Black homeowners pay more than white residents to buy a home and face other financial challenges exacerbated by the COVID-19 pandemic. This was the result of a new report.
Black homeowners pay more than white residents to buy a home in New York City and face other financial challenges exacerbated by the COVID-19 pandemic. This was the result of a new report.
The Center for NYC Neighborhoods surveyed dozens of homeowners, housing consultants, and program practitioners last year to understand and solve some of the challenges facing black home ownership, which has declined 13 percent in the city over the past two decades and is suffering from the pandemic has deteriorated, the group says. The results of the report are part of the research carried out by the Black home ownership project, an initiative founded by the Center to study how the 2008 foreclosure crisis and systemic problems affected black homeowners. Work on the survey began in 2019, before the pandemic broke out.
The new insights show that the average black homebuyer in the city pays $ 7,000 more in closing costs and higher interest rates compared to white buyers. The results showed this pattern of higher costs for both conventional mortgages, which require a buyer to have a certain percentage of a down payment and good credit to qualify, and the Federal Housing Administration (FHA) mortgage loan – federal government insured loans Coming from Approved Lenders where a buyer may qualify for a mortgage even with lower creditworthiness and down payment, but will face a higher interest rate and insurance on that loan. However, the Center for NYC Neighborhoods says the racial discrepancy cannot be explained by the nature of the loan alone.
“We know that people who take out FHA loans are likely to pay more because an FHA loan is by definition more expensive. However, we were surprised to see that the pattern also applies to conventional loans, ”said Ivy Perez, the group’s policy and research manager.
Typically, one of the reasons black homebuyers pay more closing costs is because of lower credit scores or lower down payment support, says Perez. However, during their research, they found that these typical factors weren’t always the case – some higher-income homebuyers were still paying more, according to Perez. However, without access to details of the loan application, the center could not definitively determine whether or not discriminatory practices were involved.
“Perhaps it could be as simple as a mortgage broker telling you to take out an FHA loan even though you qualify for a conventional loan because you are a colored person and five colored people have just walked in and taken out FHA loans to have. and maybe you steer them in that direction, ”she says. “So we can’t answer why it’s happening, but it’s alarming and it’s happening on all of these different types of credit and not just where we expect it to.”
Previous results from the Center for NYC Neighborhoods reported that the number of black homeowners in New York has declined 13 percent over the past two decades due to a combination of existing system problems, the effects of the 2008 foreclosure crisis, and rising prices.
Black home buyers face different challenges: Of the dozen interviewed for the survey, an estimated 80 percent said they had difficulty financing home repairs and finding trusted contractors to maintain their homes.
The Center for NYC Neighborhoods used the research to create five recommended pilot programs that address some of the challenges black homeowners face. The center would like to create a Down Payment Support Navigator – a digital resource for prospective buyers and pre-purchase advisors that could aid the credit process and connect prospective buyers to existing lender resources. Another proposed pilot called the Savings Accelerator would be a coordinated savings program to help potential and existing homeowners with their funding goals.
The center also aims to address the challenges many landlords face, for example in Southeast Queens, where there are many single- and two-family homes. They suggest supporting these small landlords through a homeowner rental service that would help connect property owners with city agencies, trusted lenders, and contractors for repairs and support, and help them maintain affordable rents and find tenants.
Another program recommendation, called Generation 2 Generation Estate Planning, would help black homeowners maintain their intergenerational wealth by protecting their wealth from theft, robbery, tax liens and other inherited debts through estate planning services and community engagement. The center also aims to create more opportunities for tenants to become homeowners through a program called Pathways to Tenant Purchase, which supports the creation of cooperatives and services that help convert a tenant home into a cooperative with limited equity.