A new interactive tool from the Urban Institute taps Census Bureau data to compare housing wealth equity in cities across America — disparities in homeownership rates, home values and the distribution of housing wealth — by race and ethnicity.

The tool, and an accompanying Urban Institute report, analyze aggregate housing wealth to “uncover the drivers of racial and ethnic housing gaps,” allowing anyone to see how housing wealth is distributed where they live.

In the report, Urban Institute researchers Michael Neal and Caitlin Young determined that households of color own only a quarter of the nation’s $26 trillion in primary-residence housing wealth, even though they represent a third of households.

The report attributes disparities in homeownership to lagging income, credit scores and educational attainment among Black and Hispanic households in particular.

Racial disparities in home values could be partly attributed to household, property and neighborhood characteristics like homeowner age, home sizes and school quality, the report concluded.

“Yet even after controlling for (those characteristics), Black households, Hispanic households, and other households of color (such as Native American and multiracial households) still have lower-valued homes than white households,” the report said.

After detailing the role that racist and discriminatory policies have historically played in reducing housing wealth for households of color, the report notes that racist housing policies and practices continue today.

“Although the passage of the Fair Housing Act in 1968 outlawed redlining, mortgage lending is often still concentrated in majority-white neighborhoods relative to neighborhoods of color,” the report said. “Racial and ethnic discrimination has contributed to disparities in creditworthiness among homebuyers of color. Appraisers continue to undervalue homes in neighborhoods where most residents are people of color, and real estate agents continue to steer homebuyers of color into less desirable neighborhoods.”

A recent analysis of 12 million appraisals by mortgage giant Freddie Mac found an “appraisal gap” in minority enclaves, adding statistical weight to media reports and legal complaints by individual homeowners who have claimed they were discriminated against by biased appraisers who undervalued their properties.

Another recent study commissioned by Illinois Realtors concluded that more than 8,000 African American borrowers were denied a mortgage in the state in 2019 due to racial disparities in appraisals.

The Illinois Realtors’ Discriminatory Appraisal Task Force recommends that Realtors report evidence of negligence or discrimination to lenders in writing. The Appraisal Subcommittee also operates an Appraisal Complaint National Hotline which can refer complaints to federal or state authorities for investigation.

Another review of 2.4 million purchase loan applications by The Markup, a nonprofit newsroom, concluded that mortgage lenders are more likely to turn down homebuyers of color than white applicants with similar debt-to-income and loan-to-value ratios, and that algorithms are likely to blame. (The American Enterprise Institute has disputed The Markup’s analysis, saying that if credit scores are considered, racial disparities “disappear.”)

Lenders who rely on artificial intelligence and algorithms could face new legal risks if the Department of Housing and Urban Development follows through on plans to rescind broad protections for lenders who unintentionally discriminate against minority borrowers.

Fannie Mae and Freddie Mac’s federal regulator has ordered the mortgage giants to submit plans by the end of the year “identifying the barriers to equitable and sustainable housing finance opportunities and setting goals for addressing those barriers.”

The Urban Institute’s housing wealth equity tool focuses on cities instead of metropolitan areas “because households of color are more likely to account for the majority of the population at the city level,” its creators said. Only incorporated cities were analyzed, with census-designated places excluded “because they lack a municipal government that can adopt policies that support economic growth or inclusion.”

Screenshot of Urban Institute interactive tool, “Tracking Homeownership Wealth Gaps.”

The tool’s analysis of housing wealth equity in Atlanta, Georgia, calculates that Black households make up 44.3 percent of households in the city but own 17.4 percent of the housing wealth.

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Email Matt Carter

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