Gap between Black and white renters who were mortgage ready narrowed during the pandemic

The gap between Black and white renter families that could afford a mortgage narrowed significantly during the COVID-19 pandemic, according to a Zillow report released Friday.

About 7.8% of Black renter families earned enough income in 2022 to afford a mortgage with a 3% down payment, compared to 12.5% of white families that year — representing a gap of 4.7 percentage points. 

The gap narrowed significantly since 2012, when it stood at 7.9 percentage points, Zillow reported.

While higher mortgage rates and elevated home prices affected affordability for everyone, regardless of race, the median household income for Black renters rose more than for white renters since 2012.

About 13.3% of Black renter families in Detroit were making enough income to comfortably afford a mortgage, the highest share among the 50 largest metro areas in the country. It was followed by Memphis, Tennessee (12.8%); St. Louis (12%); Houston (11.6%); and Cleveland (11.2%). 

While home values are relatively lower in these communities and more Black families can afford the typical mortgage payment, access to homeownership remains a challenge.

In particular, a notable homeownership gap and disproportionate rate of mortgage denials persist, suggesting that other barriers unrelated to income are impeding Black families’ access to homeownership.

Nationally, white households boast a 73% homeownership rate, while Black households lag far behind at 44%. And the typical home owned by a white family is still worth far more than the typical home owned by a Black family, the report pointed out.

Although there has been incremental progress in narrowing the home value gap, it still exceeds 10 percentage points in 42 of the 50 largest metros.

Discriminatory lending practices and higher denial rates for Black mortgage applicants, coupled with credit history issues, also pose challenges to housing equity. 

In 2022, Black applicants saw a 146% higher mortgage denial rate compared to white applicants, potentially hindering future generational wealth transfers. Credit history was the most common reason cited for these denials.

Related More:

• 30-Year Fixed Mortgage
• Black Homeownership
• Zillow