Discrimination Seeps Into Every Aspect of Home Buying for Black Americans

A Black loan applicant in the United States is more than twice as likely to be denied a home mortgage as a white applicant, aggravating the homeownership gap between Black and white Americans, according to a new report.

Though loan denials for both Black and white applicants have slowed since the 2008 financial crisis, the gap in denial rates for Black and white people applying for home loans has widened significantly. Today, 15 percent of Black applicants are denied mortgages while 6 percent of white applicants are denied the home loans, according to a report by the National Association of Real Estate Brokers, an advocacy organization for Black real estate professionals.

The housing market remains persistently and disproportionately challenging for Black prospective home buyers, the report’s writers say, although Black homeownership has been inching forward since the passage of the 1968 Fair Housing Act, which made it illegal to discriminate based on race or religion in all aspects of home sales and rentals. The full report will be released on Wednesday.

Nearly 45 percent of Black households own their homes, compared with more than 74 percent of white households. But in 1970, the gap in homeownership between Black and white households was about 24 percent. Today, it is 30 percent.

The disparity in homeownership rates, as well as widespread appraisal discrimination, are compounding the massive income gap between Black and white households and thwarting Black Americans’ efforts to create generational wealth, the report notes. In 2020, the average white family held 12 times the wealth of the average Black family, and home equity is the largest source of wealth for both Black and white households, the report says.

“Discrimination and systemic racism is still happening around the country. It has not changed, and if that doesn’t change, of course our numbers are not going to change,” said Lydia Pope, the president of the association, known as N.A.R.E.B. “It’s still going to be the same cycle, just a new season.”

Since 2012, the real estate association has been compiling an annual report on the state of Black housing. The research is primarily based on information from the Home Mortgage Disclosure Act, which requires banks and other lenders to release details, including race, gender and income, of the people who apply for and obtain their loans. It is supplemented by census data, academic journals and media reports.

This year, for the first time, the report also includes a section on climate change, noting decades of lopsided federal policies against Black homeowners that are now translating into environmental racism and an elevated risk of natural disasters in Black communities.

But the report, which relies on data from 2021, also outlines some gains: Black millennials made up the largest segment of Black home buyers in both 2020 and 2021, a surge attributed to low interest rates, reduced personal spending and the newfound ubiquity of remote work, which allowed home buyers to purchase homes in less expensive markets. These same factors also increased home buying among white millennials over the same period, but while mortgage applications from both groups dipped in 2021 after peaking in 2020, white millennials experienced a steeper decline in mortgage applications last year than Blacks of the same generation.

And Black female prospective home buyers are applying for home loans — and being approved — at higher rates than previous years. In 2021, the number of applications from Black women, which has been climbing since 2010, jumped 14 percent. Applications from Black male prospective home buyers, in contrast, have been declining since 2017. The report did not speculate as to why.

In 2021, among Black mortgage applicants, the largest segment — 42 percent — were women applying with no co-applicant. Black males applying alone made up 34 percent, and Black male-female co-applicants comprised 20 percent. Among white applicants, gender composition of the applicant pool was flipped: The largest group was male-female co-applicants, who made up 40 percent, followed by single men, who made up 34 percent. Single women represented only 22 percent of white applicants.

The proportion of Black women who are unmarried is higher than that of white women — about half of white American women in their 40s are married, compared with one-third of Black women in the same age group — but the gains seen among Black female applicants, particularly those applying on their own for a home loan, remain statistically significant. In 2021, 45 percent of applications from Black female applicants were for conventional loans, up significantly from the 21 percent seen 2010. And the application success rate of Black female applicants was also up: whereas the loan failure rate — a statistic that includes loan denials as well as loan applications that are withdrawn midway and approved loans that are ultimately not accepted — for Black female applicants was 46 percent in 2008, by 2021, it had dipped to 34 percent.

Among white women, the loan failure rate was 23 percent in 2021.

Still, overall Black applicants trailed white applicants in securing mortgages. For all borrowers, the most common reason a home loan was denied in 2021 was debt-to-income ratio, followed by credit history. Among Black applicants for whom the reason for denial was reported, about 34 percent of Black applicants were rejected because of debt-to-income ratio, versus 29 percent of white applicants.

Black borrowers also relied on high-cost loans nearly three times more often; 14 percent of Black borrowers in 2021 took out high-cost loans versus 5 percent of white borrowers.

Racism and discrimination — baked into the federal government’s housing policy for decades via redlining, inequitable division of resources and the disparate distribution of federal funds and grants dating back to the Jim Crow era — have put Black people at a disadvantage, the report notes. It persists today in appraisal bias, fees on home buyer assistance, and even the way in which student loan debt is calculated in loan applications, and will remain insurmountable until the policies themselves are fully unraveled, said Jim Carr, the report’s co-author.

“Blacks are making progress in slowly obtaining homeownership,” said Mr. Carr, a housing finance and urban policy expert. “But the barriers are so substantial and so multifaceted that they’re never going to come anywhere near to closing the gap unless the federal government takes action that repairs the damage which the federal government did.”