The objective of this work in writing is to examine cultural diversity in America specifically in terms of home ownership. This work will examine minority home ownership in terms of which countries have an ordinance against minority home ownership. There have been instances of gearing minorities towards bad mortgage loans, charging extra fees and even running of scams. This work will examine the assistance of FHA, HUD and other organizations in assisting minorities with home ownership and will examine the percentages of minority home ownership as well as the centralization geographically of these homeowners as well as the inherent struggles of minority home ownership.
Homeownership in the United States has been traditionally as well as historically impacted by the race and economic status of individuals. While it is understandable that homeownership is affected by economic status, the factor of race has served to limit the ability of many individuals to purchase a home that have the economic means to do so. In the 1950s and 1960s race was taken advantage of by dishonest investors who engaged in predatory lending to minority race individuals. One example of this is what is known as 'White Flight' in neighborhoods where black families would be sold homes and their white neighbors would leave the neighborhood and then the vacant homes would be sold to black families at much inflated prices. (Ray, nd, paraphrased) Due to the terms of the mortgage loans, the houses would often foreclose and the houses would be resold. Homeownership rates in the United States are stated at 71% of households in the 2000 census however, the homeownership rates among black individuals was stated to be at approximately 45%. There has been only a marginal increase in the rates of homeownership among black households in recent years. (Ray, nd, paraphrased)
I. Racial Disparities in Homeownership Rates
The work of Bostic and Surette (2000) examines the issue of racial disparities in homeownership rates in the work entitled " "Have the Doors Opened Wider? Trends in Homeownership Rates by Race and Income" in which it is reported that developments in the "regulatory environment may have played a role in raising the percentage of families who own their homes." Bostic and Surette (2000) additionally report that it has been long believed that some groups and especially ethnic minorities and those from lower-income households "…have not had the same access to mortgage credit as others, possibly limiting their ability to become homeowners."
II. Regulatory and Legislative Acts
Congress passed several acts, which included: (1) the Home Mortgage Disclosure Act (HMDA); and (2) the Community Reinvestment Act (CRA) along with other regulation on lending that were geared toward making sure that groups characterized by low rates of homeownership were provided access to mortgages with rates that were better aligned with the individual's credit worthiness. In addition, these Acts have been revised in combination with regulatory enactments, which has served to bring about an increase in the "level of scrutiny associated with their enforcement." (Bostic and Surette, 2000) The Department of Housing and Urban Development is the agency appointed by the U.S. Congress to establish goals for affordable housing through Fannie Mae and Freddie Mac. These two agencies have been tasked with "increasing liquidity for lending to lower-income communities." (Bostic and Surette, 2000)
III. Minorities and Foreclosure Rates
It has been reported in recent years that minorities are disproportionately affected by foreclosure rates. Correa (2009) reports subprime loans "were not only disproportionately given to minority applicants, but also were concentrated in minority neighborhoods, she said. Subprime loans, designed for homebuyers who could not qualify for conventional mortgages, carried a higher rate of interest to compensate for greater credit risk. The result, she found, is that Latino and African-American neighborhoods are experiencing higher levels of instability from housing turnover and vacancies."
IV. Key Issues for Policymakers
Key issues for policymakers according to Correa (2009) include those stated as follows:
(1) When barriers to homeownership lowered, so did the barriers to foreclosure. The next generation of housing policy should address the stability of homeownership and sustainability for families over time.
(2) Many mortgage counselors report that their minority clients receive worse outcomes than their white clients in the foreclosure prevention/loan modification process. Policy makers must remain vigilant about monitoring "predatory" lending practices and address racial disparities in outcomes.
(3) The findings presented here provide early indications that the housing market downturn is affecting families and cities unevenly and exacerbating racial and ethnic inequalities," Estrada Correa wrote. "Will recovery happen evenly or will some groups remain stuck behind? What will be the reverberations in the next generation for these financial losses? These inequalities are crucial considerations for policy makers seeking solutions for recovery." (Correa, 2009)
The work of Coulson and Dalton (nd) entitled "Temporal and Ethnic Decompositions of Homeownership Rates: Synthetic Cohorts Across Five Census" report findings that include those stated as follows:
(1) The homeownership rates obtained by white households over the past 40 years are never matched by any contemporaneous nonwhite cohort. There are always homeownership gaps.
(2) Homeownership generally increases over time for all cohorts and groups, except for those cohorts reaching old age.
(3) The changes in ethnic-cohort homeownership rates are largely due not to changes in household variables, but to changes in how those variables translate into ownership.
(4) The gaps between white and corresponding nonwhite cohorts does not exhibit large changes over time, but a general rule is that such convergence that does exist takes place as households age. White cohort ownership rates are more divergent in their 20s and 30s.
(5) In the two decades 1980-2000, nonwhite households exhibited substantial convergence of endowment effects. Those household characteristics that translate into homeownership were exhibited relatively more by nonwhite households. If this had been all there was to homeownership increases, the gaps between white and nonwhite cohorts would have closed 10 to 15 percentage points over the 20 years. The residual effect cancelled out much of these gains.
(6) In the 1960 to 1980 period, the results strongly differed across cohorts and races; for older blacks, there was convergence due to both endowment and residual effects. We speculate, along with Collins and Margo (2001) that this was due to civil rights, but the cohort analysis indicates that this had no impact on younger black households. The results are similar for Asians (although the convergent endowment effect was not observed for the oldest cohort). The residual effects do not indicate convergence for Hispanics at any age during this period. (Coulson and Dalton, nd)
According to Nier (2010) it has been demonstrated by a great number of scholars that the existence of "…such a durable homeownership gap between African-Americans and whites, in large measure, is attributable to the nation's history of racial discrimination in the housing markets as exemplified by such practices as discriminatory zoning ordinances, racial steering, blockbusting, racially restrictive covenants, and physical violence." Nier however states that the largest of all obstacles to homeownership by African-Americans has been "the inability to obtain credit or the increased costs of obtaining credit for the purchase of a property." (2010) Indeed, it is reported that the discrimination of credit markets which has served to place limitations on the access to homeownership by African-Americans as well as serving to increase the cost of the achievement of homeownership for African-Americans. Nier reports that the subprime mortgage market is representative of "yet another example of the impact of the discriminatory allocation of credit upon African-American wealth accumulation. Such wealth impediments are a manifestation of historical process of discrimination and racism which have existed since the founding of the United States." (Nier, 2010) It has been stated by economist Andrew Brimmer as follows:
"[t]o a considerable extent [lack of wealth] can be traced to a long history of deprivation in this country. This means that blacks have had much less opportunity than whites to earn, save or inherit wealth. Because of this historical legacy, black families have had few opportunities to accumulate wealth and to pass it on to their descendants." (cited in Nier, 2010)
Homeownership is reported as having been "a crucial building block of middle-class wealth ever since Jefferson promoted land-tenure laws that favored freeholders and Lincoln signed the Homestead Act." (Wright, 2009) In fact, housing is presently representative of "two-thirds of all middle-class wealth." (Wright, 2009) The following chart shows the homeownership rates between the years of 1994 and 2008 by race and ethnicity.
Homeownership Rates 1994-2008
Source: Wright (2009)
The work of Williams (2004) entitled "African-American Homeownership and the Dream Deferred: A Disparate Impact Argument against the Use of Credit Scores in Homeownership Insurance Underwriting" states that the persisting questions is one that ask "…how is it possible that African-Americans continue to face disadvantages in housing when federal law prevents disparate treatment of Blacks in regards to housing?" According to Williams (2004) the answer "…is clear. Although there are many aspects of the law preventing the disparate and discriminatory…