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Money, Honestly podcast: How the pandemic could affect the homeownership rate for Black Americans

The homeownership rate for Black Americans is more than 30 percentage points lower than the rate for white Americans. Experts worry the high unemployment due to the pandemic could exacerbate this divide as Black workers are faced with more job losses. Editor Janna Heron sits down with housing reporter Dhara Singh to discuss the historical factors that have led to this increasing gap and what that means now in the latest episode of the Money, Honestly podcast.

The podcast episode is based on reporting Dhara did for the Yahoo Money article: “Pandemic could exacerbate longstanding obstacles to homeownership for Black Americans.”

Janna: Hi. This is Money, Honestly. I'm Janna Herron, and today Dhara Singh, one of the reporters from my team at Yahoo Money and Cashay is joining us. We'll be talking about the home ownership rate for Black Americans.

So Dhara, the homeownership rate for all Americans has improved since the Great Recession, but the improvement hasn't been equal for everyone. Is that right?

Dhara: That's totally right. If we're looking at where we're standing first quarter in 2020, we see that among white Americans, 73.7% of them own a home, but with Black Americans, it's only 44%. That's a big gap. That's a 30 percentage point difference.

Janna: That's huge.

Dhara: Yeah, it's huge. The more I really talk to everyone, I learn the narrative has been that we all are starting from the same base, but that's not the case. Behind this gap, there's different layers and different factors.

Janna: So let's talk about some of the factors. What are some of the biggest reasons? Does history play a big part in this?

Dhara: Yes, history does. When the Fair Housing Act started in 1968, it outlawed discrimination. But even despite that, we saw a lot of neighborhoods that were redlined. A 2018 study by Zillow found that home values that were redlined years ago, they were considered a not so great area, they were grown, the values there have grown by 203.1%. Usually a lot of these tend to be predominantly Black American neighborhoods. It’s worth noting that non-redlined areas grew by 30 percentage points higher. So even if everything's been outlawed, the facts are still lingering, whether that's with home appraisals, etc.

I think a story that really jumps out, on the Cashay team, was when we were interviewing someone named Tiffany Aliche, commonly known as the Budgetista.She was saying that she just wanted to make sure that her home was appraised fairly. So she was going to, instead of her showing herself the home, she was going to have her white friend show her home.

Portrait of happy young african American family with little kids sit relax on couch cuddling, smiling black parents rest on sofa hug preschooler children posing for picture at home together
The white American homeownership rate stands at 73.7%, but it's at 44% for Black Americans, according to Census numbers. (Source: Getty Creative)

Janna: Oh, that's really terrible. And really eyeopening too, to think that you have to think about that as a Black American. I'm sure most white homeowners don't think of that.

Can you go back a little bit? Tell me a little bit more about redlining. For those of us who might not know what that term means, can you explain what that was?

Dhara: So redlining, such as if you want to apply for a mortgage or different types of credit, because you live in a certain area, you're more likely to get a product that's kind of disadvantaged, compared to someone who, let's say, comes from a wealthier area. So you might get more opportunities to get more lines of credit.

Janna: So basically, if a Black person, before the redlining was outlawed, tried to get a mortgage to buy a house in a neighborhood that maybe was predominantly Black, they would have a harder time getting that mortgage because lenders didn't want to lend to people who lived in that neighborhood?

Dhara: Mm-hmm.

Janna: Okay, just want to make sure I have it right. And then how does that affect now? So if there's a Black person now whose grandfather couldn't buy a house, how does that affect that person now?

Dhara: Well, it's really interesting to note that for a lot of Americans, home equity is their greatest source of wealth. Let's say your grandparent didn't have a home, so chances are the generations after might not have a home. People look to their homes as the biggest source of wealth equity. 56% of Black Americans look as equity in their home as their source of wealth. That's more than one in two. But for white Americans, that's 30.1%. Whether you want to take out funds from your home to let's do a home renovation to get the property value higher, whether you need to consolidate debt, that's one source of wealth you just don't have anymore.

Couple meeting with real estate agent in front of home
56% of Black Americans look at equity in their home as their main source of wealth. But for white Americans, that's 30.1%. (Source: Getty Creative)

Janna: Oh, wow. Right. So having a home, not only is just a roof over your head, but it's also a way to build your own wealth and tap into it to build your wealth even more?

Dhara: Yes.

Janna: And so if my grandfather didn't have access to that, then that has a trickle down effect. So maybe you can't borrow to go to college or something like that, against your home.

Dhara: Yeah. You know, the thing is, even if you let's say you still buy a home in a neighborhood that's predominantly Black American, studies have shown that the value is going to be less, so it's going to be appraised at a less value. It's shown that in nearly fifth of ZIP Codes where the majority of homeowners are Black, we're talking Detroit, Atlanta, Chicago, Cleveland, Toledo, home values have really decreased since 2000.

Janna: So even if you get to the point where you can buy a house, it doesn't mean that it's actually going to help you build your wealth.

Dhara: Exactly. There's a chance that that's not going to happen either. So it’s a really complex situation and it becomes a point where you couldn't buy a home before and now you can, and you're living in a predominantly ethnic community, that's going to be used against you. Yeah, so I guess when the 1968 Fair Housing Act outlawed discrimination, it didn't really outlaw the discrimination Black Americans are facing today.

Cleaning the table. Tall dark-skinned man in a pink tshirt and his daughter cleaning the table
It's shown that in nearly fifth of ZIP Codes where the majority of homeowners are Black, we're talking Detroit, Atlanta, Chicago, Cleveland, Toledo, home values have really decreased since 2000. (Credit: Getty Creative)

Janna: Let's move from the 1960s to say a decade ago, to the Great Recession, where that was sparked by a housing crisis, and you saw a lot of foreclosures. How did that affect Black homeowners and Black Americans?

Dhara: Well to begin with, a lot of the homes that were sold during the housing bubble, through predatory lending, a lot of these ads were targeting African Americans. And actually, it wasn't until even just a couple of days ago, that Google for instance, was just like, "We're not going to show these ads that are targeting ethnic communities."

While we can't make assumptions, the general what's going around, is really a lot of these communities were being targeted. The financial crisis happened, and it turned out to be a lot of Black Americans that lost their homes compared to white Americans.

Read more: Buying a house: What you need to know about home ownership

Janna: So how have they recovered since then, and then where are we now?

Dhara: So if we look at 2009, quarter two, we see that the Black American homeownership rate is 46.5%. The white home ownership is 74.9%. And then in today's age, Black American homeownership is 44%. We haven't really recovered a lot. A lot of why I guess we haven't recovered, from the experts I've talked to, is that Black Americans are heavily rent burdened. A study has found that 84% of Black Americans who are renters were burdened to an extent that they couldn't even have $400 in their emergency savings. So it just goes to show that you're just kind of stuck.

Janna: So being rent burden, how does that ... Can you just explain how that keeps you from, or it makes it less likely for you to become a homeowner?

Dhara: So If you want to buy a home, you have to put down a down payment. Even if you want to take out an FHA loan, and a down payment, let's say as low as 6%, so you wouldn't, if you don't have money saved up and put in your savings account, then how are you going to really cough it up for a down payment? When every single month you're worrying about how to meet your monthly expenses, that's going to be your priority. Your priority is not going to be to go and buy that house. It's just getting by, month by month.

Janna: Right. Right. Okay. I get it. So to get that down payment, you need to have extra cash, and if you don't have extra cash, you can't get that down payment. So you can't buy a house without a little bit of a down payment. I think 3.5% is what it is for FHA.

Read more: How to find affordable homes to buy

What about credit scores and things like that, does that disproportionately hurt Black Americans?

Dhara: Yeah. So now when it comes to Black Americans, 16.8% of them are unemployed. [Meanwhile] 13.3% of Americans collectively are unemployed. So basically, we're in the stage that because there's so much unemployment, and because banks think that people might not be able to pay off their mortgages, they're really increasing their credit requirements. So we saw banks like JPMorgan and these big firms really raising their credit score requirements higher.

Stressed mature business man rubbing eyes standing in office. African american businessman in formal clothing feeling tired rubbing nose and eyes, for fatigue and headache. Depressed and anxious man in office feeling frustrated after layoff.
The employment rate for Black Americans has climbed to 16.8% during the pandemic. (Source: Getty Creative)

For someone who let's say is in a position where they don't even have $400 saved up and they don't have access to, they might not even want to take out a credit card and such. You're so burdened with expenses, that if you have any debt, then it's going to be harder for you to seem like a good candidate for these banks, for them to lend to you. And a 700 plus credit score is already very high for most Americans. So now, because you can't go into the bank and you can't get that mortgage, you're just stuck waiting.

Janna: And that's because of what's happening right now because of the pandemic, and the shutdowns, we have this high unemployment, so you have that trickle down effect. And you're saying that you think it's going to disproportionately affect Black Americans?

Dhara: Yes. I talked to a LendingTree expert and he was saying that at the end of the day, even if banks were to loosen the requirements, the government needs to play a role by really funding those neighborhoods that are in areas that are predominantly Black Americans, to really making sure resources go there so people are getting the proper education, so these home values are going up and this cycle of the lack of home access doesn't continue. It's really investing in communities.

Janna: So that's one of the big solutions, is not necessarily make it easier to get a mortgage, but try to improve the situation on the environments and communities that Black Americans live in. Anybody else offer other solutions?

Read more: Buying your first home: What you need to know

Dhara: Yeah. So Skylar Olsen, she's the Chief Economist at Zillow, she was saying that it's great that there's a lot of demand side solutions, such as through FHA back loans, as you were saying that people can only put down 3.5% of a down payment. She was saying that this is all great, but at the end of the day, even if you get a couple people who let's say meet this criteria, and there's not enough affordable homes for sale, then that goes against a lot of the demand side effort.

She says a big focus should be on supply side solutions. There's already a housing shortage, but we need more affordable housing. She made that distinction. She was just saying that due to the pandemic, everyone's taking precautions. We're taking precautions being in our homes, but even builders, are taking precautions. A lot of them are stepping back from building homes just because they need to watch on the site, and it's really hard when you're in that environment and you can't really build homes and practice social-distancing.

Janna: Right. Okay. Can you tell us a little bit about the housing shortage that's happening?

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Yahoo Money sister site Cashay has a weekly newsletter.

Dhara: Yeah. Believe it or not, today we actually found out from the MBA that purchase applications for a home were at an all time high, but we're in a stage where housing units are actually short by five to six million. So even if you're interested, we're just not at a place where we can provide everyone who's looking for a home, a home to be in.

Yeah. I think if anyone can take away anything from this podcast, it would be that there's this false narrative about opportunities. [Tendayi Kapfidze, chief economist at Lending Tree] had told me we have the biggest economy in the world, and people think that each of our individual outcomes are just the result of effort we put in. But there is a lot of discrimination that Black Americans, and even other minorities, are still facing. To create a more equitable place experts are saying we do have to look at how these neighborhoods with predominantly Black Americans are being valued. We need to look at the root of the source.

Janna: Yeah, yeah. I think that's a really, really good point. Thank you Dhara, for joining us today on Money, Honestly, and thanks for everyone listening. Head over to Apple Podcasts and leave us a five-star rating and review. We will see you next week.

Dhara is a reporter Yahoo Money and Cashay. Follow her on Twitter at @Dsinghx.

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