Racial homeownership gap persists in Philly metro, analysis finds

The homeownership gap between Black and white Philadelphians persists despite an uptick in the number of Black renters who are able to afford a mortgage, according to real estate giant Zillow.

The finding suggests the metro’s homeownership gap is the result of systemic roadblocks that go beyond income, according to a report released last week. For example, lenders tend to deny more Black applicants seeking mortgage loans, often due to factors related to credit and debt. Black renters also tend to have less access to generational wealth, in part because of the racial homeownership gap.

Senior economist Orphe Divounguy said parents of Black renters are less likely to own a home than their white counterparts, meaning they’re unable to extract equity to help their children with a down payment — what he calls the “Bank of Mom and Dad.”

“We know that transfers from parents to children have had a tremendous impact on helping these young people access that first rung of the homeownership ladder. And so, Black families are at a disadvantage. And so, closing that gap means supporting them, giving them access to down payment assistance programs,” said Divounguy, who authored the report.

In 2022, the homeownership rate among white families in the Philadelphia metro was 75.3% compared to 48.2% for Black families, the report said. The rates nearly mirror the national homeownership split between Black and white families and have remained effectively unchanged since 2012, said Divounguy.

At the same time, Black-owned homes are typically valued 28.3% lower than homes with white owners, according to the report, meaning there may be less equity to draw on for a loan. The typical Black-owned home in the metro is worth $261,041, compared to $364,028 for a white-owned home.

The high mortgage rates seen over the last few years, which have contributed to an inventory crisis and put pressure on home values, did not disproportionately impact Black renter households seeking to buy, Divounguy said.

“What I think surprises me the most is the fact that, over time, we’re not seeing an increase in Black homeownership, even during the pandemic when we saw a lot of flows into homeownership,” said Divounguy.

A 2021 report by the Federal Reserve Bank of Philadelphia revealed that lenders offering conventional mortgage loans continued to favor white applicants over Black applicants. Black mortgage applicants in Philadelphia were nearly three times more likely to be denied by lenders than white applicants in 2020, according to the study.

Nearly 30% of rejected Black applicants were denied because of their credit history. By comparison, only 16% of denied white applicants were rejected for the same reason. Researchers also traced the disparity to low credit scores, debt-to-income ratio, and the lingering impacts of redlining. The discriminatory practice dates back to the 1930s and saw mortgage lenders deny loan requests based on race.