Homeownership has long been pursued as a means to build generational wealth in the U.S., but it’s been far from a level playing field.
Black Americans have been systematically and intentionally discriminated against for generations at every step of the home buying process, resulting in a 30% Black homeownership gap. Conditions have only gotten worse despite the Fair Housing Act in 1968, signed into law by President Lyndon Johnson.
Following the Great Recession of 2008, the racial chasm widened to its highest level in 50 years, according to The Urban Institute, and 74% of White Americans now own their home, versus just 44% of Black Americans. The gap is largely led by differences in income, marital status and credit scores, markers which in and of themselves represent structural inequities. But 17% of the difference is “unexplained,” and likely representative of the “vestiges of policies that have made it difficult for Black households to obtain homes,” according to the Urban Institute researchers.
“We still live in a segregated society where people feel we should have racialized communities. Many people feel Black people will reduce the value of their home when Black people don’t do that, racism does,” says Andre Perry, Senior Fellow at the Brookings Institution’s Metropolitan Policy Program. “It gets to this very basic thing that people negatively view Black and brown Americans. They don’t want to live with us, go to school with us. That kind of discrimination is illogical and there is no room for it in a democracy.”
Thankfully, there are a growing number of individuals and institutions working to overhaul the status quo. We spoke to five changemakers in a range of disciplines to share their guidance for Black and brown homebuyers in today’s increasingly crowded market.
Their overarching advice is this: Assume racism will rear its ugly head at some point in the home buying process. Be aware and stay vigilant.
Angela V. McKnight, New Jersey Assemblywoman
Holding Appraisers More Accountable
It’s well-documented how some Black homeowners experience racial discrimination during their home appraisal. And while it goes against the Fair Housing Act to discriminate, there’s not much oversight of this law or guidance for how consumers can fight back.
Financial expert Tiffany Aliche shared her experience as a victim of appraisal discrimination. The first appraisal of her home in Newark, NJ came in at $390,000, which seemed oddly low to her. After reviewing comparable homes in the neighborhood with a realtor, it was estimated the first appraisal was undervalued by at least $30,000.
Change was needed on a wider scale. New Jersey Democratic Assemblywoman Angela V. McKnight, who is a friend of Aliche’s (together they created a financial literacy law for kids), created a bill that would allow the State Real Estate Appraiser Board to “revoke, suspend, or fine appraisers or appraisal management companies who knowingly engage in discriminatory appraisals of residential property on basis of race or national origin.”
The bill will not only hold the appraisal industry accountable, McKnight says, but would give consumers a playbook if they experience discrimination.
“We’re putting appraisers on notice,” says McKnight. “We’re saying that if you [discriminate], you will lose your license. We want to hit them where it hurts. What some of these appraisers are doing, they’re hurting Black and brown people from creating generational wealth for themselves and their loved ones. You’re taking money out of their mouth, so we’ll take it out of theirs,” she says.
McKnight’s Top Advice for Homebuyers
Always get a second appraisal and compare values. And you don’t have to go with the appraisal company that the bank recommends. Contact a Black or brown friend who recently had their home successfully appraised and consider working with the same firm.
McKnight also recommends asking a White friend to be present in the home during the appraisal. If that’s not possible, tell the appraiser that you hope they’ll be fair and give your home the value it deserves or that you will file a complaint and share the experience online. “Bring the issue to the forefront,” McKnight says.
Lisa Phillips, Founder of Affordable Real Estate Investments
Investing in Black Communities
While seeking a way to create additional revenue streams outside of her corporate career where she felt underpaid and overlooked, Lisa Phillips began investing in real estate. But as previously described on NextAdvisor, her strategy wasn’t typical.
Rather than zero in on up-and-coming markets where you can buy low and flip high, Phillips is pouring her money into the same neighborhoods in which she was raised: predominantly Black and brown, working class towns where you can find fixer-uppers for $30,000 or less. With smart and strategic upgrades, she’s proving it’s possible to turn properties into welcoming and safe homes. Her approach to these investments is buy-and-hold. “We’re not about gentrification or flipping,” she says. “I’d love to have the same renters for 30 or more years in my house.”
Phillips, who currently owns six properties, is teaching fellow minority professionals and middle-income workers how to begin investing with less capital. Her company Affordable Real Estate Investments provides training and her “Sub30K” Facebook community features over 12,500 members sharing secrets, tips, and resources.
Phillips recognizes that her approach isn’t a quick climb to riches, since part of the goal is to curb gentrification and fast-rising property values. But playing the long game pays off, she says, as renters make their payments on time and investors can turn a profit in lower-income neighborhoods. “Working class culture works,” she says. “My dad got up at 3 a.m. for work for 30 years … When you invest in the working class, you consistently get rewarded for it.”
Phillips’ Top Advice for Homebuyers
In addition to considering homes valued at $30,000 or less in minority communities, Phillips suggests leveraging social media to learn and stay connected. So much success in the investment world can be attributed to being “in the know” and benefiting from word of mouth to identify the best brokers, lenders, and appraisers in the market who won’t discriminate based on race.
Yemi Rose, Founder of OfColor
Creating Financial Wellness by and for People of Color
Per the Urban Institute study, 22% of the gap in homeownership between White and Black households can be attributed to credit score differences. More than 50% of White households have a FICO credit score above 700, compared to only 21% of Black households.
Your credit score is a major prerequisite when financing a mortgage and is heavily influenced by your payment history and debt-to-credit ratio, among other variables. Race isn’t technically an input in the algorithm, but can still play a role, despite efforts to make the calculation bias-free. As Washington Post columnist Michelle Singletary recently wrote, “Decades of discrimination in employment, lending policies, debt collection and even criminal prosecution have left Black families struggling to make ends meet.” All of that, she says, “dings credit scores.”
Yemi Rose built a company to combat this problem. After decades working in the financial services industry, Rose began his own business focused on helping large companies support their employees of color achieve financial wellness. He founded OfColor, a platform featuring relevant tools and resources for elevating one’s financial life. “We help users save automatically, and pay off student debt through roundups. We help them execute their plans for homeownership and their legacy through AI or with an advisor that looks like them. It’s all wrapped in content that teaches about money in a way that makes them feel seen,” says Rose, who immigrated to the U.S. from Jamaica over 20 years ago.
Rose’s Top Advice for Homebuyers
Once you’ve improved your credit score, Rose advises searching for rates at both local banks and more modern digital alternatives. “Going digital can reduce the rate for minority borrowers by about three basis points compared to a face-to-face process,” he says. “Don’t get me wrong, minority borrowers still pay more for credit than White borrowers with the same digital tools…and digital solutions can amplify bias quickly. But for now, doing this can help us save a bit. And it’s just another example of how people of color have to try to navigate bias on a daily basis.”
Andre Perry, Senior Fellow at the Brookings Institution’s Metropolitan Policy Program
Pushing for Policy Change
Andre Perry is an award-winning writer, academic, and activist whose work has largely centered around issues of race, structural inequality, and education. More recently, he’s been focusing on the impact of race on housing and real estate.
His book, Know Your Price: Valuing Black Lives and Property in America’s Black Cities, explores the deliberate devaluation of Black Americans and their communities, and the resulting negative economic and social impact.
A Brookings Institute report he co-authored in 2018 quantified the cost of racial bias in home ownership and the undervaluing of Black-owned and occupied homes in Black neighborhoods. The damage? A loss of $48,000 per home on average, or roughly $156 billion in cumulative losses. The report also found that metropolitan areas with greater devaluation of Black neighborhoods are more segregated and produce less upward mobility for Black children who grow up in those communities. “A home represents power in so many different ways,” says Perry. “Access to being able to own a home and a home’s value itself … it’s not just about material wealth. It’s about power.”
Perry’s mission is to end the excuse that conditions of Black neighborhoods are a direct result of the people who live in them. “How can we reframe this narrative to one that shows that policy is continuously robbing Black people of the opportunity to lift themselves up?” he says. Among his ideas for sweeping change and creating equity: new zoning ordinances, new loan products, new credit scoring systems, and new systems for measuring value in Black communities.
Perry’s Top Advice for Homebuyers
Know the ins and outs of how to respond to a potentially discriminatory experience. “Black and brown homebuyers should assume they’re being discriminated against. They need to pay particular attention to the real estate agent’s behavior, the lending terms, the interest rates, as well as appraisals. Within those major buckets, find an advocate who can help you if you get a sense you’re being discriminated against,” says Perry. He recommends contacting a local Fair Housing Center for more help.
Fee Gentry, Board of Director, eXP World Holdings
Raising Awareness Among Agents
Success in the home buying process can often be linked to working with a trusted and experienced real estate agent. Fee Gentry, an agent based in Austin, Texas, is on a mission to help eliminate bias and increase equity within the global real estate industry and train fellow real estate professionals on how to be more socially aware. Gentry serves as the nation’s first Black woman to sit on the Board of Directors for a publicly-traded real estate company, eXp World Holdings. She is the founder of the Black eXp Network, which includes nearly 3,000 Black agents, staff, and allies that support and serve agents working with Black consumers.
She is also the co-creator of the Agent Accelerator Academy, a 60-day business transformation course on how to work with communities of color. “A lot of it is mindset work,” she says. “There are some Black real estate agents who believe the color of their skin is a disservice to clients. And we have White agents who aren’t sure how to tell their Black clients that they got denied a home because they’re Black” — which happens more often than you might think, she says. Her team also works with local real estate groups across the country to help them with their diversity and inclusion programs.
Gentry’s Top Advice for Homebuyers
Look out for steering or pre-screening attempts by discriminating agents. “If an agent asks for forms of ID or a pre-approval letter ahead of time, or uses racially charged words,” say something, says Gentry. When interviewing brokers, ask the hard questions: Have you worked with someone who looks like me? How would you advocate for me if there was a house we really wanted in an area that historically does not have people who look like me? What kind of support can we expect from you?