Home ownership is one of the key components in creating generational wealth. With a history of racist politics – from lack of access to home loan credit to redlining districts – black homeowners face their own hurdles to securing a new home. A study conducted by the Massachusetts Institute of Technology (MIT) shows that new evidence suggests that blacks are paying more than $ 13,000 more for their homes compared to their white counterparts.
The MIT study, The Unequal Cost of Black Homeownership, found that black homeowners pay higher mortgage rates, higher mortgage insurance rates, and higher property taxes as they arise.
The data shows that the interest expense for black home loan buyers was $ 250 more per year, resulting in a loss of over $ 11,000 in retirement assets compared to their white counterparts. With black homeowners having less access to affordable refinancing options, black homeowners paid an average of $ 475 more per year than white homeowners, resulting in a loss of nearly $ 20,000 in retirement assets.
In addition, the study cites higher property taxes and the additional burden on black residents that white residents do not face. "The authors identify large tax assessment areas and an appeal process that tends to benefit white homeowners as the predominant factors that result in a higher relative property tax burden for black homeowners," the study said. "They suggest that a smaller scoring area, one at the postcode level, would reduce racial inequality in real estate tax valuation by at least 55-70%."
The study also concluded that during times of economic downturn, black homeowners were more likely to feel the effects than their white counterparts. "These capital standards mean that black homeowners must avoid a repeat of the great 2008 recession, even though black homeowners were primarily victims of the crisis, not its cause," the study added.
"Even so, black homeowners are paying more for their mortgages due to the financial recovery because lenders have committed misdeeds and policymakers failed to stop bad credit and prevent unnecessary foreclosures."