What IS housing discrimination?
How will you know when it’s happening to you?
Is it a legal issue, something you can take action against?
How is it likely to affect your family’s future?
Is it something you can stop, and if you decide to report it, how do you do that?
Read on for answers to those questions and take a look at our infographic for a quick view of housing discrimination.
Defining “Housing Discrimination” by the Law.
Housing discrimination is essentially any discrimination related to housing or home ownership that is based on protected class status, which includes ethnicity and race, as well as religion, age, national origin, and sexual orientation. It refers to discriminatory practices that play out in the realms of renting, home sales, lending, mortgage, and homeowner’s insurance.
Within this, there is “exclusionary” discrimination, which keeps people from gaining a housing arrangement, and “nonexclusionary,” which occurs within an already established housing arrangement (for example, differing treatment of tenants of different races by a landlord). Here I’m going to focus more on exclusionary discrimination, because this is the area that comes up the most often in my work with clients, and is the form that is currently affecting the housing market relative to Latino buying power. However, non-exclusionary discrimination is also prevalent, and you should not hesitate to educate yourself further, and report it if you believe you’re being discriminated against in this way.
Much of current housing discrimination against Latino would-be home buyers takes place in the form of discriminatory financing, loans and appraisals of property. It’s difficult to parse apart exactly what is intentional and what is not; quite often those in financial institutions or in a position to sell a home are adhering to racial or ethnic stereotypes in ways that may not be intentional—but they are still discriminatory, they still impact the lives of home buyers as well as the real estate market negatively, and they still deserve—and need—to be addressed.
Discrimination through Limited Access
A comprehensive study by the Department of Housing and Urban Development (HUD) in 2000 showed, through paired tests in which applicants who had identical financial status but different races, that roughly 25% of white applicants were favored over African American and Hispanic applicants. 20% of Hispanic applicants were subjected to “adverse treatment” which included receiving less information about homes in their price range, and being shown fewer, lower-quality homes. This is discrimination that is based on limited access, where a buyer might be given less of a chance to consider buying a home, or excluded from it entirely, simply based on the withholding of information.*
At the same time, many prospective Latino homebuyers are likely to have incomplete information about U.S. real estate infrastructure already, if they have immigrated in recent years, if there is any language barrier, and if they don’t have relatives in the US who own homes. Effectively, this means starting from a lower baseline of information to begin with, which places many new home buyers in a vulnerable position that can be exploited.
Discrimination through Limited Financing
Recent studies have shown that Latinos, although we have driven homeownership growth over the last decade, are actually only half as likely as non-Hispanic white applicants to be approved for mortgages. NAHREP’s recent State of Hispanic Homeownership report attributed this to the use of conventional credit scoring models—ones based on the domestic norms for non-Hispanic white/Anglo-European households, which don’t take into account the fact that it’s normal for Latino homes to have more than one or two contributors (as in a multi-generational home), or to hold more than one job long-term.
This discrimination is likely to be inadvertent, but it is nonetheless problematic for buyers as well as the wider market. Current credit score models, in light of changes in the economy, are somewhat outdated; a Federal Reserve study showed that married individuals and immigrants perform better on their loans than predicted by their conventional credit scores.
There is also the problem that Hispanics are more likely to make small down payments on home loans than white, non-Hispanic buyers, and thus are disproportionately affected by the fees charged to those perceived to be higher-risk borrowers. In this case, the discrimination is obviously not intentional but is rather an effect of the system already in place. Yet, it still represents a problem in that it causes difficulty for Hispanic home buyers whose ability to pay the loan back is likely being underestimated, and this causes them to be overcharged.
How Can Housing Discrimination Affect Your Future?
The problem with housing discrimination, in the short term, is obviously that it can keep you from getting a house, from getting the home you want, from getting fair rates on your mortgage or house insurance. This in itself is enough to encourage most people to be aware that it could happen, and to report it to someone when it does. I’ve now been representing people in housing discrimination suits for [how many] years, so I am daily faced with negative impact this can have on the individual and the family, but I’m also well aware of how this plays out in the market over time, and in both cases the outcomes are distressing.
One major effect that housing discrimination has, which impacts whole communities, is that it perpetuates inequality by helping those who are already doing relatively well (eg. white, non-Hispanics with conventional financial situations) improve their prospects, while it keeps those who have the most to gain (Hispanic, first-generation U.S. homeowners) from bettering their situation. This is not simply a matter of chance; the system is literally rigged against Latinos in this case, at least 25% of the time.
The most common direct effect is that discrimination keeps Latino homebuyers from buying in higher-quality areas, due to lack of access or finance, and as a result they end up in lower-quality housing situations. Low-quality housing refers to anything from the quality of the building itself (eg. lead in old paint, lack of insulation or security features, asbestos, mold) which in turn can lead to health problems; low quality housing also refers here to an area where the crime rate is high, where there is only access to lower-quality education, where there are fewer employment opportunities—factors that have extremely negative effects over time, and reduce the chances of the individual or family bettering their situation over time, even over generations.
Note: The information shared in this post shouldn’t be confused with the fact that there is a current market shortage of homes, for a number of reasons including the high number of homes in the foreclosure process, a high number of homes in negative equity, the conversion of many formerly owner-occupied homes into rental properties, and the rising prices of condominiums.