed housing market discrimination based on race,” said Gregory Sharp, a postdoctoral fellow in Rice’s Department of Sociology and the study’s lead author. “African-American homeowners who purchased their homes in the late 1960s or 1970s were no more or less likely to become renters than were white owners.

However, emerging racial disparities over the next three decades resulted in black owners who bought their homes in the 2000s being 50 percent more likely to lose their homeowner status than similar white owners.”

Sharp noted that these inequalities in homeownership exit held even after adjusting for an extensive set of life-cycle traits, socioeconomic characteristics, characteristics of housing units and debt loads, as well as events that prompt giving up homeownership, such as going through a divorce or losing a job.

Sharp said the deregulation of the mortgage markets in the 1980s – when Congress removed interest rate caps on first-lien home mortgages and permitted banks to offer loans with variable interest rate schedules – and subsequent emergence of the subprime market are likely reasons blacks were at an elevated risk of losing their homeowner status.

In 2000, African-Americans were more than twice as likely as whites with similar incomes to sign subprime loans; among lower-income blacks, more than half of home refinance loans were subprime.

“African-American homeowners’ heightened subprime rates were not only due to their relatively weaker socioeconomic position, but also because lenders specifically targeted minority neighborhoods,” Sharp said.

Sharp and his coauthor hope the research will prompt further analysis of additional factors that potentially contribute to racial disparities in homeownership exit, such as household wealth and residential location.

The study will appear in the August edition of Social Problems and was coauthored by Matthew Hall, a demographer and assistant professor of public policy at Cornell University. A National Institutes of Health grant from Pennsylvania State University’s Population Research Institute Center funded the research, which is available online at http://bit.ly/1rDgkmL.

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Oakland Post: Week of October 30 – November 5, 2024

The printed Weekly Edition of the Oakland Post: Week of October 30 – November 5, 2024

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1 day ago

November 1, 2024

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Business

Special Interview: Rep. Barbara Lee Discusses Kamala Harris’ Plan for Black Men

On Oct. 16, California Black Media (CBM) spoke with Harris-Walz campaign surrogate, Congresswoman Barbara Lee (D-CA-12), who shared more insights on Harris’ agenda and the importance of securing the Black Male vote. “She has said very clearly that she wants to earn the vote of everyone. And that means earning the vote of Black men,” said Lee of Harris. “She understands the systemic and historic challenges that Black men have. You haven’ t heard of a presidential candidate coming up with a concrete actual plan and policy agenda.” The agenda includes five focus areas based on insights she gleaned from hosting discussions with Black men during her Economic Opportunity Tour.

Published

5 days ago

October 28, 2024

Oakland Post

(File Photo) U.S. Congresswoman Barbara Lee (D-13-Oakland) chides Justices on the Supreme Court of the United States for voting to strike down Affirmative Action. She is shown here speaking in front of the California Reparations Task Force in Oakland on May 6, 2023. CBM photo by Antonio Ray Harvey. By Edward Henderson, California Black Media

By Edward Henderson, California Black Media

Last week, the Kamala Harris campaign released its Opportunity Agenda for Black Men.

“She has said very clearly that she wants to earn the vote of everyone. And that means earning the vote of Black men,” said Lee of Harris. “She understands the systemic and historic challenges that Black men have. You haven’ t heard of a presidential candidate coming up with a concrete actual plan and policy agenda.”

The agenda includes five focus areas based on insights she gleaned from hosting discussions with Black men during her Economic Opportunity Tour:

Provide 1 million loans that are fully forgivable to Black entrepreneurs and others disadvantaged groups to start businesses.
Champion education, training, and mentorship programs that help Black men get good-paying jobs in high-demand industries It will also develop more accessible pathways for Black men to become teachers.
Support a regulatory framework for cryptocurrency and other digital assets so Black men who invest in and own these assets are protected.
Launch a National Health Equity Initiative focused on Black men that addresses sickle cell disease, diabetes, mental health, prostate cancer, and other health challenges that disproportionately impact them.
Legalize recreational marijuana and creating opportunities for Black Americans to succeed in this new industry.

“[Vice President Harris] knows that Black men have long felt that too often their voice in our political process has gone unheard and that there is so much untapped ambition and leadership within the Black male community,” the language in the agenda states. “Black men and boys deserve a president who will provide the opportunity to unleash this talent and potential by removing historic barriers to wealth creation, education, employment, earnings, health, and improving the criminal justice system.”

Diving into Harris’ agenda, Lee says, reminded her of her own record of supporting Black men over the years as an elected official. In the 90’s, she established the first California Commission on African American Males through which she pressured the state to address urgent economic, health and social challenges specific to Black men.

“No group of people are a monolithic group of people,” said Lee She’ s not taking any vote for granted. I’ve known her over three decades and I believe she is being herself. She’ s authentic,” Lee added.

Each of the 5 key points addressed in the Harris Campaign’s agenda, Lee says, has additional clauses that can potentially help Black men and their families thrive. This includes lowering rent; up to $25,000 in downpayment help for first time homebuyers; and cutting taxes for Black men in lower-wage jobs by increasing the Earned Income Tax Credit maximum to $1,500.

“I think the messages is one of empowerment for Black men — regardless of whether they’ re a blue-collar worker, if they’ re not working, if they’ re in business, if they’ re an entrepreneur, whatever background or whatever they’re doing or experiencing life. I think the authenticity of their experience can only be articulated through them,” said Lee.