Black homeowners turned down twice as often by Illinois lenders, even amid historic low interest rates (Chicago, IL) — After the Federal Reserve slashed interest rates in 2020 to their lowest level in a decade, families across the country jumped at the chance to realize their dream of homelessness. the property. While these dramatic rate cuts were intended to soften the economic blow of COVID-19, recent data shows they have brought little relief to black and brown communities who have been hardest hit by the pandemic.
According to data from the Woodstock Institute, Black buyers and owners in Illinois were turned down twice as often by lenders for purchase, rehabilitation and refinance loans as their white counterparts at the start of the pandemic. Latino applicants were also denied loans 1.5 times more often than white applicants across all categories. The data also shows that these racial disparities exist regardless of the borrower’s income level and down payment amount.
The disparities were particularly stark for home improvement loan applications, where more than 64% of black applicants were denied while 47% of white applicants were approved. Without home improvement capital, many homeowners cannot make the necessary upgrades to keep their home safe and increase its value over time.
Studies have shown that homeownership is still the number one tool for creating wealth in the United States today, and that the growing racial homeownership gap is a key driver of the racial wealth gap. Up to 70% of a family’s net worth is tied to their home. However, racial disparities in mortgage lending have resulted in a troubling gap in homeownership rates. Only 39% of black families and 53% of Latino families own their homes, compared to 75% of white families in our state. As a result, the typical black household has a net worth of just $17,000, compared to $171,000 for white families.
“These alarming disparities persist because of systemic racism in the mortgage system,” said Anthony Simpkins, president and CEO of Neighborhood Housing Services of Chicago (NHS), a nonprofit mortgage lender and health organization. affordable home ownership serving the Chicagoland area. He continued: “The result is that many black and brown families continue to pay rent instead of building equity, even though most could be homeowners for the same amount they pay in rent or less. Any true commitment to racial equity, economic equity, and closing the racial wealth gap must include dramatically expanding access to affordable homeownership for Black and Brown Americans.
Local advocates see solutions on the horizon but fear that without prompt action, many of the disproportionate impacts of the pandemic will be felt permanently. “It’s time for state and local leaders to take action and help close the racial homeownership gap that has been exacerbated by this pandemic,” said Kevin Jackson, executive director of the Chicago Rehab Network (CRN). CRN is a non-profit organization that advocates for policy change on issues of affordable housing and community development. He continued, “A targeted injection of public funds would allow our local not-for-profit lenders and developers to address these disparities that the private market fails to address. Every day that we do not act, more and more families fall through the cracks.
Black homeowners turned down twice as often by Illinois lenders, even amid historic low interest rates