Home ownership is often regarded as the key to the American dream, including economic security, accumulating wealth and passing wealth on to the next generation. This is shown by the latest Survey of Consumer Finances, published by the Federal Reserve Board (FRB). In 2001 the median (typical) family that owned its home had a net worth of $171,700. Those without a home had a net worth of only $4,800. Although the typical homeowner is far from wealthy, those without homes have almost nothing to fall back on.
The FRB study divides families into two categories: white non-Hispanic, and nonwhite or Hispanic. It shows a growing divide between the two.
Who Owns Homes?
Between 1992 and 2001, the percentage of white families with their own homes increased from 68.9 percent to 74.1 percent. But nonwhite family ownership rate actually declined from 48.8 percent to 47.0 percent. The typical nonwhite home was worth $92,000, or 71 percent of the typical white-owned home (worth $130,000). If owning a home is the key to the American dream and to economic security, African Americans, along with Hispanics and other people of color, are falling further behind.
Lower rates of home-ownership for nonwhites can be partly explained by lower incomes, and less chance of inheriting a home. But other forms of discrimination also contribute. For people of color, mortgages are harder to get and their fees and interest rates are higher; homeowners insurance is harder to find and costs more; and property taxes are likely to be higher.
The 1990s saw a big growth of subprime and predatory lending – mortgage loans with extra-high interest rates and exorbitant fees and conditions. The community organization ACORN showed that African Americans are four times more likely than white homebuyers to receive a subprime loan, and Latinos are twice as likely. The problem is getting worse: from 1995 to 2000, the percentage of subprime loans increased three-fold to white homebuyers, and about seven times for African-American and Latino homebuyers.
Another study showed that even Black and Hispanic homeowners with above-average incomes pay more for their mortgages than whites with comparable incomes (New York Times, May 1, 2002).
Business Week (January 28, 2002) reported that insurance redlining, outlawed in 1968, “never completely went away.” Now, with profits under pressure from losses in the stock market, insurance companies are raising premiums in ways that “have aroused suspicions [of] illegal discrimination against low-income, elderly and minority customers.” In most states, according to the Inner City Press (ICP), insurance companies face very weak regulation. In the few places where information is available, ICP found clear evidence of discrimination against African Americans, even when family income levels were comparable with white homeowners.
In Connecticut, state data show that African Americans pay about 27 percent more than whites for auto insurance. The state does not provide comparable information for homeowners insurance, but there is no reason to think the situation is any better.
African Americans are likely to pay more for taxes as well as insurance. Because corporations and wealthy individuals have deserted cities and towns with a high proportion of people of color, the costs of maintaining city services falls squarely on the backs of those remaining, and property taxes are higher.
Even within a single town or county, homes in Black neighborhoods can be taxed more heavily. A study by Robert P. Strauss of Carnegie-Mellon University looked at tax assessments in Allegheny County, which includes Pittsburgh, Pa. He found that homes in all-Black neighborhoods were assessed at over twice the rate as homes in all-white neighborhoods! It is unlikely that Allegheny County is unique.
In every step of the home ownership process, people of color face obstacles and added costs. It is difficult to prove discrimination in individual cases. But the pattern becomes clear in the low rate of home ownership.
We need stronger affirmative action laws with real enforcement power. Targeted aid programs should help people of color close the housing gap. Mortgage and insurance executives whose companies show a pattern of discrimination against African-American or Latino neighborhoods should be prosecuted. Increased federal funding for public education would reduce property taxes for all homeowners, with the most relief going to the present victims of discrimination.
The author can be reached at firstname.lastname@example.org