For Black families in the United States, homeownership has long been a means of acquiring and passing down generational wealth. However, mass displacement of Black people from their culturally rich urban enclaves continues to raise the question of whether it’s possible for them to own property in newly revitalized U.S. cities.
A recent study by a real estate agency broadens this discussion, partly by implicating mortgage lenders as a perpetrator of discriminatory practices against Black loan applicants. Researchers also cited information gaps they said complicate efforts to prevent bias toward historically marginalized groups.
“Black people were twice as likely to be denied a mortgage, and this was most pronounced in the South,” said Tommy O’Shaughnessy, head of research at Clever Real Estate in Missouri. “Another important takeaway is that this data set is not complete.”
Clever Real Estate’s study, titled “Racial Discrimination in Mortgage Lending: A Call for Greater Transparency,” tested a sample of 1.7 million home loan applicants out of a national total of 3.5 million. Findings showed a nationwide disparity in home loan approvals between white and Black applicants.
Researchers analyzed mortgage approval and denial data from each state, differentiating between regions, using racial identification as a variable, and controlling for income level.
Data showed an approval gap of 10 percent between Black and white applicants. In the District, whites and Asians had a significantly higher probability, also up to 10 percentage points, of getting approved for a home loan, compared to their Black counterparts.
Researchers couldn’t determine key reasons mortgage lenders denied mortgages to Black applicants, due to what O’Shaughnessy described as their negligence in revealing such information.
“The Home Mortgage Disclosure Act was created in the 1970s to ensure that lenders weren’t discriminating,” he said. “One of the things they’re required to disclose is why an applicant was denied a mortgage. More than half of 80,422 Black applicants sampled had no reason.”
The release of the Clever Real Estate study followed the latest D.C. Housing Expo and Home Show at the Washington Convention Center in Northwest where a group of protesters, chanting and toting signs, confronted Mayor Muriel Bowser (D) as a demonstration of their anger about what’s been described as city officials’ disdain for longtime African American residents who’ve struggled to live in an increasingly expensive city.
In April, data from the National Community Reinvestment Coalition highlighted the disappearance of what had once been heralded as Chocolate City. By 2015, Black people accounted for less than 50 percent of the population, compared to more than 70 percent in the 1970s. Researchers pointed to increasing property values, rent and taxes as key factors in the removal of 135,000 residents from more than 200 District neighborhoods since the turn of the century. Last year, local attorney Aristotle Theresa sued the District, alleging that urban renewal projects had been designed to push out longtime residents in favor of new, white single millennials.
In recent years, the eastern part of the city has become more of an attractive option for displaced Washingtonians seeking new accomodations. However, houses in that region may be out of reach, said Ryan Butler, a local realtor whose client base mostly includes Black people, many of whom feel more compelled to seek housing in neighboring Prince George’s County, even with the availability of District-based home purchase programs.
Those experiences, he stressed, often happen because of a financial portfolio that doesn’t make banks confident that one could keep up with mortgage payments.
“Reasons why people might be denied a loan include a credit score of under 580, though many lenders require at least 620,” said Butler, managing partner of Coalition Partner Groups, an affiliate of Keller Williams Property Group. “I recommend at least 620 because rates tend to be different below.
“Sometimes, the buyer doesn’t have enough cash, or the debt-to-income ratio is too high to afford prices in D.C. proper,” Butler said. “With clients, the conversation is mostly around where to get the funds for down payment and closing costs associated with buying a home.
“So we spend time on first-time homebuyer programs and how our negotiating techniques keep their out-of-pocket low,” he said. “My team was at the forefront of DC Open Doors education and a lot of our buyers utilize DC’s Home Purchase Assistance Program program. Of course, we can’t forget about student loans and the impact it has the debt-to-income ratio.”