The Housing Shortage Is a Problem for Racial Equity

By Bryan Greene
VP Policy Advocacy | National Association of REALTORS®

Owning a home is a defining marker of the American dream. But all too often, it’s also an uncomfortable reminder of our nation’s shortcomings in the fight for racial equity.

The homeownership gap between Black and white Americans is larger today than it was in 1960, when it was effectively legal to deny someone a home because of the color of their skin.

We must confront the barriers that perpetuate this gap—from uneven lending practices, to exclusionary zoning, to the financial disadvantages borne by a history of exclusion—and help more people realize the dream of homeownership.

Racism’s legacy makes it difficult for countless Americans to compete in the housing market. Racially restrictive covenants, redlining, unfairly devalued communities, and other officially sanctioned discrimination prevented many qualified people of color from buying homes—and held down the property values of those who did.

By some estimates, the median Black family has one-tenth the net worth of the median white family. That racial wealth gap is largely a function of the fact that Black Americans have been unable to build equity in homes over generations. Forty-two percent of Black households are homeowners, compared to 72% of whites.

The real-estate industry—and our country as a whole—have much more work to do to make America’s housing market equitable.

Consumers can’t buy homes without access to mortgage credit. Many well-qualified Americans, particularly people of color, lack access to credit because of an antiquated system does not provide a complete picture of a potential borrower’s creditworthiness.

Credit bureaus do not automatically include rent and utility payments, which are the typical consumer’s largest expenses. Incorporating these data points would provide a more comprehensive, more predictive view of credit performance—and increase opportunities for homeownership among people of color.

Black people are also less likely than whites to be able to count on the sale of an existing home, a family inheritance, or help from family for a down payment.

Fortunately, there are several proposals circulating in Washington that could help address this inequity. New down-payment grants and tax credits have the potential to help millions of households achieve the American dream, especially minorities, millennials, and middle-income families.

Efforts to increase down-payment assistance will have little impact, however, if housing inventory remains near record lows. At the end of May, there were only 1.23 million active listings. That’s down 20.6% from one year ago and is less than half of what is needed to be considered a balanced market.

To address the housing shortage, we’ll have to get creative. One option is to zero out the capital gains tax for those who sell an investment property to a first-time homebuyer. We can consider extending tax credits to those who convert commercial space into residential units. Tax incentives that defray the costs of training and hiring more workers for residential construction could help, too.

The federal government can also offer tax credits or other support to localities that ease zoning rules that limit the supply of homes—like minimum lot sizes, parking requirements, and bans on multifamily housing.

America’s 1.4 million Realtors are in a unique position to aid this effort. Before the pandemic, the National Association of Realtors began implementing a new, association-wide fair housing action plan designed to emphasize accountability, culture change, and training (ACT!). The goal of the program is to educate our members about the realities of housing discrimination, hold ourselves accountable under the law, and position Realtors as champions for fair housing in their communities.

Policies that empower Americans, especially the historically marginalized, to build wealth are crucial to addressing our nation’s persistent inequities. Expanding access to homeownership can do just that—and strengthen communities in the process.

Originally published in Barron’s (subscriber content)