Black families unable to buy homes due to a lack of credit
are often stuck paying more in rent
- Lack of access to credit is keeping many renters from
homeownership, despite those renters living in areas where a
monthly mortgage payment is less than rent.
- Areas with higher levels of credit insecurity tend to have
higher populations of color, especially Black households — a legacy
of redlining practices that were outlawed decades ago.
- Improving credit access is essential to closing the racial
wealth gap and improving access to homeownership across the
board.
SEATTLE, Nov. 6, 2023
/PRNewswire/ -- Zillow Research today published new maps that
shine light on how a lack of credit access is keeping millions of
people — particularly Black families — from homeownership, even as
they pay relatively more each month in rent.
"Lack of credit access keeps people in a cycle of paying more in
rent than they would pay each month for a mortgage on that same
home," said Nicole Bachaud, senior
economist at Zillow. "Communities of color, particularly Black
families, see this play out, keeping a path to economic stability
and wealth generation locked. Policymakers should take action to
reasonably improve access to credit for millions of families."
Credit insecurity refers to the challenges individuals and
households face in qualifying for credit, and is particularly
prevalent in Black neighborhoods, where access to traditional and
safe credit building is limited. As a result, many Black households
are forced to remain renters in their communities, despite being
able to afford a monthly mortgage payment. This is especially
concerning considering that tenants nationwide spend $600 billion on rent each year, yet these
payments often do not help build credit for those who need it
most.
In areas with more credit insecurity, homeownership rates are
lower. Even so, a monthly mortgage payment would cost less than
rent in these areas, even with mortgage rates at 22-year highs.
This shows that a lack of credit access is as much a barrier to
homeownership as affordability, and highlights the urgent need to
address disparities in credit access.
This new Zillow analysis includes maps that show how
credit-insecure census tracts are directly linked to the share of
the population that is Black, and to the areas where rent is more
expensive than mortgage payments.
New Orleans is the city that
most reflects this phenomenon, according to Zillow's research.
Looking only at census tracts deemed credit insecure by the Federal
Reserve Bank of New
York,i the income-adjusted gap between the
cost of a typical rental and a mortgage payment on a typical home
is the widest in New Orleans.
In New Orleans' credit-insecure
census tracts — where 56.7% of the population is Black — a median
renter household would spend 77.5% of its income on a typical
rental, but a median household that owns its home would spend only
28.6% on a mortgage payment on the typical home. This means that
residents in these areas, unable to secure the financing they need
to buy a home, are stuck paying more for rent each month than they
would expect to pay for a mortgage.
Zillow has also published a table that displays
homeownership rate, the share of census tracts where it is cheaper
to buy than rent and the share of a typical homeowner or renter's
income needed to pay for a typical mortgage or rental, sorted by
the level of credit security.
The disparities in credit access are particularly impactful for
communities with higher rates of credit insecurity, which tend to
have larger populations of color, in particular, Black households.
The legacy of redlining practices, though prohibited by law,
continue to impact communities today, perpetuating racial
disparities in homeownership and financial opportunities.
Policymakers could explore a number of solutions to help address
this issue. Encouraging more financial institutions and
landlords to report positive rent payments -- and for government
sponsored agencies to consider this data -- would help renters
build credit, especially in areas where building a credit profile
is so difficult. Improving awareness of down payment
assistance can help more renters overcome the cash barriers
they face when trying to purchase a home. And supporting policies
that build more homes can help open more doors to homes that are
affordable and accessible.
The table below shines a line on census tracts that are
considered credit insecure, showing where people could afford to
buy but are locked out of homeownership due to a lack of credit
profile.
Credit Insecure
Census Tracts
|
Metro
Area
|
Homeownership
Rate
|
Share of Population
That is Black
|
Share of Census
Tracts Where it is Cheaper to Buy Than Rent
|
Share of Median
Homeowner Income Spent on a New Mortgage
|
Share of Median
Renter Income Spent on a New Rental
|
Atlanta, GA
|
39.2 %
|
57.6 %
|
25.6 %
|
37.0 %
|
65.3 %
|
Austin, TX
|
36.0 %
|
10.2 %
|
0.0 %
|
45.0 %
|
62.2 %
|
Baltimore,
MD
|
47.4 %
|
63.8 %
|
81.8 %
|
25.8 %
|
61.6 %
|
Birmingham,
AL
|
54.3 %
|
63.6 %
|
71.7 %
|
25.9 %
|
51.3 %
|
Boston, MA
|
33.2 %
|
17.9 %
|
0.0 %
|
46.5 %
|
80.7 %
|
Charlotte,
NC
|
46.5 %
|
35.1 %
|
6.3 %
|
39.4 %
|
56.4 %
|
Chicago, IL
|
45.7 %
|
35.9 %
|
50.9 %
|
29.7 %
|
61.8 %
|
Cincinnati,
OH
|
46.3 %
|
27.7 %
|
73.2 %
|
26.9 %
|
63.6 %
|
Cleveland,
OH
|
42.0 %
|
33.5 %
|
89.0 %
|
22.1 %
|
58.6 %
|
Columbus, OH
|
41.0 %
|
35.0 %
|
38.9 %
|
29.0 %
|
55.6 %
|
Dallas-Fort Worth,
TX
|
46.7 %
|
21.6 %
|
41.6 %
|
37.2 %
|
61.4 %
|
Denver, CO
|
46.9 %
|
9.5 %
|
0.0 %
|
47.0 %
|
63.8 %
|
Detroit, MI
|
50.3 %
|
60.1 %
|
84.8 %
|
21.9 %
|
54.8 %
|
Hartford, CT
|
30.4 %
|
20.0 %
|
68.6 %
|
30.5 %
|
75.8 %
|
Houston, TX
|
50.1 %
|
22.8 %
|
70.9 %
|
31.9 %
|
56.3 %
|
Indianapolis,
IN
|
43.2 %
|
36.1 %
|
64.8 %
|
25.8 %
|
46.5 %
|
Jacksonville,
FL
|
44.8 %
|
48.8 %
|
33.3 %
|
39.8 %
|
57.2 %
|
Kansas City,
MO
|
45.9 %
|
30.4 %
|
48.6 %
|
26.6 %
|
50.9 %
|
Las Vegas,
NV
|
35.7 %
|
14.0 %
|
2.2 %
|
43.5 %
|
56.8 %
|
Los Angeles,
CA
|
29.0 %
|
9.2 %
|
0.0 %
|
68.4 %
|
88.1 %
|
Louisville,
KY
|
50.2 %
|
32.1 %
|
48.9 %
|
26.5 %
|
51.4 %
|
Memphis, TN
|
45.3 %
|
68.2 %
|
82.4 %
|
22.6 %
|
50.5 %
|
Miami, FL
|
37.6 %
|
39.9 %
|
20.5 %
|
55.1 %
|
86.3 %
|
Milwaukee,
WI
|
38.4 %
|
39.7 %
|
63.8 %
|
26.7 %
|
51.5 %
|
Minneapolis-St. Paul,
MN
|
41.8 %
|
22.4 %
|
24.5 %
|
30.0 %
|
66.3 %
|
Nashville,
TN
|
47.2 %
|
26.7 %
|
0.0 %
|
42.4 %
|
63.8 %
|
New Orleans,
LA
|
46.4 %
|
56.7 %
|
67.1 %
|
28.6 %
|
77.5 %
|
New York, NY
|
29.6 %
|
32.2 %
|
0.8 %
|
57.9 %
|
75.9 %
|
Oklahoma City,
OK
|
52.8 %
|
13.4 %
|
56.8 %
|
24.9 %
|
44.7 %
|
Orlando, FL
|
45.0 %
|
37.4 %
|
19.6 %
|
46.3 %
|
59.6 %
|
Philadelphia,
PA
|
47.4 %
|
47.7 %
|
71.3 %
|
30.4 %
|
64.8 %
|
Phoenix, AZ
|
47.0 %
|
6.7 %
|
0.0 %
|
46.9 %
|
53.0 %
|
Pittsburgh,
PA
|
50.8 %
|
19.8 %
|
86.2 %
|
19.5 %
|
56.6 %
|
Portland, OR
|
48.0 %
|
3.5 %
|
0.0 %
|
42.0 %
|
71.5 %
|
Providence,
RI
|
40.5 %
|
10.6 %
|
24.0 %
|
42.8 %
|
78.1 %
|
Raleigh, NC
|
40.9 %
|
42.9 %
|
0.0 %
|
38.9 %
|
61.5 %
|
Richmond, VA
|
52.3 %
|
46.7 %
|
0.0 %
|
34.3 %
|
54.8 %
|
Riverside,
CA
|
49.1 %
|
6.0 %
|
3.7 %
|
58.7 %
|
70.8 %
|
Sacramento,
CA
|
37.3 %
|
7.5 %
|
0.0 %
|
45.9 %
|
69.0 %
|
Salt Lake City,
UT
|
46.2 %
|
4.0 %
|
0.0 %
|
47.7 %
|
66.9 %
|
San Antonio,
TX
|
49.3 %
|
6.1 %
|
49.6 %
|
33.2 %
|
56.4 %
|
San Diego,
CA
|
30.6 %
|
6.4 %
|
0.0 %
|
72.2 %
|
84.7 %
|
San Francisco,
CA
|
33.5 %
|
16.3 %
|
0.0 %
|
61.2 %
|
78.8 %
|
San Jose, CA
|
39.1 %
|
3.1 %
|
0.0 %
|
59.7 %
|
61.4 %
|
Seattle, WA
|
41.7 %
|
11.3 %
|
0.0 %
|
48.2 %
|
68.8 %
|
St. Louis,
MO
|
46.8 %
|
50.5 %
|
74.6 %
|
20.3 %
|
53.2 %
|
Tampa, FL
|
47.7 %
|
28.4 %
|
30.8 %
|
51.1 %
|
74.8 %
|
Virginia Beach,
VA
|
42.3 %
|
49.6 %
|
42.9 %
|
32.9 %
|
63.6 %
|
Washington,
DC
|
36.6 %
|
51.1 %
|
10.8 %
|
36.1 %
|
66.4 %
|
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Zillow affiliate.
i Source: Federal Reserve Bank of New York's credit insecurity index:
https://www.newyorkfed.org/medialibrary/media/outreach-and-education/community-development/constraints-on-access-to-credit.pdf
View original content to download
multimedia:https://www.prnewswire.com/news-releases/redlinings-legacy-new-zillow-maps-show-the-continuing-barriers-to-homeownership-in-black-neighborhoods-301977809.html
SOURCE Zillow