Crushed by Rent, Homeownership More Out of Reach for Minorities: Report
RISMEDIA, Tuesday, April 04, 2017— Rent has become a sizable expense for many households, but more so in minority communities, according to a recently released analysis by Zillow. Renters in minority communities, in effect, are having a harder time saving for a down payment on a home than renters in white ones. Why? According to the report, renters in majority black neighborhoods have to spend 43.7 percent of their income on rent, while renters in majority Hispanic neighborhoods have to spend 48.1 percent; renters in majority white neighborhoods, to compare, have to spend 30.7 percent—on par with the ideal budget for housing, 30 percent. In the last five years, the amount of income spent on rent has grown more in minority communities than in white ones, as well—by three percentage points in white neighborhoods, four percentage points in black neighborhoods and seven percentage points in Hispanic neighborhoods. "This research sheds light on another example of inequality in the housing market," says Dr. Svenja Gudell, chief economist at Zillow. "Renters in African-American or Hispanic neighborhoods find themselves in a catch 22 situation—while owning a home is a great way to build wealth, you need to save up some cash to be able to buy. If you're spending close to half of your income on rent, saving up that down payment is going to be incredibly difficult." The inequality is magnified in housing markets with the most potential for upward movement—i.e., employment opportunity. In the New York City metropolitan area, for instance, renters in black neighborhoods have to spend 57.5 percent of their income on rent, while renters in Hispanic neighborhoods have to spend 67.5 percent—considerably above the 37.8 percent spent by renters in white neighborhoods. In San Francisco, Calif., renters in black neighborhoods have to spend 74.8 percent of their income on rent, while renters in Hispanic neighborhoods have to spend 62.5 percent; renters in white neighborhoods have to spend 48.8 percent. A mortgage is generally more affordable (and more financially rewarding) than rent, in both minority and white communities. Homeowners in black neighborhoods have to spend just 13.6 percent of their income on a mortgage, while homeowners in Hispanic neighborhoods have to spend only 22.8 percent. Homeowners in white neighborhoods have to spend 15.2 percent. To view Zillow's report, click here.