Mortgage denial rates remain shockingly unequal across racial lines

by Peter Thomas Ricci

homes-houses-at-night-suburb-town-community-real-estate

The mortgage denial disparity remains as wide as ever across racial lines, and it’s especially pronounced here in Metro Atlanta, according to new Zillow analysis of Home Mortgage Disclosure Act data.

The numbers are hardly encouraging: although mortgage applicants in the ATL are denied at a lower rate than the national averages, the racial inequality is sharply defined. While white applicants are denied only 7.1 percent of the time, Asian applicants are denied 9.6 percent, while Black and Hispanic applicants are denied 18.9 and 13.1 percent of the time.

Racial disparities in real estate

To be fair, Metro Atlanta is hardly alone in its racially unequal housing market. According to Zillow’s analysis, Black mortgage applicants are denied at more than twice the rate of white applicants, while Hispanic applicants are denied 70 percent more. And those divergences are hardly recent developments – Zillow noted that the homeownership gap between Black and white households is as wide in 2016 as it has been for the past century.

As our Chicago Agent publication detailed in its cover story “A Black and White City, the history behind today’s housing disparities runs deep and wide, encompassing housing policies at the local, state and federal level. Whether it was restrictive racial covenants that prohibited Black homeowners from buying property in certain areas, which thereby forced them into increasingly crowded, neglected neighborhoods; FHA policies that prohibited banks and homebuilders from lending to Black prospective homebuyers; opportunist real estate professionals who sold Black homebuyers properties “on contract” at inflated prices and under overly-strict terms; slum lords who purchased apartment buildings on the cheap from fleeing white owners and refused any maintenance or renovation to the new tenants; or “urban renewal” policies that displaced hundreds of Black residents – all those collective housing policies conspired to create today’s housing/economic disparities, as Dearborn REALTIST Board President Tracey Taylor explained.

“Those unlawful practices are still impacting African Americans today,” Taylor said. “Decades of systemic bias and unlawful real estate business practices have denied us the right then and, to a certain extent, continues to do so today. When you have a property that is equal distance to downtown Chicago, but the values are not equal, there is a huge disparity. Property valuation is key in determining the worth and economic development potential in a given neighborhood. If the playing field is not level, it’s an economically devastating loss for that community.”

See our chart below on mortgage denial rates to see the nationwide impact of those practices:

Metro Area All Applicants Asian Applicants Black Applicants Hispanic Applicants White Applicants
Atlanta 9.6% 9.6% 18.9% 13.1% 7.1%
Boston 7.0% 7.9% 17.2% 14.9% 6.0%
Chicago 9.7% 10.7% 24.7% 18.6% 7.6%
Denver 6.7% 8.2% 13.3% 10.3% 5.7%
Houston 9.9% 12.0% 17.7% 14.6% 6.9%
Los Angeles 11.0% 11.1% 16.6% 12.9% 9.9%
Miami 18.1% 18.7% 25.9% 20.4% 13.9%
New York 12.8% 13.8% 24.0% 19.7% 10.5%
Philadelphia 8.2% 11.4% 20.2% 13.8% 6.3%
Phoenix 9.5% 9.9% 16.8% 13.2% 8.3%
San Francisco 8.5% 10.2% 17.6% 13.1% 6.6%
Seattle 8.1% 9.8% 19.2% 11.8% 7.2%
U.S. Average 10.4% 11.1% 22.4% 17.3% 8.7%