House Hunting While Black: Racism Sabotages the American Dream

A recent report from The Markup, co-published with The Associated Press, reveals what many Americans already know: Race plays a significant factor in the home-lending industry. Based on information gathered in 2019, the new report reveals that

Latino, Asian and Pacific Islander, Native American and Black applicants experienced discrimination during the mortgage approval process, but Black applicants encountered the most. According to the report, Black people were 80 percent more likely to be denied a mortgage loan than a white applicant with a similar profile. In some places, the pattern of exclusion is even more startling: Black applicants, in Chicago, for example, were 150 percent more likely to be denied than white counterparts with the same credit score, same debt as percentage of income, and looking to borrow the same percentage of a property’s value.

The current rate of mortgage denials — and the interrelated patterns of housing discrimination and exclusion — is rooted in American history. Discrimination against Black Americans applying for mortgage loans is not new. In the 1930s, when the federal government created the Home Owners’ Loan Corporation (HOLC) to make it easier for Americans to own homes, Black Americans were purposely excluded. The Servicemen’s Readjustment Act of 1944 — most commonly known as the GI Bill — replicated the same pattern of racial discrimination in housing. The GI Bill helped millions of veterans purchase homes — 40 percent of the mortgages issued in 1946 and 1947 were guaranteed by the Veterans Administration. Yet, those low-interest home loans went primarily to white Americans because banks consistently refused mortgages to Black applicants.

Despite the passage of the 1968 Fair Housing Act and the 1974 Equal Credit Opportunity Act, racial disparity in home ownership persists, and the ongoing home-lending discrimination captured in The Markup/AP report underscores the limitations of federal housing policies to address housing and lending discrimination.

The Black homeownership rate today is 30.5 percent lower than the white homeownership rate and 22 percent lower than the national homeownership rate of 63.7 percent. According to a 2019 National Association of Realtors study, Black homebuyers bought homes at the lowest median price ($228,000) compared to white and Hispanic homebuyers.

What we’re seeing now are the vestiges of the housing discrimination that began during Jim Crow. During the Great Depression, which left an estimated 15 million Americans unemployed in March 1933, a major component of Franklin D. Roosevelt’s New Deal was the federal government’s attempts to boost the private housing market with the creation of the HOLC in 1933 and the Federal Housing Administration (FHA) in 1934. The HOLC provided low-interest loans to homeowners at risk of losing their homes to foreclosure, and the FHA provided government support to long-term mortgages, which allowed lenders to extend the terms of repayment up to 30 years.