Devan Southerland knows she wants to purchase a home in Baltimore City. She is cautious, though, after hearing about how predatory lenders disproportionately targeted minority homebuyers a decade ago. "I just want to be smart about it," Southerland says. "Because I know a lot of black people suffered during the whole housing crisis and whole subprime lending issue that happened a few years ago."
In the historic Baltimore neighborhood of Bolton Hill, Southerland and her 10-year-old son, Liam, tour the tree-lined streets and dream about one day purchasing a home in this culturally diverse enclave. Average home prices in the neighborhood, known for its 19th century architecture, go for about $380,000.
Southerland is 39 years old and she is juggling a lot. As a legal assistant, she makes about $25,000 a year. She saves what she can but is also working on a master's degree in human services and has student loans.
At times, not being a homeowner weighs on her. "Oh, I feel like I should have more by now, like I've got to step it up. This is crazy, why am I not further?"
Owning a home is widely believed to be the best way for working and middle class Americans to build wealth. And for many African-Americans, the dream of homeownership remains an elusive one. A recent report by Harvard University's Joint Center for Housing Studies found that 43 percent of black adults in the U.S. owned homes in 2017. Contrast that to white homeownership rates, which were measured at 72 percent.
Researchers found that between 1987 and 2017, homeownership rates increased for Asian-Americans, Hispanics and whites. But African-Americans in that timespan lost ground, falling nearly 3 percentage points below their 1987 levels.
Oh, I feel like I should have more by now, like I've got to step it up. This is crazy, why am I not further?
"Taken together, these trends mean that while the Hispanic-white and Asian-white homeownership gaps have narrowed somewhat over the past three decades, the black-white gap has widened substantially," according to the report.
In the runup to the housing bubble a decade ago, black Americans were making strides getting into the ranks of homeownership. No longer, says Alanna McCargo, vice president of housing policy at the Urban Institute. "There was a slight uptick in black homeownership going into those years," McCargo said. But since then, she said, all sorts of gains that had been made have been lost.
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Earlier this year, the Urban Institute charted the disparities between the rates of white and black homeownership. So just how bad has it become in the U.S.? "To put it into context, if you think about the last 50 years when the Fair Housing Act was passed, the black homeownership rate today is just the same as it was in 1968," McCargo says.
When broken down by city, some places do worse than others. Minneapolis, for instance, ranks the worst in the country with a homeownership gap of 50 percent. Albany, N.Y., and Salisbury, Md., are not far behind. Charleston, S.C., and Austin, Texas, are around 20 percent.
But Baltimore — a city where two-thirds of the population is African-American — is right smack in the middle. The city's 31 percent white-to-black homeownership gap mirrors the national average.
"It's definitely not a surprise," says Lawrence Brown, a professor in the School of Community Health and Policy at Morgan State University in Baltimore. Brown points to a 2017 study by the Washington-based think tank Prosperity Now, formerly known as Corporation for Enterprise Development.
It found that, for black Baltimore residents:
Brown adds that present-day underinvestment in black neighborhoods echoes what happened in the city decades ago: the practice of redlining neighborhoods means certain areas are systematically devalued and denied financial services because of their racial makeup.
"People in black communities, in these redlined areas, have not been able to accumulate the wealth and resources oftentimes to be able to purchase those homes," Brown says. "And then, oftentimes when they do, they get hit with the predatory loan. So they're redlined on the front end, subprimed on the back end."
In 2012, Wells Fargo reached a landmark $175 million settlement with the U.S. Department of Justice over accusations the bank steered black and Latino customers into high-cost loans. The settlement was sparked by a lawsuit filed by the city of Baltimore over violations of fair lending laws.
Housing experts say another problem is that housing inventory in the city, like in many parts of the country, is dwindling.
"Inventory is really at an all-time low," says JoAnne Poole, an associate broker with Berkshire Hathaway with more than 30 years of experience in the Baltimore housing market. "A healthy market is six, seven months of inventory. When you start to get into the two, three months' worth of inventory, that's really not a lot."
She also points out that Baltimore City's property taxes are among the highest in Maryland. That may explain why home prices in the city are on the rise. According to one analysis, June median sales prices in Baltimore City rose nearly 4 percent from June 2017 to $170,000.
McCargo, the housing expert from the Urban Institute, says closing the gap of homeownership has to be addressed on two fronts: "The black homeownership problem is not just about blacks being able to purchase homes going forward, it's equally about blacks who own today keeping their ownership and being able to transfer and build equity and advance their overall wealth picture."
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