It’s a problem for many who are struggling to buy a home, but the way that the rising prices intersect with the Twin Cities’ existing racial inequalities makes the problem much worse. During the last few years, the Twin Cities has become known for having the largest racial inequalities in the country (depending on how you measure it). A great deal of the problem stems from the unequal access to homeownership and everything that goes along with that.
That is one reason why, last month, the Met Council released a report aimed at debunking common narratives about the region’s homeownership gap, attempting to focus attention on the broader structural problems around housing markets. If trends in housing affordability continue, the problem is only going to get worse.
Waving the statistical magic wand
For at least 10 years, researchers from institutions around Minnesota have been trying to better understand the causes behind the homeownership gap. But the previous reports, like the Met Council’s “Choice, Place and Opportunity” report or the Minneapolis Fed studies from 10 years ago, haven’t always had the desired effect. According to the Met Council research team, these gaps are often dismissed as temporary, part of the problem with “emerging markets” of homeownership. Skeptics point to age or language differences and suggest they will gradually disappear over time.
“When we reported on disparities by race and income, people in comments sections immediately turned to say, ‘well once communities of color have been in this country longer, the disparities will go away,’” Libby Starling, a research manager for the Met Council, told me. “People sometimes claim that once they match the white age distribution, the disparities will go away. We were looking to measure the contribution of these demographic differences, and how much of the gap we could explain. But what’s left isn’t explained by these differences.”
The research — much of which is over my head — involves running regression analyses to factor out demographic differences between ethnic and racial groups. The study looks at seemingly every possible combination of factors, everything from educational attainment (categories like high school diploma, associates degree, college degree) to foreign-born status to language to income to age to gender. The result is what Met Council number cruncher Matt Schroeder calls “waving a magic wand” in an attempt to see what might happen if communities of color had the same income, age and educational profile as the region’s white households.
The results are not encouraging. The gap in homeownership stubbornly remains.
“I spent a number of years as deputy director of civil rights in Minnesota, working on both class- and individual discrimination complaints. This is a prima facie case that discrimination is occurring in the marketplace,” Met Council Member Gary Cunningham said at a press conference last month. “Basically it says, hey if black education were the same, on down the list of factors, there would still be a disparity.”
If not demographics, then what?
Cunningham argues that housing, banking and Twin Cities’ geography seem to “work together” to produce an outcome that’s deeply and persistently unequal, where white people gain advantage seemingly without realizing it.
And the problem exceeds the traditional economic solutions, for things like income, education and credit scores. While those remain critical factors, there’s something about the cultural production of housing in Minnesota that excludes a big slice of society.
“Income and education are definitely prime movers and shakers in this disparity, but there are other things too,” Ed Nelson, communications manager for the Minnesota Homeownership Center, a housing nonprofit, told me this week.
Nelson points to three more subtle causes for the homeownership gap that transcend the underlying economics.
“The first is knowledge and comfort with the buying and lending processes. Few communities of color have family members with experience in the buying process, people who they can turn to learn about home ownership. Black households are much less likely to initiate a mortgage application on their own because they have the expectation that their application would be denied or be treated unfairly,” Nelson said.
(Given that people of color pay higher interest rates than white buyers, this suspicion seems warranted. But that doesn’t make it less problematic.)
The other factors Nelson describes include age: Communities of color are often much younger than white households. Yet an “age gap” remains around when people purchase homes in the Twin Cities. According to the Minnesota Homeownership Center’s research, the average age at which people buy homes depends on race.
“Approximately 30 percent of white households purchase their first home after the age of 35,” Nelson told me. “But 52 percent of African-Americans buy their first home after 35 and 45 percent of Latino households buy after 35. So while some of the issue is that communities themselves are younger, it generally takes our communities of color longer to age into when they purchase a first home as well.”
The intergenerational wealth gap
Of all the factors behind the scenes of the homeownership gap, the one that seems the most significant and pervasive is the wealth gap between the white and nonwhite families.
“After World War II, the GI bill allowed many white Veterans to enter home ownership,” Libby Starling told me. “But it did not allow African-American renters that same privilege. When you think through home ownership as a way of wealth formation, you accumulate wealth through the value of the home. White households 40, 50, 60 years ago were building up a foundation of wealth, but black or African-American households did not have that opportunity. Nationally, the average wealth of white households is over $100,000, but the average for a black household is something like $5,000.”
This disparity rings true for Nelson, as well. Compared to communities of color, white homebuyers often turn to family members for help when buying a home.
“It’s what we refer to as generations of wealth,” Nelson told me. “White buyers are four times more likely to receive down payment assistance from a parent or relative than communities of color. Our focus group participants [from a recent study] discussing this issue also added that the culture of teaching children about money management and savings is less integrated for families from communities of color.”
For example, Nelson describes how some immigrant communities come from areas of the world with unstable banking systems, or often deal in cash for work and employment. Both of these factors make people less likely to get involved with or have trust in the U.S. mortgage and lending systems.
The long legacy of racism and housing
One of the great untold stories in both the Twin Cities and the Midwest is how housing policy worked almost systematically to create today’s unequal landscape. The combination of redlining, lending and racism is just one piece of the puzzle. Zoning codes, affordable housing and outright violence also played a role.
Two stories illustrate this history: The first is the Arthur Lee house, in South Minneapolis, where a white mob formed when a black family moved into the Field neighborhood in 1931. Another similar tale is Thomas Sugrue’s amazing book on housing policy, economics, and racial violence in Detroit, where white homeowners, realtors, and public policy worked to keep the benefits of home ownership in few hands.
It’s not difficult to understand that there’s a connection. As clichés about the “American dream” reveal, so much of our collective sense of identity and prosperity revolves around our houses. The connection between Minnesotans and their houses is a deep and emotional one.
But in the Twin Cities, it’s also largely a white relationship. The economic role that homeownership plays as an inter-generational asset profoundly shapes the social and economic landscape of the Twin Cities. The Met Council report suggests that the legacy of Twin Cities housing inequality has a long tail, that the racism that was inherent in the housing market in the ’50s and ’60s still plays a role in today’s urban landscape.
“We know there’s a giant disparity between white and nonwhite homeownership in Minnesota,” Ed Nelson explained. “And nonwhite populations are growing much faster than the overall white population. As these groups are growing, if we don’t fundamentally change something about these homeownership rates, the gap is only going to get larger.”
Even under a rosy political scenario where policy-makers could somehow equalize income and education for people of color, there would still be a deep gap around race and opportunity. It reminds me of the trope about the difference between justice and equality. To tackle the region’s inequality will involve something more remunerative than good schools and fair wages. Economic equality would be a good start, but housing justice remains a larger challenge.