One of the compelling aspects of Ta-Nehisi Coates' cover story for The Atlantic last month making the case for reparations is that he focuses more on housing inequality in the 20th century than slave labor in the 17th through 19th centuries. Indeed, that was the key to telling whether someone bothered to actually read the essay before commenting on it. As Slate's Ben Mathis-Lilley pointed out, Coates' narrow focus on the practice of redlining in Chicago "turns the issue of race in America into a pressing discussion about work, wealth, and theft rather than an unresolvable grudge-match about bygone guilt." ("Narrow" being a relative term for a 16,000-word essay.)
Coates' story observed how difficult it is for black residents in Chicago to make and keep their homes. Now there's research to show how much harder African Americans struggle as homeowners. A new study demonstrates that, despite significant gains in residential equality, white households still have an advantage over black households when it comes to homeownership. Worse still, the changes in the market that led to the foreclosure crisis have essentially wipes out the gains made by black homeowners since the 1970s.
The report, which is the work of sociologists Gregory Sharp at Rice University and Matthew Hall at Cornell University, focuses on the racial dynamics of homeownership exit—i.e., when an owner becomes a renter. Even granting the shifts in the housing market both before and after the Fair Housing Act of 1968 (which prohibited housing discrimination based on race), the matter of homeownership exits remains understudied, according to Sharp and Hall.
"This issue is especially salient in light of recent reports on the racially uneven impacts of the housing crisis, but more importantly because of the enormous advantages that homeownership confers—to wealth accumulation, accessibility to valuable public services and amenities, community engagement and civil life, and less exposure to violence and other social ills," the report reads.
For background, the report traces the persistent sources of racial discrimination in home lending even after the passage of the Fair Housing Act, leading to three more laws passed by Congress in quick succession: the Equal Credit Opportunity Act of 1974, the Home Mortgage Disclosure Act of 1975, and the Community Reinvestment Act of 1975. (Read Coates's essay for a vivid sense of the abuse black residents suffered before these protections were passed into law.) Actually enforcing the laws proved difficult, until Congress passed the Fair Housing Amendments Act of 1988, which expanded the definition of housing discrimination to ban interference, coercion, and intimidation by sellers while also boosting the role of the U.S. Department of Housing and Urban Development in monitoring home sales.
Yet the improvements in racial–residential equality of the 1980s and 1990s, accelerated by a few more changes in federal law—the Federal Housing Enterprises Financial Safety and Soundness Act of 1992, which set minority homeownership goals for Fannie Mae and Freddie Mac, for example—coincided with the emergence of ever more complex financial products in the lending market. With them came the subprime-mortgage industry.
"There is extensive evidence that black households were especially likely to sign these types of subprime, predatory, and otherwise exotic loans," the report by Sharp and Hall reads. "In 2000, African Americans were more than twice as likely as whites with similar incomes to sign subprime loans, and among lower-income blacks, more than half (56.3 percent) of home refinance loans were subprime."
This research builds on a blockbuster reporter released by HUD and the U.S. Treasury back in 2000, which demonstrated how mortgage lenders targeted black homeowners with subprime loans. The figures the feds revealed remain staggering. "In predominantly black neighborhoods, the high-cost subprime lending accounted for 51 percent of home loans in 1998—compared with only 9 percent in predominately white areas," the joint report shows.
Even adjusting for income, racial discrimination is still evident in the subprime mortgage market. Black homeowners in high-income neighborhoods were twice as likely to have subprime mortgages as white homeowners in low-income neighborhoods. The HUD–Treasury report echoes one of the broader themes in Coates's feature.
"From the 1930s through the 1960s, black people across the country were largely cut out of the legitimate home-mortgage market through means both legal and extralegal," Coates writes. A similar structure took root once again in the 1990s through the 2000s: Although blacks had gained greater access to credit, the quality of the credit itself came to be less than equal.
What the joint HUD–Treasury report did not demonstrate—and where the new research from Sharp and Hall picks up—is how racial discrimination drives black homeowners out of their homes, now more so than in the past.
The study draws on longitudinal data from the Panel Study of Income Dynamics, a sample of some 5,000 families launched in 1968 and collected annually until 1997, and then biennially until 2009. Over four decades, that sample has grown to include more than 9,000 families and 70,000 individuals. The survey controlled for "trigger events" that increase the likelihood that homeowners will lose their homes, including divorce, death, or job loss. (And more mundane factors, such as when a kid leaves home for college.) Sharp and Hall also accounted for homeowners who developed disabilities.
The study finds that about six percent of the sample transitioned from homeowners to renters. But black homeowners experienced an exit rate 68.2 percent higher than white homeowners. Although racial differences in trigger events were "minimal," the report says, black homeowners were nevertheless more likely to "see their households shrink, to lose their jobs, and to suffer from substantial income losses" than white homeowners. So, even accounting for events that can lead to downward life trajectories, African Americans were much more likely to lose their status as homeowners—suggesting they are more vulnerable and subject to predatory, exploitative, and racially motivated lending practices.
"Compared to black homeowners, for example, white homeowners have higher rates of being coupled (married or cohabiting), have fewer children, and live in less-crowded housing units," the report reads. "However," the report later affirms, "blacks remain at a substantial disadvantage in accessing homeownership even when racial differences in socioeconomic resources and family characteristics are equalized."
Sharp and Hall demonstrate graphically how racial inequalities in both exit and ownership have persisted since 1968—and increased over the last decade. The trend lines indicate racial difference in the probability of being a homeowner and the probability of homeownership exit (by year of home purchase).
"First, the adjusted racial disparity in the odds of being a homeowner is substantial and steady over the last forty years," Sharp and Hall write, "but perhaps more alarming is the slight uptick in the black disadvantage observed during the most recent decade. Second, this trend is juxtaposed against the significant widening of the racial gap in homeownership exit, a disparity that has continued to grow among owners who purchased homes in the 1990s or later."
The Great Recession had a disproportionate impact on black homeowners. Over the most recently observed two-year period (for which data are still incomplete), Sharp and Hall found that black homeowners who became renters in 2009 were three times more likely to have fallen behind on their mortgage payments that year. They are also 50 percent more likely to report anticipating falling behind on future loan payments—suggesting mortgage instruments that do not represent their best financial interests or could be predatory in nature.
"The results also suggest that, contrary to expectations, racial differences in ownership have not converged over the last four decades," the report reads. "Indeed, the results suggest that the black disadvantage in attaining ownership intensified during the 2000s."
Even given the stricter enforcement of housing discrimination laws—and granting the persistent but narrowing achievement gaps between black students and white students—black homeowners are not better off today than they were four decades ago. In terms of homeownership exits, they are worse off now.