How 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 an important role in the mortgage industry. Based on information gathered in 2019, the new report reveals that
People of color, regardless of their economic situation, have been turned down from mortgage applications at a higher rate than white Americans.
Latino, Asian and Pacific Islander, Native American, and black applicants faced discrimination during the mortgage approval process, but black applicants faced the most. According to the report, blacks were 80% more likely to be denied a mortgage than a white applicant with a similar profile. In some places, the pattern of exclusion is even more surprising: Black applicants, in Chicago, for example, were 150% more likely to be turned down than their white counterparts with the same credit score, same debt as a percentage of debt. income and seeking to borrow the same percentage of a property’s value.
The current mortgage rejection rate – and the interrelated patterns of housing discrimination and exclusion – are rooted in American history. Discrimination against black Americans who apply for mortgages 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 a home, black Americans were willfully excluded. The Military Readjustment Act of 1944 – more commonly known as the GI Bill – replicated the same pattern of racial discrimination in housing. The GI Bill helped millions of veterans buy homes – 40 percent of mortgages issued in 1946 and 1947 were guaranteed by the Veterans Administration. Yet these low-interest home loans went primarily to white Americans because banks routinely refused mortgages to black applicants.
Despite the passage of the Fair Housing Act of 1968 and the Equal Credit Opportunity Act of 1974, racial disparities in homeownership persist, and the discrimination in mortgage lending continues as described in The Markup / AP emphasizes the limits of federal housing policies to combat housing and loans. discrimination.
The black homeownership rate is now 30.5% lower than the white homeownership rate and 22% lower than the national homeownership rate of 63.7%. 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 are seeing now are the remnants of the housing discrimination that began under 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 stimulate 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 for mortgages long term, which has allowed lenders to extend repayment terms up to 30 years. .
These developments more than doubled homeownership in the United States over the next several decades. According to historian Thomas J. Sugrue, “In 1930, only 30% of Americans owned their own homes; in 1960, over 60 percent were owners. Homeownership has become an emblem of American citizenship.
Federal assessors penalized neighborhoods with a strong black presence, giving them the lowest score of D.
But black Americans and other people of color have been largely limited in accessing the benefits of federal housing programs. As Sugrue details in his groundbreaking book, “The Origins of the Urban Crisis,” HOLC categorized neighborhoods based on a variety of factors, including the economy class of residents and the age of buildings. One of the most important factors, however, was the presence of black residents. Federal assessors penalized neighborhoods with a strong black presence, giving them the lowest rating of D, indicating that residents were considered a risk for mortgages. It was therefore extremely difficult for them to receive federal housing assistance. On color-coded maps used by federal agencies, these areas were designated by the color red, originally the term “redlining.”
Sugrue found that in Detroit, every neighborhood with “even a small African American population” received a D rating from the HOLC. As Andre M. Perry and David Harshbarger explain in a 2018 Brookings Institution report: “With racial restrictive housing covenants barring black Americans from buying certain properties, redlining has prevented generations of families acquire equity or make improvements to homes already owned. “
Then, like today, black Americans faced a number of obstacles when trying to get these mortgages. According to historian Ira Katznelson, author of “When Affirmative Action Was White,” federal policies such as the GI Bill have served to widen the racial wealth gap in America rather than help close it.
Despite other efforts to tackle housing discrimination over the past 80 years, the recent report by The Markup / AP reveals that many of the same exclusionary practices of the 20th century remain firmly in place. Access to quality housing has not improved and there are still many barriers people of color face when seeking a mortgage. The mechanics may have changed over time, but the end result is the same: Home ownership for black Americans and other people of color is an uphill battle. And that’s unlikely to change anytime soon, especially if the federal government doesn’t make change a priority.