Those in the African American community are far too familiar with the struggles of homeownership. A history of redlining and blockbusting has only been compounded by the recent tightening of credit. It seems like African Americans are always under incredible scrutiny, even when they are trying to contribute to their communities by investing in real estate and creating stable futures for their families.
While these struggles are real, they became even more apparent when the Urban Institute issued a report this summer entitled “Headship and Homeownership: What Does the Future Hold?” The report was alarming to me as an African American on many levels, but primarily because of the prediction that African Americans will continue to lag other ethnicities in rates of homeownership.
Here are the five key points that the report makes regarding household growth and housing preferences over the next fifteen yearThe surge in rental housing is coming. Nearly six in ten of the 22 million new households that will form between 2010 and 2030 will rent, creating enormous pressure on the rental housing market which is already constrained. More suitable rental housing is needed.
- The surge in rental housing is coming. Nearly six in ten of the 22 million new households that will form between 2010 and 2030 will rent, creating enormous pressure on the rental housing market which is already constrained. More suitable rental housing is needed.
- Most of the new households that will form between 2010 and 2030 will be non-white. From 2010 to 2020, an estimated 11.6 million new households will form. Of these, 77 percent of new households will be non-white (Hispanic, African American, Asian, American Indians and Alaska Natives, and people of multiple or other races. From 2020 to 2030, 10.4 million net new households will form, 88 percent of which will be non-white. Because non-white groups have lower homeownership rates than whites, these household formation projections are the main driver of the Urban Institute’s homeownership forecasts. One-third, or more of the thirteen million new renters, between 2010 and 2030 will be Hispanic. Only one-quarter will be white. Almost one-quarter will be African American and fifteen percent will be other racial or ethnic backgrounds.
- The homeownership rate will decrease for all age groups, except those over the age of 75. Total owners will still outnumber total renters throughout the 20-year period, but the homeownership rate will decrease for all but the oldest age group.
- The number of senior-headed households will increase dramatically. Head of households with people aged 65 and older is projected to increase from 25.8 million in 2010 to 35.4 million in 2020, and then to 45.7 million in 2030. This should come as no surprise given the sheer size of the Baby Boomer generation, the majority of whom were homeowners.
- African Americans will fall further behind all racial groups in homeownership. The report states: “For at least the next 15 years, whether the economy grows slowly or quickly, the homeownership rate for African Americans will decrease while the rate for Hispanics will increase.” The report goes on to state that more than fifty percent of the 9 million new owners between 2010 and 2030 will be Hispanic; only eleven percent will be African American. By 2030, the homeownership rate for African Americans will have fallen to forty percent, a drop of six percentage points from just three decades prior. During that same time, Hispanic homeownership will increase by two percentage points.
I took the five key points of the report out of order in order to save number five for last. Go back and re-read those statistics and try to wrap your head around them. I cannot.
To what can we attribute the divergence of homeownership rates between African Americans and Hispanics? The Urban Institute notes that the Hispanic population is younger, and as the economy improves will be of the age range to form families and buy homes. The think-tank also acknowledges that African Americans were among the hardest hit by the financial crisis, and homeownership rates rapidly declined compared to those of their white or Hispanic counterparts. African American households lost equity and have struggled to regain their financial footing.
What is happening to us? Why is it that no matter what the economy does, for the next fifteen years African Americans will continue to lose ground when it comes to homeownership? In those fifteen years, my granddaughter will be driving and I will be sixty-eight years old. Odds are that if I do not leave some wealth behind for her, she will be a renter just like the rest of her generation. She will face an incredible housing burden because of the rental market shortage. She and her classmates will be in a constant battle to find affordable housing and clawing their way to homeownership will be an ongoing fight.
If the Urban Institute’s predictions are true, then how can we turn the tide?
We can start by making homeownership a part of everyday conversations. Too much of the news is focused on rioting, burning our cities, being beaten down in the streets by police, being imprisoned for minor offenses, or dealing with other cases of discrimination. As these stories dominate the headlines, people ignore the plight of African American homeownership. Housing is a pathway for most Americans, regardless of color, but especially for African Americans who struggle to build equity and increase earnings over time. Homeownership is a critical way for us to build wealth.
Yet there is no affirmative action in housing, credit, income or education. African Americans are left to figure this problem out by themselves. Voting power can only take them so far. Economic and market forces only matter to the extent that systemic racism, discrimination, and burdensome housing policies are addressed. Otherwise, they will prevent us from moving forward.
As a real estate professional and mortgage banking professional, what can I do? As a citizen of the United States and member of the African American community, what can I do? I am member of most of the black civic and religious institutions and a supporter of many solutions to issues that affect African Americans and people of color, but what can I do to specially address this issue?
At some point, we must stop the decline in African American homeownership and create new pathways to promote an increase. If we don’t, whose fault is it? Who is to blame? Is that the legacy we want to leave for our children? The ramifications of doing so is unfathomable.
Perhaps more importantly, what is the solution or answer to the problem?
We can explore new mortgage products, demand that banks lend to borrowers with lower credit sores, and even push for programs that allow for no down payments at all. I am not sure what the solution is, but what I do know for sure is that there is no single solution. The answers may not be found in any one of the aforementioned strategies, but we have to figure something out. We need to begin chipping away at this now for the sake of future generations, for the sake of grandchildren like my own.
In the absence of systemic change, we have to rely upon ourselves to create our own destinies. We must plant a stake in the ground and build wealth by our own individual selves. Nobody will do this for you. Nobody will save you, especially not in today’s bureaucratic, self-serving political atmosphere. There is no modern day Moses who will descend from the mountain top with wisdom to guide you to the land of homeownership. You must rise up and take actions on your own behalf. The power is now!
I too have had my share of problems. I have made my mistakes and I have suffered, but I have no one to blame but me: not the economy, not my industry, but me. It will be me that takes to me the promise land, because I am building it with my own hands and not operating in fear or believing those who say I cannot when I say I can. My problem our not your problem, and you should not make your problems mine. Not all of our problems are community problems, because the solutions to whatever issues or circumstances that are stopping us from be our best self and achieving our potential rest with each individual within the community. We must do individually and collectively what we must do to make our individual and collective American Dream a reality.
Keep hope alive! There is no need for the dream of African American homeownership to die.
Eric Lawrence Frazier, MBA
President and CEO