Why owning a home in America is so hard

Jeremy Ney
7 min readJul 31, 2023

And what we can do to make it easier to supply, apply, and buy homes

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Over the last 2 years, home prices have increased 45%, putting homeownership out of reach for millions of Americans. Home prices are at historic highs.

But the story of homeownership in America really depends on neighborhoods. We don’t need to look much further than the country’s history of redlining to understand this. In particular, price increases have not been distributed equally across the country and seem to be negatively impacting some communities more than others.

No region shows this more clearly than the Bronx in NYC. The Bronx has the lowest rate of homeownership in America, with just 19% of residents owning their homes. New York overall is the state with the lowest rate of homeownership at 53%.

We’ve written extensively about inequality in the Bronx. For example, the region has the highest childcare expenses in the country, has one of the highest costs of living, and has much higher rates of unemployment than the rest of the country.

📍The regions around the Mississippi river also have some of the lowest rates of homeownership. Across 5 states — Louisiana, Mississippi, Arkansas, Tennessee, and Missouri — all the way up to Kentucky, nearly every county along the river has a homeownership rate far below the national average. Most of these counties are majority-Black communities.

Powhatan County, VA has the highest rate of homeownership in America at 90%. The median income in Powhatan is $93,833, 33% higher than the national average, and the region is 85% White. The median property value is $291,300 and grows at about 4% each year.

Economic reality: Buying a home is hard

With rising prices and rising rates, it has become even less affordable to purchase a home. Homeowners taking out a mortgage now will need to pay on average 84% more than if they had purchased that same house two years ago.

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Homeownership peaked in April 2020 with 68% of Americans owning homes. These levels hadn’t been seen since the lead up to the 2008 financial crisis. But homeownership tanked after the financial crisis and fell to a low of 63% in April 2016, a level not seen since July 1965.

In the last 2 years, homeownership has fallen 3%.

Renting is often more expensive than homeownership. As Mathew Desmond explains in his new book, Poverty, by America, “In 2019, the median renter in Louisville, Kentucky paid $900 a month in rent and insurance, while housing costs for the median homeowner were $573 a month, including mortgage payments, insurance, and property taxes.”

Demographics are a driving factor of homeownership

Black homeownership is often half that of White homeownership or White employment. The most recent data shows there is 29.6 percentage point gap between Black and White homeownership, a greater divide than was present in January 1994, the first year that race-based data was collected by the Federal Reserve (the gap was 27.7 then).

Explore the chart

In January 2000, the Black-White homeownership gap was at its narrowest level, but by October 2021 it had grown to the widest it had been in 30 years. 43.1% of Black Americans owned their home compared to 74.4% of White Americans who owned their homes.

Latinx homeownership is actually at some of highest levels ever and recently peaked above 50% for the first time. It has now fallen back to its 2010 levels.

Despite the laws of the 1968 Fair Housing Act, Black Americans still face repeated discrimination in trying to become homeowners. 15% of Black applicants are denied mortgages while only 6% of White applicants are denied. Even when loans do get approved, Black applicants are forced to take out high interest loans at 3x higher rates than their White peers. Black women have seen some gains in the past two years, but challenges persist.

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Even when Black Americans overcome the tremendous barriers to buying, selling a home can be a nightmare. Research from the Brookings Institute found “homes in Black neighborhoods are valued roughly 21% to 23% below what their valuations would be in non-Black neighborhoods.” They find that 1 in 20 homes in Black neighborhoods is under-appraised, costing Black homeowners about $156 billion in cumulative losses.

Abena and Alex Horton tried to sell their house. Once Abena hid any trace of being a Black homeowner, the value increased 40%. Source — NYTImes

When Abena and Alex Horton wanted to sell their house in Jacksonville, FL, they were first appraised at $330,000. Abena, who is Black, suspected discrimination. The couple had a new appraiser come in, but beforehand hid all of their family photos, all of their books by Toni Morrison, and instead hung up oil paints of Alex and his family, who are White. The new appraiser gave their home a value of $465,000–40% more than the first appraisal. Stephen Richmond, an aerospace engineer in Hartford, CT had a White neighbor stand in for him during an appraisal and similarly saw a $40,000 bump in value.

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Maura Sweeney, an appraiser in Chicago, wrote the following letter to a congressional subcommittee after they heard testimony on bias in homeownership in America:

“Is there a problem with poor and underserved communities in the United States? Yes. Is it the appraisal profession’s fault? No. It’s like blaming the canary for the bad air in the coal mine, or blaming the mirror for your bad hair day. Appraisers reflect the market; we do not create it.”

While Maura may be right that the problems run much deeper than the appraisers or the brokers involved, we cannot neglect the responsibility that each of has to turn the tide. As we have said time and again, inequality happens in communities. Systems exist that hamper opportunity, but individuals and neighborhoods and institutions can enforce those systems or build new ones that open up doors instead.

The Path Forward

At American Inequality, we recommend 3 steps for improving homeownership and inequality in America that covers the whole range of activities — supply, apply, and buy. First, let’s increase the inventory of affordable homes and make it easier to supply; next, let’s improve the credit scoring process and make it easier to apply; and lastly let’s expand federal loan programs and make it easier to buy.

  • [Supply] 🏠 Increase the fair share of affordable housing 75% of housing in U.S. urban areas is reserved for stand-alone single family homes. New Jersey has been leading the way in creating more affordable housing. The NJ Supreme Court not only prohibited exclusionary zoning, but they also required that all the municipalities in the state provide their “fair share” of affordable housing. This has led more than 340 towns to develop more affordable housing, which has allowed the state to create thousands of affordable units without the state or federal government having to spend a cent.
  • [Apply] 🔖 Include rent payments in credit scores — Most Americans rent before they buy. But rent is not included in your credit score unless your landlord specifically opts your building into sharing this data with credit bureaus like Experian and Equifax. In a sample of 300,000 residents, 8% of them had no credit score and then were able to get a score of 635 after opting their rent payments in, and 23% of the population who were subprime saw their scores increase by 13 points. We’ve written about several other ways to improve credit scores and inequality.
  • [Buy] 🏦 Expand 502 Direct Loans — Banks earn more money on larger loans and so do not always have the incentive to help lower-income families purchase lower value homes. But the USDA’s 502 Direct Loans Program assists low-income families to purchase homes by covering the entire cost of the mortgage, providing low-interest rates, and guaranteeing the entire loan. This program is only for rural America but could be expanded to other regions. In particular, in 2021 the average 502 Direct Loan was $187,181 but only cost the government $10,370. Expanding this program to include non-rural regions could be a cost effective way to improve homeownership in America.

Nearly 80 years ago, FDR proclaimed that “America is a nation of homeowners” and 150 years before that, Hamilton, Jefferson, and Madison argued that “The right to procure property and to use it for one’s own enjoyment is essential to the freedom of every person.” But this declaration that homeownership and property is interwoven in the American fabric seems to be coming undone. Specific programs to improve homeownership like those mentioned above can make it easier to supply, apply, and buy.

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Jeremy Ney

Former Federal Reserve policymaker, currently at Google, now writing about inequality at AmericanInequality.substack.com