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Hurdles to Breaking Into the Housing Market

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A Washington Post article on millennials saving up to buy a home by living rent-free with family or friends cited José Loya, assistant professor of urban planning at UCLA Luskin. Record-high rental prices, along with student loan debt, car payments, child-care costs and other expenses, have tapped the finances of many young adults. Breaking into the housing market is particularly difficult for Black and Latino homebuyers, who have applied for mortgages at declining rates since the start of the pandemic, said Loya, who researches housing inequality. Such groups are disproportionately affected by rising home prices because they tend to have lower incomes. “They’re getting squeezed out,” he said. Loya also reviewed a Futuro Investigates project that found that financial institutions in New Jersey rejected Latino mortgage applicants at higher rates than their white counterparts between 2018 and 2022. Latinos who did get mortgages, meanwhile, paid higher interest rates than white borrowers on comparable home loans.

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Racial Disparities in Mortgage Approval Rates

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José Loya of the UCLA Luskin Urban Planning faculty spoke to CNN about disparities discovered in the mortgage approval rates at the largest credit union in the nation. CNN reported that Navy Federal Credit Union approved more than 75% of the white borrowers who applied for a new conventional home purchase mortgage in 2022, but fewer than 50% of Black borrowers who applied for the same type of loan. This is the widest disparity in mortgage approval rates between white and Black borrowers of any major lender, the news organization concluded. The disparities are alarming, said Loya, who studies racial gaps in mortgage approvals and reviewed CNN’s analysis. “It does surprise me that they’re doing significantly worse than other big lenders” because of Navy Federal’s status as a credit union, he added.

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Loya’s Research on Mortgage Disparities Bolstered by New LPPI Study

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A new study released by the UCLA Latino Policy & Politics Institute finds that racial disparities persist in homeownership within Los Angeles County. The report, part of a larger research project led by UCLA Luskin Assistant Professor of Urban Planning José Loya, is based on an analysis of pre-pandemic data from the Home Mortgage Disclosure Act. It reveals that despite anti-discrimination laws and regulations, households of color continue to face significant barriers to accessing low-cost mortgage credit, hindering their path to homeownership and exacerbating a racial wealth gap. The report highlights the central role of homeownership in wealth creation in the United States and emphasizes how limited access impacts households of color. The report’s author is Miguel Miguel, an urban planning student who is among a group of first-generation Latino scholars at LPPI helping to provide a more nuanced understanding of the housing market and the COVID-19 pandemic’s effect on racial disparities. Loya recently received two awards from LPPI that will support continuing research efforts aimed at improving the well-being of the country’s Latino population. “Dr. Loya’s research is a salient reminder that homeownership is not an option for the majority of Latinos because our creditworthiness is not equally valued by financial markets,” said Silvia R. González, a director of research at LPPI.

 

Loya on Racial Disparities in Mortgage Approval Rates

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Assistant Professor of Urban Planning José Loya spoke to Markup about new data regarding ethnic and racial disparities in mortgage approval rates. For years, the mortgage industry has said financial factors, such as credit score and debt as a percentage of income, explain any racial disparities in loan approval rates. However, Markup investigated more than 2 million mortgage applications and found that lenders in 2019 were more likely to deny home loans to people of color than to white people with similar financial characteristics, even after controlling for 17 financial factors. “Lenders used to tell us, ‘It’s because you don’t have the lending profiles; the ethno-racial differences would go away if you had them,’” Loya said. Now that these financial factors have been made public through the Home Mortgage Disclosure Act, Loya concluded, “Your work shows that’s not true.” The report found that, nationwide, lenders were 80% more likely to reject Black applicants than white applicants with similar qualifications.

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CNK Documents Racial Inequalities Among Homeowners Due to Pandemic

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A new report by the UCLA Center for Neighborhood Knowledge (CNK) at UCLA Luskin highlights how the COVID-19 pandemic has affected homeowners’ inability to pay mortgages, signaling an unprecedented housing crisis and revealing huge racial disparities among homeowners. Researchers from the center, led by Paul Ong, research professor and CNK director, partnered with the UCLA Ziman Center for Real Estate and Ong & Associates to produce research as part of a series of COVID-19 policy briefs documenting the systemic racial inequalities of the pandemic. The new report, “Systemic Racial Inequality and the COVID-19 Homeowner Crisis,” analyzes data from the U.S. Census Bureau’s weekly Household Pulse Survey, collected between April and July 2020, to examine the magnitude, pattern and causes of the housing crisis. The authors report that about 5 million, or 8%, of American homeowners were unable to pay their mortgage on time. In comparison, during the Great Recession, there were approximately 3.8 million foreclosures; early-stage delinquent mortgages (for 30 to 59 days) peaked at 3%. “Compared with non-Hispanic whites, Black people and Hispanics (or Latinx) had two to three times higher odds of experiencing housing hardships,” the researchers noted. “This systematic inequality is produced by pre-existing income and educational inequalities, and reinforced by the disparate impacts of COVID-19 on the labor market,” according to the report. The rising number of homeowners currently struggling to pay their mortgages is an ominous indication that this may lead to more foreclosures, housing instability and homelessness, the researchers wrote.

Home Sweet Home During a Lewis Center Book Talk, visiting lecturer Brian McCabe explores the efficiency of U.S. government support for homeownership

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By Zev Hurwitz

Brian J. McCabe is a sociologist whose research focuses on the importance, impact and problems associated with homeownership in the U.S. — not exactly common issues for a sociologist.

“Sociologists have largely ceded the study of housing to economists,” McCabe said. “We should be thinking about housing as not only an economic problem but as a social problem, too.”

McCabe, an assistant professor of sociology at Georgetown University, delivered a seminar at the Luskin School of Public Affairs on Feb. 22, 2017, based on his recent book, “No Place Like Home: Wealth, Community & the Politics of Homeownership.” The book explores the American passion for home ownership and its effect on local communities.

At the Book Talk hosted by the UCLA Lewis Center, McCabe walked attendees through the central themes of his book, focusing particularly on methods for evaluating the impact of homeownership on communities.

Michael Lens, assistant professor in UCLA Luskin School of Public Affairs Department of Urban Planning, noted that McCabe’s diverse background yielded a unique approach to his work.

“[McCabe’s] research offers an interdisciplinary approach to the study of cities combining his training in sociology, geography and public policy, primarily on housing issues,” Lens said.

Homeownership did not become the status quo for most Americans until the middle of the 20th century as marketing campaigns and the news media helped establish the notion that owning a home is an American ideal, McCabe said.

“We generally agree that buying a home is a good thing,” he said. “Ninety percent of Americans believe they prefer to live in a home rather than rent one. Most people who own a home are happy with their housing decision, and most renters expect that one day they’re going to be homeowners.”

In addition to being a vehicle for building wealth, home ownership can also be a tool for building citizenship and community. Government programs that create incentives for Americans to purchase a home strive to strengthen citizenry, but McCabe’s book challenges whether owning a home is actually responsible for community and civic engagement.

“This is what I want to challenge in my talk: Does the evidence actually confirm that homeowners are more engaged citizens?” McCabe said. “And, if so, what kinds of civic activities are homeowners engaged in?”

McCabe’s book explores whether the true effects of homeownership have justified government programs designed to promote it, and whether funding for those programs might be better allocated elsewhere.

McCabe cited several pieces of legislation in the 20th century that made it easier for Americans to buy homes, including the National Housing Act of 1934, which established a nationalized mortgage market, and the GI Bill, which made it easier for veterans to pursue homeownership through VA-brokered loans.

“Building a nation where almost 70 percent of Americans own their own home was not natural, nor was it inevitable,” he said. “It’s built on the back of federal interventions and mortgage markets that make the cost of borrowing cheaper. The federal government is deeply involved with all of this.”

In the course of McCabe’s research, he found that homeownership does correspond to higher rates of civic involvement. Homeowners are more likely to vote or sign a petition, McCabe learned.

However, when accounting for “residential stability”— which McCabe defines as living in the same place for five or more years — the data suggest that homeownership has less of an effect on the likeliness to engage in civic ways than does the length of residence.

“The nuance that I want to add to the story that ‘homeowners are better citizens’ is that there are some places where it is not home ownership that causes people to be more engaged, but actually residential stability,” he said.

Putting the roots of civic engagement in the context of modern government programs that make it easier to buy homes, namely the mortgage interest rate deduction, McCabe said that such programs are inefficient and that the payoffs are not substantial.

“Even if the deduction was a way to increase home ownership, the public benefits of promoting homeownership are insufficient to justify those costs,” he said.

McCabe laid out several policy alternatives to current deductions that might be healthier for the country, including capping the size of loans eligible for deduction, eliminating the deduction for a one-time first-home credit or prioritizing programs that promote residential stability, such as home-choice vouchers.