Homeownership gaps between people of color and White people are significant: in 2019, 73% of White households owned their homes relative to 43% of Black households and 47% of Hispanic households. Having sufficient housing options available in communities is valuable for the functioning of regional economies, ensuring that workers are able to live near their jobs and promoting economic growth. Homeownership is also important in fostering economic opportunity. Differences in homeownership rates between people of color and White people are one of the leading drivers of wealth inequality in the United States (pdf, 920 kb), and many communities with desirable amenities, good schools, and safe neighborhoods are difficult to access as renters. Additionally, where a person lives can have important implications for their health. As a result, housing policy has often focused on reducing racial and ethnic gaps in the homeownership rate.
However, where the home is located is important to access many of the benefits associated with homeownership, and home price appreciation is tied to local neighborhoods and markets. The U.S. retains many segregated neighborhoods, and if homeowners of color are buying in these segregated communities, their experience of homeownership may be quite different than that of Whites. While there has been considerable research on the differences between the neighborhoods of Black and White homeowners, less research has focused on inequities between Hispanic and White homebuyers.
In a recent paper published by the U.S. Department of Housing and Urban Development, I examined the neighborhoods of Hispanic and White homebuyers in 2018 in the 100 largest metro areas in the U.S. and considered whether buying in a suburban community—rather than an urban one—improved neighborhood characteristics for homebuyers. I used the 2018 Home Mortgage Disclosure Act data coupled with data on census tract characteristics from the 2000 Census and the 2017 5-year American Community Survey to model differences in the neighborhoods of Hispanic and White homebuyers. (Read the full methodology.)
I found that Hispanic and White buyers purchased in very different types of neighborhoods, even when homebuyers had similar financial and demographic profiles and were buying homes of the same value within the same metros.
Hispanics are buying in neighborhoods that are more disadvantaged
Hispanic homebuyers in 2018 purchased homes in neighborhoods that were demographically and economically different from those of similar White buyers. The neighborhoods of Hispanic buyers have fewer White residents, more individuals living in poverty, lower median incomes, and lower median home values (Figure 1).
Additionally, buying in suburban communities did not alter the differences between the neighborhoods of White and Hispanic buyers—except in the case of median home value, where the delta was smaller in suburban communities. Though living in the suburbs decreased the difference in home values between Hispanics and Whites, the suburban communities of 2018 homebuyers had lower median home values than those in urban areas, so owning in a suburb was less financially beneficial than owning in a city.
Though differences in the neighborhoods of Hispanic and White buyers may be limiting the current economic opportunity of Hispanic buyers, if Hispanic buyers are purchasing in neighborhoods that are improving, they may stand to gain a larger return on their investment in homeownership. However, the research found that the reverse is true: the neighborhoods that Hispanic homebuyers purchased in have experienced more economic decline from 2000–2017 than those of similar White buyers. The neighborhoods of Hispanic homebuyers had larger increases in the share of the population living in poverty, larger declines in median income, and larger declines in median home values relative to the neighborhoods of White buyers (Figure 2). The neighborhoods where Hispanic people are buying have also become more segregated over time, with greater declines in the White population than the neighborhoods of White homebuyers.
In the case of neighborhood change, buying in a suburban area decreased the difference between Hispanic and White buyers. However, with respect to changes in both median income and median home value, urban communities outperformed suburban ones. Hispanic and White buyers alike are living in suburban neighborhoods with less economic prosperity than urban ones.
These findings indicate that the experiences of Hispanic and White homeowners can be quite different, even for households with similar financial characteristics and mortgages. This has important implications for the community development field’s understanding of the role of homeownership in improving economic opportunity for Hispanic families in the 12th Federal Reserve District.
First, access to homeownership alone does not eliminate spatial differences between Hispanic and White households. Hispanic homebuyers are not receiving the same neighborhood benefits from being a homeowner as White homebuyers with similar financial and demographic profiles. This affects their ability to access quality jobs, schools, and opportunities, and impacts long-term wealth accumulation. These differences can then have intergenerational effects.
Second, suburbs are ethnically stratified places. Before the advent of fair housing and civil rights legislation, people of color were legally shut out of many suburban communities. Today, despite the elimination of explicit legal barriers to suburbanization, Hispanic buyers continue to live in neighborhoods that are economically and demographically distinct from those of White buyers, even in suburban communities.
Third, homeownership is likely to be a riskier investment for Hispanics than Whites. Despite purchasing homes of the same value, Hispanic homebuyers purchased in neighborhoods with significantly lower median home values and where home prices had declined more since 2000, in addition to purchasing in neighborhoods with lower economic profiles and more economic decline. These differences may then translate into lower home-price appreciation and wealth accumulation for Hispanic buyers. Furthermore, the differences in the neighborhood trajectories of Hispanic and White buyers who purchased in an urban area suggest that urban Whites are more likely than Hispanics to reap the positive effects of urban revitalization, and that urban Hispanic buyers are particularly unable to access neighborhoods that match those of their White counterparts. This aligns with evidence that gentrification processes are linked to those of segregation.
Taken together, these findings suggest that policymakers and those designing programs could improve economic outcomes for Hispanics by considering not only the share of Hispanic families accessing homeownership but also the neighborhoods in which homeownership takes place. These results also highlight the role for place-based community development across all types of neighborhoods and in creating opportunities for people of color to access traditionally exclusive suburban neighborhoods and thriving urban ones.
Rocio Sanchez-Moyano, PhD is a senior researcher in Community Development at the Federal Reserve Bank of San Francisco. Her areas of expertise include housing and asset building, with a special interest in racial and ethnic equity and the experiences of Hispanic and immigrant households. At the SF Fed, Rocio also works on inclusive financial systems.
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The views expressed here do not necessarily reflect the views of the management of the Federal Reserve Bank of San Francisco or of the Board of Governors of the Federal Reserve System.