Melissa Newman purchased a house in Minneapolis north Minneapolis 16 years back.
Newman said that he was 25 when he started looking for a font-weight of 400 ;”>”. “I just had my daughter, and I thought, “I have to do more for my girl .'”
Newman cleared her credit and got her finances in order. She then went to the bank and was approved for a home loan. Newman began looking at houses in Minneapolis and settled on a house that was newly built near the intersection of 36th Avenue North & 6th Street North.
She was thrilled when the sale was over.
Newman said that he was excited to purchase the house and brought his car filled with boxes to close. “I am a first-time homebuyer. It’s just me and my daughter buying a new house. 26-years-old, I am excited about the next chapter .”
Newman is now part a group that has been becoming increasingly rare: Black Minneapolis residents who own their homes.
Minneapolis’ Black homeownership rate continues to fall.
Contrary to what is being repeated, Minneapolis’s continuing decline in Black homeownership is not due to the past racist housing practices of the mid-20th century. Researchers are still unsure of the exact reason Black homeownership is continuing to decline. According to the 2019 APM Research Lab report, Black homeownership rates in Minneapolis are 19%. White homeownership is 77% in Minneapolis. This is a gap of 58 %.
The best way for a family to grow their wealth in America is through home ownership. Homeowners use the equity in their homes to finance college tuition and the down payment on a home for their children. A homeowner who does not own a home would be in a very difficult economic position.
Minnesota wasn’t always like this. It is commonly believed that Black homeownership rates were lower during Jim Crow, and have stagnated or slowly improved. However, the reverse is true. Many more Black Minnesotans owned homes when it was legal to operate white-only water fountains.
According to the Federal Reserve Bank of Minneapolis, Minnesota’s Black homeownership rate was 46% in 1950.
In Minneapolis, there were more Black residents back then than in the suburbs or rural areas. This means that around half of the nearly 50 percent midcentury rate was attributed to Black Minnesotans living in Minneapolis.
It’s been a great time for Black homeowners in Minneapolis since then. It has been particularly bad in the last 20 years.
According to the Urban Institute, 31% of Black residents owned their homes in Hennepin County and Ramsey County in 2000.
The 1990s and 2000s saw steady growth in the Black population, thanks to an influx of African immigrants. The amount of housing construction also increased. In 2018, the Hennepin Ramsey County Black homeownership rate was 21%.
Today, the Black homeownership rate is lower than 20% in Minneapolis.
Possible explanations
What is the reason for the current steady decline in Black homeownership?
Researchers suggest a network of factors as a possible explanation for Black homeownership and wealth. However, the reason for the increasing gap between Black and white homeownership going into 2020 is still largely unknown.
Minneapolis’ Black homeownership history over the past 20-years is more complex than a book on racial redlining or covenants. Another place to begin is the 2008 housing crash.
While many Americans want to forget about the Great Recession, they still feel its impact in Black communities. Subprime loans and other predatory financial products that were created to extract wealth from Black and low-income communities have been mostly eradicated since 2008. Many of the Minneapolis homes that were lost to Blacks and put into foreclosure during the 2008 housing crisis, particularly on the northside, were bought by large corporations and made into rentals.
“The legacy from the Great Recession are single-family rentals,” statedYonah freemark, an Urban Institute researcher, who conducted an extensive analysis in June 2021 entitled Who Owns The Twin Cities? that focuses specifically on factors that have had an impact on Black homeownership.
Freemark estimates that between 2005 and 2020, the number single-family rentals in Ramsey and Hennepin counties (SFRs) more than doubled, from 22,000 to 48,000 homes. A University of California Berkeley study found that 87 percent of single family homes were owned in 2000 by the families who lived there.
According to the Urban Institute, North Minneapolis has seen an increase in SFRs owned and managed by investors who have at least three properties. These areas have seen a decline in homeownership, with over 10% of the housing in north Minneapolis being SFR units.
span style=”font weight: 400 Over the past 15 years, according to the Urban Institute report “the amount property wealth held in local homeowners of single family homes has declined in both counties [=(Ramsey & Hennepin)] despite an increasing population. The slack has been taken up by investors who have siphoned off billions of dollars in local property value from single-family homes that are currently rented .”
Other than SFRs, income, education, and family inheritance all have an impact on Black homeownership rates. These historical factors can also be significant.
White people have higher incomes than Black individuals and are more educated. Many first-time homebuyers of color rely on the money of their family for their down payment. These factors do not explain all of the differences in homeownership between Black and White homeowners, Freemark said.
“Although income, marital status and access to parental support, credit scores and (to a certain degree) location can be correlated with homeownership rates,” says the Urban Institute report.
Other possible explanations
span style=”font weight: 400 I wish I could give you definitive answers, but I think that if I was to start a research project, I would be looking at a lot of different data pieces.” Libby Starling, director of the Federal Reserve Bank of Minneapolis’ Community Development and Engagement division, said it.
Starling notes that there are a few aspects to the migration patterns of African refugees and slave descendants. One aspect is how many Black families are moving to the suburbs.
span style=”font weight: 400 For example, Brooklyn Center went from being predominantly white to becoming a majority resident of color suburb between 2000 and 2010, Starling said. Brooklyn Park, however, saw a similar shift, although not as dramatic. “We can see that between 2000 and 2010, the seven-county Twin Cities area saw a significant shift in the number of households of color. Although we don’t know if it was true for Black households, the vast majority of these households are located outside of Minneapolis and St. Paul span>
The Twin Cities also saw an influx in African immigrants between 2000 and 2010. Stalling said that Muslim immigrants to Africa may adhere to strict religious rules, which prohibits interest-bearing loans.
Myron Ofield, director of The Institute on Metropolitan Opportunity at University of Minnesota believes that the white-Black homeownership gap of Minneapolis can be explained by one single culprit: Neo-segregation .
Orfield describes neosegregation in terms of a trend that he believes took root when Skip Humphrey was Minnesota’s attorney general. This position he held between 1983 and 1999.
Humphry and the “Humphry Democrats”, as Orfield refers to them, have relaxed state law to make it illegal to deny students access to schools based on race. However, the state will not consider schools with high concentrations of Black students segregated.
Orfield stated that the span style=”font weight: 400 That was explained as a choice that Black people wanted to live together, and not being restricted to particular parts or school districts within the city.” Orfield said that multiple lawsuits were filed against Minneapolis schools district over claims of segregation, which prevented students of color from enrolling at majority-white schools.
Orfield stated that span style=”font weight: 400 Housing segregation follows school segregation.” Orfield also stated that segregation was the main way in which wealth is taken from Black people by whites.
In Minneapolis, more Black residents began to live in close quarters. This created a wealth of opportunities for unscrupulous real estate and bankers to come in the mid-2000s with poor financial products such as subprime loans and take over the Black family’s home in foreclosure, taking all their wealth.
Orfield said that the bank sells the home to another Black family and then the cycle continues. The bank may sell the foreclosed house to a corporate investor, who keeps the land ownership profits and rents it to a Black family.
Solutions
New regulations for SFR investors would be a huge help, according to Freemark. Freemark stated that the two biggest players in Minneapolis are Invitation Homes, and the Front Yard Residential Corporation.
According to the Urban Institute, the legislature at the state level could prohibit corporations from purchasing multiple homes in a single foreclosure auction. Instead, it would prioritize local governments and affordable housing programs.
In March, a bill at the Minnesota Legislature was introduced that would limit the conversion of single-family homes to rentals by corporate developers.
Minneapolis officials could create a progressive tax to discourage large real-estate portfolios within the city. The progressive taxation of earned income, which increases in tax with increasing income, eases the burden on small landlords while increasing the costs for large conglomerates.
David McGee is the executive director at the Minneapolis-based nonprofit Build wealth Minnesota. He has 30 years experience as an underwriter and believes that there has been a worrying lack of analysis about underwriting.
He said that span style=”font weight: 400 That never comes up to surface” “Underwriting — That’s the key to making a decision.”
McGee stated that boilerplate underwriting, which was designed to serve white families on higher incomes, has not changed much over the past 80-years.
Many lenders, including local governments, have forgiven predatory loans since the Great Recession. McGee believes this type of understanding can be extended in order to reshape the underwriting. Lenders should also be open to the possibility that a Black family member might have a poor financial history and a lower income.
span style=”font weight: 400 If a Black Janitor makes $37,000 per year and may have a predatory credit report but they have not lost their job for 15 or 17 years, then underwriters should seek ways to work together,” McGee said, adding that it is reasonable for Black janitors to pay their mortgage on a consistent basis.
span style=”font weight: 400 People assume the worst about their situations,” Kathy Wetzel-Mastel is executive director of PRG Minneapolis, which also offers homebuyer services. They assume that they will get a “No” when they ask a bank for a mortgage. When someone makes it easy, people say, “Well, this is my only chance, so I am going .'”
Unfortunately, these opportunistic and bad actors are still present in real estate. Steering is another predatory practice in real estate. Real estate agents direct Black buyers to Black neighborhoods that have low home values and a history equity stripping, while directing white buyers into neighborhoods with rising home values, good schools and plenty of opportunities to grow wealth.
“Font-weight: 400 This practice prevented Black homebuyers from purchasing homes in predominantly white neighborhoods and forced them to compete against their peers in a smaller, less-valued housing market,” Henry Rucker stated in a statement. Rucker, a former chair of the Diversity, Equity and Inclusion Committee for the Minneapolis Area Association of Realtors, is a realty broker.
To eliminate such practices, Rucker stated that more people of color should be hired “across all real estate industries” including loan officers, realtors and closers at title companies.
Wetzel-Mastel stated that solutions to the Black homeownership problem could be found in local governments like Minneapolis City Hall if they were more deliberate and surgical in their housing efforts instead of trying to fix multiple problems using blanket initiatives.
span style=”font weight: 400 ;”>” What problem are we trying solve? Is it to solve the problem of no one being able to afford a Minneapolis home? She asked, “Or, are we trying solve the problem that Minneapolis has the highest Black-white homeownership disparity and thus the greatest wealth disparity among the 50 largest metropolitan areas?” We should probably try to solve both, but we shouldn’t attempt to solve both with the same programs span>
Newman is an exception. It has not been easy
Newman stated that the house’s value dropped below the price she paid for it when she got the keys to it.
She is one of few Black Minneapolis residents who owns her home. However, she hasn’t experienced the same wealth accumulation as white Minneapolis homeowners in areas outside of Minneapolis.
Newman said that he used the span style=”font weight: 400 ;”>” I entered 2021 stating that I would get rid of stressors.”
She did extensive research on the housing market as well as the intricacies associated with the home loans she accepted. Newman did some research and was able to understand her options, including legal recourse.
Newman’s home has been her home for the past ten years and more. She stated that she is still learning about the housing market, and is considering whether she would like to keep her North Side home. However, she does not have any immediate plans.
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