Real Estate’s Racial Divide: Why Don’t Minorities Own More Homes?

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The recent violent and deadly protests in Charlottesville, VA, are a tragic reminder that racism continues to divide our nation. And the racial division permeates so many facets of life, including real estate..

White Americans are much more likely to own their homes compared with minorities—regardless of how much money they’re making or their education level—according to a recent Apartment List report. The apartment rental site looked at homeownership and rental trends by race, education, and income levels as well as U.S. Census Bureau data from 1980 to 2015. The report included only households headed by adults aged 25 to 54.

What it found is that about 64.4% of white households were homeowners. The same is true for about 54% of Asian households, 41.1% of Hispanic households, and 32.7% of black households.

“The fact that these gaps persist in spite of educational attainment or income levels is pretty striking,” says Chris Salviati, a housing economist at Apartment List. He attributes some of the disparity to generational wealth being passed down and potentially fewer professional opportunities for minorities.

“A lot of first-time buyers are relying on help from parents or other family members” to come up with a down payment, he says. “For a whole host of reasons, minority households, even those with college degrees, are more likely to come from less privileged backgrounds.”

Why aren’t there more minority homeowners?

Blacks in particular were hit hard by the housing bust a decade ago. Many were targeted by shady mortgage lenders selling subprime loans. These mortgages were typically issued to borrowers with lower credit and often came with higher or ballooning interest rates, which led many homeowners unable to pay the larger monthly bills to default.

“They were disproportionately affected by foreclosures,” Salviati says of black homeowners. “It’s hard to buy after a foreclosure. And after having that experience, it would certainly make a person more leery of entering the market again.”

Since the recession, it’s also harder for potential buyers to get a mortgage—let alone a loan with a low down payment—and they often must have high credit scores to do so. This hurts minority buyers, who have lower credit scores or don’t have credit cards, says Barry Zigas, director of housing policy at the Consumer Federation of America. The federation is a Washington, DC–based umbrella advocacy group.

“It’s not getting better,” Zigas says of the racial homeownership gap.

Want to become a homeowner? Finish college

No matter their race, every group’s homeownership rate has fallen since the recession. But, not surprisingly, those with bachelor’s degrees or higher, about 65.1%, were most likely to own the deeds to their properties.

That’s because the highest-paying jobs typically require academic credentials. Unless you’re Steve Jobs, Bill Gates, or Mark Zuckerberg, it’s become harder to make a good living without a degree.

About 53.5% of those with just some college credits under their belt were homeowners, as were 50.1% of those with just high school diplomas and 34.6% of those who never finished high school.

The racial disparities were starkest between high school dropouts: 44.9% of whites who dropped out still became homeowners compared with just 15.3% of blacks who didn’t finish high school.

Asians were the most likely to complete a college degree, at 65.8%, compared with whites, at 42.2%; blacks, at 25.1%; and Hispanics, at 18.2%, according to the Apartment List report.

Areas where the gaps are largest

The report also pinned down the phenomenon of homeownership gaps. To figure out which areas of the country had the widest disparity between races, it calculated the average racial differences in homeownership rates. After examining the data, the widest gaps in the country are concentrated mostly in the Northeast and the Midwest. South Dakota, at 43%, had the biggest contrast on average, followed by North Dakota, at 41%; Montana, at 35%; Minnesota, at 35%; and Vermont, at 33%.

On the metro level, smaller, struggling cities in upstate New York had the highest disparities. Buffalo, NY, and Rochester, NY, at 40.5% and 37.1% respectively, topped the list. They were followed by Hartford, CT, at 35.1%; Minneapolis, at 33.9%; and Pittsburgh, at 33.6%.

More than two-thirds of white households, about 67.8%, own homes in Buffalo compared with 27.3% of minorities.

On the state level, the smallest racial gaps were spotted in New Mexico, at 8.6%. Washington, DC, had a 10.5% disparity followed by Nevada, at 15.4%; Florida, at 15.5%; and Oregon, at 15.9%.

Miami was the metro with the smallest racial gaps in homeownership, at 13%. It was followed by San Diego, at 14.6%; Jacksonville, FL, at 14.8%; Washington, DC, at 15.1%; and Austin, TX, at 15.7%.

“Metros that are diverse tend to have smaller gaps in their homeownership rates,” Salviati says.

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