CRL on Harvard report: Inequality in housing harms economic growth

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By Charlene Crowell

Recently Harvard University’s Joint Center for Housing Studies (JCHS) released its annual report, The State of the Nation’s Housing 2018. Published annually since 1988, this year’s report again identifies trends and changes in housing.  Key to this year’s findings are:

  • A growing income inequality where the cost of housing has outpaced growth in income, particularly for young and lower-income households;
  • A persistent and worsening racial gap in homeownership, especially between Black and white consumers; and
  • The burgeoning impacts of the nation’s still-growing student loan debt that delays the creation of new households, hitting millennials the hardest.

In response to these and other findings, Nikitra Bailey an Executive Vice President with the Center for Responsible Lending made the following statement:

“This report is a wake-up call for policymakers to grasp that the housing sector has yet to fully recover. While many economic metrics have shown steady improvements over the past decade, both rental housing and homeownership opportunity continue to lag for people of color and low-to-moderate income families.

“Stagnant wages harm these consumers and the economy overall as one-third of consumers are paying more than 30 percent of their incomes for housing – homeowners and renters alike. According to the annual report, 11 million households now pay more than half of their income for housing. Geographically, America’s Western states are home to many of the most severely cost-burdened households.

“Another significant JCHS finding is that differences in rates of homeownership continue to be wide for people of color and whites, especially African-Americans. While both Hispanic and Asian-Americans experienced respective homeownership gains of 5.7 percent and 7.1 percent, a 29 percent gap between whites and African-Americans remains stark. In 2017, 40.4 percent of African-American families were homeowners, while the measure for white families stands at 72.3 percent.

“Expanding access to mortgage credit for communities of color in general, and African-Americans in particular, will greatly reduce these racial disparities in homeownership. CRL’s research shows that current excessive risk-based pricing makes mortgage loans unaffordable for lower-wealth consumers. As lawmakers continue to deliberate the future of government-sponsored enterprises (GSEs), ensuring that the mortgage market serves all credit-worthy borrowers will be essential to closing this persistent gap. Stronger enforcement of the Fair Housing Act, Equal Credit Opportunity Act, and resuming HUD’s Affirmatively Furthering Fair Housing Rule would both alleviate these challenges and enable growth in underserved communities.

“With the cost of home prices rising 6.2 percent last year, millennials and other consumers burdened with $1.5 trillion in student loan debt will be further challenged to make a transition from renting to homeownership. More should be done to rein in for-profit colleges that leave students with high levels of debt and poor job prospects. In addition, improving loan servicing and income-based repayment for more students would facilitate access to wealth-building through homeownership and help the overall economy.

“When all families succeed, their neighborhoods and communities become places of opportunity and the nation is strengthened.”

Charlene Crowell is the Center for Responsible Lending’s Communications Deputy Director. She can be reached at charlene.crowell@responsiblelending.org.

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