Black and Latino Wealth Plummets as Homeownership Rate Drops to Record Lows, According to New Report
Seven Years After Start of Great Recession, Households of Color Face Staggering Economic Losses
To be released at 9/19/13 Congressional Black Caucus Foundation Conference in Washington DC
Washington, DC – As the United States continues its recovery from the Great Recession, a new report finds that millions of African American and Latino families are facing increased financial instability due to the massive loss of wealth and assets within the housing market. The report, “The State of Housing in Black America,” was published today by the National Association of Real Estate Brokers (NAREB) and will be featured on a panel at the Congressional Black Congress Foundation Conference in Washington, DC.
“The State of Housing in Black America” examines the worsening racial economic disparity gap since the financial crisis and onset of the Great Recession in 2007, describing how African Americans and Latinos have become more cut off from the housing market and home finance system while also losing significant employment ground. Says Jim Carr, the report’s lead coauthor, “this study highlights that the economic losses experienced by African-Americans as a result of the foreclosure crisis and downturn in the economy were substantial and that neither the current economic rebound nor housing recovery are benefiting substantially the black community.”
The authors outline how African Americans and Latinos, who were targets for unregulated, high cost and unsustainable subprime loans during the bubble, face significant challenges today as they try to obtain home financing. The report also underscores the severe deficiency in affordable rental housing.
“The State of Housing in Black America” shows some disturbing trends in America’s housing market, including:
● Homeownership rates for African Americans have dropped from a high of just under 50 percent in 2004 to just above 43 percent today.
● From 2005 to 2009, African American and Latino households lost 53 percent and 66 percent of their net worth, respectively, while non-Hispanic White households lost just 16 percent.
● African Americans and Latinos are greater than 70 percent more likely to have been foreclosed upon, even when controlling for income. African Americans have 7.8 percent of mortgage originations, but 11.6 percent of completed foreclosures.
● The private housing market, backed by Fannie Mae and Freddie Mac, is effectively closed to people of color as credit score and down payment requirements have risen substantially. More than half of all home loans to African Americans and Latinos occur via the Federal Housing Administration (FHA).
● Overall, there is a lack of affordable rental homes in the US: 35 percent of American households–or 41 million people– are renters of homes. 50 percent of renters pay more than 30 percent of their income to rent.
● The current African American unemployment rate, at more than 13 percent, is more twice as high as the rate of unemployment for non-Hispanic whites.
The report offers several key areas of reform:
While people of color will represent 7 of 10 new household formations in the coming decade, the national housing policy debate ignores economic challenges facing Black and Hispanic Americans. The report makes the following recommendations:
● Re-engineer the housing finance system in a manner that makes providing affordable mortgage credit its principal goal.
● Ensure that an adequate supply of credit for rental housing is available.
● Establish a Housing and Community Infrastructure Bank to jump start investment, particularly in communities that have been hardest hit by the foreclosure crisis and economic downturn to rebuild neighborhoods, create jobs and stimulate the economy.
Carr notes that “failure to comprehensively address both the housing and community challenges resulting from the loss of homes and jobs may leave African Americans struggling to recover for a decade or longer.”
The report also addresses new home finance legislation in the Senate–the Corker-Warner Bill–and underscores that, while it has a number of positive attributes, the provision of affordable mortgage financing is not its principal goal and as such, substantial revision of that legislation should be made prior to its passage. An alternative bill currently in the House, proposed by Rep. Hensarling, would completely eliminate the federal housing finance system as it exists today and result in even more limited access to housing finance for Black and Latino families.
“Failure by Congress to act immediately to restructure the housing finance system will not result in the status quo because the Federal Housing Finance Agency is already pursuing its own vision of housing finance reform that could further decrease access to affordable home loans by historically underserved borrowers,” says Carr. “Home prices and interest rates are rising and the opportunity to access affordable homeownership is slowly vanishing in many communities.”