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Homeownership Gaps Among Low-Income and Minority Borrowers and Neighborhoods


Report Acceptance Date: March 2005 (271 pages)

Posted Date: March 01, 2005

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Homeownership rates currently stand at historically high levels for all segments of the U.S. population. Nevertheless, dramatic gaps in homeownership rates have been stubbornly present over the last several decades, and even increased somewhat during the decade of the 1990s. As of 2004, the white homeownership rate was 76 percent while African-American and Hispanic homeownership rates remained below 50 percent, and the Asian rate was 60 percent. At the same time households with very-low income had a homeownership rate that was 37 percentage points below the rate for high-income households.

Understanding the determinants of homeownership rates and gaps is important because homeownership is widely believed to provide a variety of benefits for both individuals and communities. Homeownership expands individual opportunities to accumulate wealth, enables a family to exert greater control over its living environment, creates incentives for households to better maintain their homes, and may benefit children of homeowners. Homeownership also benefits local neighborhoods because owner-occupiers have a financial stake in the quality of the local community.

In light of the many potential benefits of homeownership, the fact that homeownership rates first declined and then stagnated during the 1980s and into the early 1990s became a cause for concern for the federal government. First, Secretary Jack Kemp set a goal and initiated efforts to create one million new homeowners. Then in 1994, at the President’s request, the U.S. Department of Housing and Urban Development (HUD) began work to develop a National Homeownership Strategy with the goal of lifting the overall homeownership rate to 67.5 percent by the end of the year 2000. While the most tangible goal of the National Homeownership Strategy was to raise the overall homeownership rate, in presenting the strategy HUD pointed explicitly to declines in homeownership rates among low-income, young, and minority households as motivation for these efforts. And in June of 2002, President Bush announced a joint public/private initiative to increase minority homeownership by 5.5 million households by the year 2010.

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