The visualizations in this blog post are taken from the forthcoming Ohio Housing Needs Assessment.
Owning a home is arguably one of the best ways to build equity and intergenerational wealth. However, this pathway to generating wealth has historically been blocked for non-white households across the country. This trend continues in Ohio, where the gap in homeownership between white and Black householders (Figure 1) has been widening steadily for over a decade, reaching 37 percentage points in 2018. For many Black Ohioans, purchasing a home and the wealth-building benefits that come with homeownership are often difficult or out of reach.
Figure 1: Homeownership Rate Gap, White and Black Householders 1
Many barriers to homeownership for Black households stem from historic and ongoing discrimination in employment and housing policies that have led to a severe gap in current income and poverty levels. Higher poverty rates and lower incomes can leave Black families unable to enter the housing market. In 2018, Black Ohioans were nearly three times more likely to live in poverty than white Ohioans (29% versus 11%), making the poverty gap larger than those of neighboring states, as well as the national gap (Figure 2). Disparities in income contribute to a larger price-to-income ratio for potential Black homeowners, making homebuying unaffordable. In 2018, the median home sales price 2 in Ohio was $151,100. At that time, the median household income for a white householder in Ohio was $60,783, nearly double the median household income for a Black householder at $33,590 (Figure 3).
Figure 2: Poverty Rate Gap in Ohio and Neighboring States, Black and White 3
Figure 3: Income Gap Ratio, White and Black Householders 4
Another barrier is the mortgage lending process. Both Black and white potential homebuyers in Ohio are less likely to be denied on a mortgage loan application than they were a decade ago, but the denial rate gap between them remains large. Black Ohioans are still far more likely to be denied a home loan than white Ohioans—38% compared to 22% (Figure 4). Even when holding incomes equal, Black applicants have a higher denial rate than their white counterparts (Figure 5). This suggests that even if the income gap closed, historic discrimination in applicant viability may continue to be challenged through credit score, household debt, and evaluations of home and neighborhood conditions, which are linked to historic and ongoing discriminatory practices. But the fact remains that Black Ohioans with the same earning potential as whites are being given fewer opportunities to achieve the American dream of homeownership and all that comes with it.
Figure 4: Mortgage Loan Denial Rate Gap, Black and White Applicants 5
Figure 5: Mortgage Loan Denial Rate Gap, Black and White Applicants, by Income 6
Removing barriers to homeownership for Black Americans should be a top priority for policy makers. Equal access to homeownership is pivotal for creating true opportunity and reversing more than a century of housing discrimination in the United States. To do this, we need to close the income and poverty gaps by encouraging full employment, increasing minimum wages and building transportation infrastructure that makes it easier for low-income workers to get to available jobs. Second, we need to understand and acknowledge how a history of racist housing policy and de facto segregation contributed to many of the inequalities we still see today. Only when there is a broad understanding of this largely untaught history can we begin to create a more equitable loan application and appraisal process. Third, we should increase the supply of affordable housing for homeownership and offer a variety of affordable alternatives to owning or renting: community land trusts, limited-equity co-ops, cohousing, and lease–purchase. Finally, we should continue to promote and fund state homebuyer programs, like OHFA's Your Choice! Down Payment Assistance, Grants for Grads and Ohio Heroes, which can also bring the dream of homeownership within reach for low- to moderate - income families of color.
1 Source: American Community Survey (ACS) One-Year Estimates, Tables B25003A & B25003B
2 Source: American Community Survey (ACS) One-Year Estimates, Table B25077
3 Source: 2018 American Community Survey (ACS) One-Year Estimates, Tables B17001B and B17001H
4 Source: American Community Survey (ACS) One-Year Estimates, Tables B19013A & B19013B
5 Source: Home Mortgage Disclosure Act (HMDA) data, Consumer Financial Protection Bureau. Mortgage loan denial rate is the percentage of total mortgage loan applications denied by lenders. Applications include preapproval requests. Applications approved but not accepted are counted as approved. Applications withdrawn by applicant, files closed for incompleteness and loans purchased by a financial institution are excluded from the analysis.