Let’s talk about blacks and our struggles with homeownership.
For those who still aren’t convinced on what the big deal is about buying a home, let me remind you that it is the number one way to build wealth. Homes generally tend to build equity which opens the pathways for the purchase of other homes or investing in businesses, and sending children to college, thus contributing to the goal of creating generational wealth. Homes generally tend to build equity which opens the pathways for the purchase of other homes or investing in businesses, and sending children to college, thus contributing to the goal of creating generational wealth.
This is an area we have struggled with for many years and based on the findings by the National Association of Real Estate Brokers review of the latest Census Bureau statistics, blacks aren’t going in the right direction. According to the Bureau, there is a disturbing new trend of declining homeownership among blacks by over 41.7% which is nearly a 50-year low. To add a little more salt to the wound are the reports that there is also an even greater racial gap than ever before between blacks and other groups.
We are behind and I want every black person to understand how important it is to own a home. I want us look at it as being more than just “a piece of paper” or thinking of it as insignificant unless it is paid in full.
Don’t get me wrong – I am fully aware of the many obstacles we face in our attempts to get there. Yet still, I don’t think enough of us see the bigger picture beyond the mortgage payment. Our mindset should be focused more on the opportunities instead of being so easily defeated by the challenges albeit there are many.
So here is my take on how history continues to hinder our efforts to get a piece of the American dream.
WE WERE ALREADY BEHIND THE GUN
This section will be brief because once again, everything starts with slavery.
Without rehashing the devastating trickle down effects our ancestors endured, let’s just say those years literally ripped any notions of generational wealth right from our hands so we were already behind the gun.
Blacks didn’t have any real opportunities for owning land that could be passed down and if we did, it was stolen from us (literally and figuratively).
We didn’t have inheritances and didn’t come from wealthy families that could “gift” money for down payments. And we certainly didn’t have the resources or education on what was needed to purchase a home. We literally had to start from nothing.
THE U.S. GOVERNMENT WELCOMED DISCRIMINATION
“From the 1930s through the 1960s, black people across the country were largely cut out of the legitimate home-mortgage market.”
For nearly 30 years the country acknowledges how blacks were left out of the housing market, but I am fully aware that everything can’t be blamed on racial discrimination. Poor handling of finances, bad credit and other factors we have to take responsibility for where a home loan is concerned.
However there is something that is very real that can explain why the homeownership numbers for blacks was so low for over 30 years. Something to explain why we are seeing such a major decline again – Institutional Racism and what follows is instance after instance of how our government not only knew what was going on with housing discrimination, but actually created programs that allowed it.
National Housing Act of 1934 – Is a law enacted to “encourage improvement in housing standards and conditions, to provide a system of mutual mortgage insurance, and for other purposes.” In short, it was meant to help the marker recover from the devastating depression and created the Federal Housing Administration (FHA) and the Home Owner’s Loan Corporation (HOLC).
While it’s true these new programs worked hard to improve the housing market, they also were responsible for the more nefarious duties when it came to black mortgage clients and practiced a disturbing type of mortgage discrimination- redlining.
The official definition of redlining is “the practice of denying or limiting financial services to certain neighborhoods based on ethnic composition without regard to the residents’ qualifications or credit worthiness.”
Banks would actually use a red line on a map to identify neighborhoods that were primarily minority and, would deny most if not all applications or approve without regards for inability to repay loans. For those who were actually approved, the loans were more of a double edged sword and came in the form of excessive fees, higher than normal interest rates, and prepayment penalties.
For those who were actually approved, the loans were more of a double edged sword and came in the form of excessive fees, higher than normal interest rates, and prepayment penalties. So it was these types of discriminatory practices that led to the declining neighborhoods, urban decay and only elevated the disparity in homeownership among blacks.
The GI Bill – Introduced in 1944 for servicemen returning from World War II and provided education and training, guaranteed loans for homes, farms, and businesses and provided unemployment pay. While the benefits were ideal in terms of helping millions of soldiers purchase homes, blacks were excluded due to the discrimination experienced trying to buy homes in European American neighborhoods.
Both redlining and discrimination through the GI bill further enhanced racial segregation and housing discrimination with the use of redlining keeping blacks out of certain neighborhoods, primarily European American neighborhoods.
The Housing Act of 1937 – provided for the development of public housing for the poor and working class thus contributing to racial segregation which created projects that consisted primarily of minorities.
We’re talking about a period of nearly 30 years of housing discrimination that didn’t end (on paper) until the passing of the Fair Housing Act of 1968 which mandated fair housing as a national policy, specifically prohibiting discrimination on the basis of race, color, sex or national origin.
We Tried and Were Duped
While the Fair Housing Act and other laws were established to eliminate illegal housing discrimination, as I mentioned before that was only on paper. There were still ways of preventing blacks from obtaining loans and purchasing in certain areas that were done under the table.
Do the words predatory lending and subprime loans sound familiar?
We really tried to get in on the dream of ownership but the way those home loans were structured, many blacks were being set up for failure. When the economic downturn hit and the housing market tanked we were disproportionately affected and homes were being lost in records numbers due to short sales and foreclosures, causing devastating effects on our credit.
Good credit is needed to secure a home loan, good credit is needed to secure a home loan with favorable rates. Are we seeing a cycle here?
When the economic downturn hit and the housing market tanked we were disproportionately affected and homes were being lost in records numbers due to short sales and foreclosures, causing devastating effects on our credit.
THE OUTLOOK FOR THE FUTURE
So what now?
While the statistics are painting a pretty grim picture, I don’t think we are out for the count. But we definitely have a long way to go in recovering the strides lost over the last 5 years or so but quite frankly, I think we are scared. We bought into the goal of attaining the American dream and with all of the laws in place to prevent as many obstacles as possible, it seems as if we still can’t catch a break.
We bought into the goal of attaining the American dream and with all of the laws in place to prevent as many obstacles as possible, it seems as if we still can’t catch a break.
Still, there is a light at the end of the tunnel and it has to do with the droves of blacks migrating out of the high-cost areas and into more affordable areas. Places that are not only offering affordable housing to
Places that are not only offering affordable housing to buy but other opportunities for jobs and businesses such as Atlanta (Georgia), Raleigh (North Carolina) and Austin (Texas), where home ownership has steadily been on the rise the last couple of years.
If there’s anything I want to leave you with at the end of this unintentionally detailed post is the importance of black history in America. It all started with slavery which left effect on the past and continues to influence present conditions.
This is why we can never forget.
References: U.S. Census Bureau