The Homeownership Gap

Despite advances in the housing market, homeownership among the various minority populations continues to lag the rate for non-Hispanic Whites. As shown below, the 2003 homeownership difference between the non-Hispanic ownership rate of 75.4 percent and the various minority groups ranged from 28.7 percentage points for Hispanics to 19.1 percentage point for Asian/Pacific Islanders with Black and American Indian rates trailing by 27.3 percentage points and 21.1 percentage points.

Census Bureau Measured Homeownership Rates
	1995	1996	1997	1998	1999	2000	2001	2002	2003
Total	64.70%	65.40%	65.70%	66.30%	66.80%	67.40%	67.80%	67.90%	68.30%
Non-Hispanic White	70.9	71.7	72.0	72.6	73.2	73.8	74.3	74.7	75.4
Black	42.7	44.1	44.8	45.6	46.3	47.2	47.7	47.4	48.1
American Indian	55.8	51.6	51.7	54.3	56.1	56.2	55.4	54.0	54.3
Asian or Pacific Islander	50.8	50.8	52.8	52.6	53.1	52.8	53.9	54.6	56.3
Hispanic or Latino	42.1	42.8	43.3	44.7	45.5	46.3	47.3	47.0	56.3

Source: Current Population Survey (CPS) , U.S. Census Bureau

About half of the gap in the homeownership rate between the various minority groups and non-Hispanic Whites can be explained by demographic and socioeconomic differences such as age, marital status, household type, income, and wealth. Even taking these factors into account, however, a significant share of minority households appear financially qualified to obtain a mortgage but for some reason have not become homeowners.

A number of factors may account for this difference. Some families do not apply for mortgages at their expected rates, possibly because of their fear of discrimination and distrust of financial institutions. Studies suggest that lack of information about the importance of good credit may also deter qualified applicants from taking the first steps toward homeownership.

The Homeownership Gap The high cost of housing also presents a barrier to homeownership. According to Harvard's Joint Center for Housing Studies, home prices during 2003 increased significantly in all of the 163 metropolitan areas reporting. Some 34 metropolitan areas posted home price increases in double digits. Not surprisingly, more families require two incomes to pay for housing. Even with both spouses employed, more than 13 percent of low-income married couples have severe cost burdens, paying more than half their incomes for housing. For those lower-income families who do achieve homeownership, it often requires the contributions of several incomes and may result in overcrowded living conditions.

Finally, the prevalence of abusive sub-prime lending practices in the lower-income and minority communities poses a threat to recent homeownership gains, as well as future prospects for accumulating wealth through homeownership. Although sub-prime lending provides a needed source of financing to borrowers with blemished credit, certain practices have been identified as having a high potential for lender abuse. These include the charging of excessive fees and points, inadequate borrower choice about mortgage terms, such as repayments penalties. In too many cases, vulnerable borrowers, particularly the elderly and minority families, have had hard-won equity stripped from their homes.

Overcoming barriers to homeownership will be the defining task in the years to come – if housing and mortgage markets are going to be able to meet the housing needs of a changing populace.

Over the next decade, minority families are expected to comprise more than one half of new households. Ensuring that homeownership is accessible to these new homebuyers requires a greater understanding of the barriers faced by minority and immigrant families – and a strong, focused commitment to dismantle these barriers.