Local Black homebuyers twice as likely to be denied loans. Here’s what could help.

Bottom line: Redlining ‘still exists a little bit,’ one local realtor says.

Dayton-area residents of color, particularly in minority neighborhoods, are denied home loans at higher rates than their white counterparts over half a century after the Fair Housing Act of 1968 was intended to level the playing field.

A Dayton Daily News analysis of Home Mortgage Disclosure Act data for all home loan applications reported in 2020 in the Dayton Metropolitan Statistical Area, which includes Montgomery, Greene and Miami counties, found Black area residents were over twice as likely to be denied conventional home mortgage loans as white residents. And the more minorities living in the neighborhood, the more likely a loan was to be denied.

“Nobody likes to use that term, redlining, but it still exists a little bit,” said Frederick Diggs, a local realtor who is Black and past president of the Greater Dayton Realtist Association. “We call it something else but it’s redlining, bottom line.”

The newspaper’s findings match a data analysis conducted by Reveal, the online platform of The Center for Investigative Reporting, that found Black applicants in the Dayton metro area in 2016 were 2.1 times as likely to be denied a conventional home mortgage as white applicants, even when controlling for applicant’s income, loan amount and neighborhood.

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The Dayton Daily News Path Forward project investigates the most pressing issues in our community, including race and equity. This story digs into the barriers to homeownership that Black and minority residents face, solutions local advocates would like to see — or are working on — and what Ohio’s U.S. senators are doing about the issue. Future stories will examine discrimination Black and minority homeowners face in the home appraisal system and stagnant home values in minority neighborhoods.

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Building equity in one’s home is the primary way the average American builds wealth, said Diggs. But Black homeownership rates have barely budged since it was legal to discriminate against Black people seeking loans and exclude them from many neighborhoods and suburbs.

In 2019, about 42% of Black households in the Dayton metro area owned their home while about 70% of white, non-Hispanic households owned their home, according to the U.S. Census Bureau. In 1960, about 38% of Black households nationally owned their home, according to analysis of census data by the Urban Institute.

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Homeownership is viewed by many as the key to closing the large racial wealth gap in the U.S., but the lack of wealth is also a large barrier to homeownership for Black Americans.

According to the 2019 Survey of Consumer Finances by the Federal Reserve, the latest data available, white families in America have the highest level of median family wealth, which includes any property or assets they own, at $188,200. For Black families their median wealth is $36,100, respectively.

In recent months, some Washington lawmakers have called for more to be done to increase minority homeownership. At the same time, the real estate market is booming in the Dayton region and many markets nationwide. And with sellers receiving so many attractive offers, local advocates worry it might allow for more racial discrimination.

Housing discrimination not a thing of the past

In the 1930s, federal government surveyors created maps banks used that deemed white neighborhoods desirable for mortgage lending and neighborhoods with high numbers of African Americans or European immigrants, especially Jewish people, “hazardous” for lending by drawing red lines around those neighborhoods. The Fair Housing Act of 1968 made denying loans systematically to minority neighborhoods illegal. But little has changed, advocates say.

“It’s not as overt as it used to be like people making comments to your face or refusing to let you in the door,” said Miranda Wilson, director of investigations and enforcement at the Miami Valley Fair Housing Center.

All Americans face barriers to homeownership, such as a lack of low and moderately priced homes. But Black Americans also face discrimination in appraisals and lending, and a myriad of problems related to their lower family wealth, according to Adam Blake, vice president of housing at County Corp.

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Lower incomes and lower wealth means it is harder to save for a down payment. Black Americans often have higher debt-to-income ratios — including twice as much college loan debt according to the Brookings Institution — which can in itself get them denied for a home loan but also affects their credit scores.

Underwriting can be highly subjective, Wilson said.

“Underwriting is just kind of a black box that you have no idea what’s happening in that process,” she said.

Norman and Zaria Scearce, an African American couple, are trying to buy a bigger home in Trotwood since their three kids are getting older and they need the extra space. Zaria Scearce works as a branch manager at a bank and Norman Scearce is self-employed as a pastor and house painter. He has a steady and verifiable income, but Norman Scearce said he’s had to jump through hoops to prove it to the bank.

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Norman Scearce’s student loan lender allowed him to put his student loans into forbearance due to the pandemic, but the bank the couple is applying to for a home loan told him to instead put them in an income-based repayment plan. That made his monthly payment zero. Now, the bank says his repayment should be at least $5 per month to qualify for the home loan.

“What you told me to do was wrong and it’s the reason we can’t close on our loan. A lot of the issue is the lack of communication and the discretion of the underwriter,” he said. “The underwriters get an enormous amount of control over what they say is necessary to approve someone for a loan. And it just should not be.”

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Local advocates propose solutions to barriers

Dayton-area housing advocates want to see the local and federal government and lenders make changes that would help all homebuyers but also target minority Americans. Here are some of the proposals they shared with the Dayton Daily News.

Adam Blake, County Corp:

  • More well-funded programs from the federal, state or local governments that assist homebuyers and target minority households.
  • More homebuyer education, including in high school.
  • The Community Reinvestment Act, the major way the federal government encourages banks to lend more to low and moderate income communities, is five decades old, weak and needs an overhaul to meet the needs of minority communities.
  • Banks should create better lending solutions that acknowledge modern cultural needs, such as recognizing that a self-employed person with multiple business ventures is qualified for a home loan even though they don’t have a traditional job.
  • Local communities should put mechanisms in place such as land trusts to preserve long-term affordability. A land trust owns the land a house is on and establishes affordability requirements that put restrictions on who can buy the house, usually based on the owner’s income.
  • Local governments should provide tax incentives for developers to build in minority neighborhoods and require any housing developers receiving incentives anywhere to include a percentage of affordable units in their project.

Cora Diggs, and Frederick Diggs, Greater Dayton Realtist Association:

  • More homebuyer education, including in high school.
  • Better funded and better advertised government down payment assistance programs.
  • Local governments should incentivize more development in minority neighborhoods.

Miranda Wilson, Miami Valley Fair Housing Center:

  • Create more uniformity in appraisal and lending practices so there is less room for unconscious bias or discrimination.
  • The federal government should regulate the credit score reporting agencies or create an alternative public credit reporting agency so scores better capture all the details that prove somebody is financeable, including paying rent or utilities.

Cora Diggs is president of the Greater Dayton Realtist Association, a group of minority real estate professionals whose goal is to promote democracy in housing by advocating for fair housing, fair lending and fair valuations for all. “I think it’s the number one most important thing that we can do for our community: encourage them to become homeowners,” Diggs said.
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Cora Diggs is president of the Greater Dayton Realtist Association, a group of minority real estate professionals whose goal is to promote democracy in housing by advocating for fair housing, fair lending and fair valuations for all. “I think it’s the number one most important thing that we can do for our community: encourage them to become homeowners,” Diggs said.

Credit: Jordan Laird

Credit: Jordan Laird

What locals are doing to increase minority homeownership

Unified Power is a new land trust coupled with a real estate investment cooperative that grew out of Co-Op Dayton, the same nonprofit that developed the Gem City Market. Unified Power’s goal is to help long-term Dayton community members remain in or return to the area, and to promote racial justice and integration in Montgomery County.

“It will prevent people who have lived here for generations (from being) pushed out by gentrification,” said Kenya Baker, president of Unified Power’s board of directors.

The group hopes to work with single family homes and potentially multifamily homes, depending on what a neighborhood needs, as well as some commercial development.

Meanwhile, Kémo A’akhutera quit flipping houses in the Dayton area because the housing stock is too damaged. Instead he developed Design to Build, a cargotecture construction company he hopes will provide high-quality, affordable and market-priced housing.

“We want to be able to do something with all these sites where they tore down homes,” he said.

Cargotecture retrofits shipping crates to build. A’akhutera said this new way of building houses will allow young professionals to more easily, buy a first home and then easily add onto it.

What Dayton’s representatives in D.C. are doing

Ohio’s U.S. Sens. Rob Portman, a Republican, and Sherrod Brown, a Democrat, say they are working on the issue of minority homeownership. U.S. Rep. Mike Turner, R-Dayton, did not return requests for comment.

In March, Portman, Amy Klobuchar, D-Minnesota, and Tim Kaine, D-Virginia, introduced the Housing Supply and Affordability Act, which would create a grant program to help localities develop comprehensive housing policy plans.

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“Sen. Rob Portman recognizes that the economic impact of the coronavirus pandemic has increased the cost of housing in Ohio and cities across the nation. He believes that in order to address this issue, you need to look closely at what’s happening at the local level, which is why he supports the Housing Supply and Affordability Act — a bipartisan piece of legislation that will provide localities and municipalities with resources to expand the supply of housing and increase affordability,” said Emmalee Cioffi, a spokesperson for Portman.

Portman also authored the Neighborhood Homes Investment Act, which would create a federal tax credit to cover the cost between building or renovating a home in disadvantaged areas and the price at which the home could be sold. Brown’s office said he supports the bill.

A rule established under President Donald Trump’s administration would have allowed banks to fulfill their Community Reinvestment Act responsibility through several large investments or loans instead of many small-dollar loans to individuals. Brown advocated to overturn that rule, which was scrapped this month. U.S. bank regulating agencies said they are working jointly to modernize the CRA.

Since Brown became chairman of the Senate Banking, Housing and Urban Affairs Committee this year, he has held a hearing on the legacy of racial discrimination in housing and several hearings on housing bills, including legislation to study the lack of FHA financing for smaller mortgages.

Brown’s office said he agrees with the Biden-Sanders Unity Taskforce recommendation to establish a public credit reporting agency to provide a non-discriminatory credit reporting alternative to the private companies.

About the Path Forward

Our team of investigative reporters digs into what you identified as pressing issues facing our community. The Path Forward project seeks solutions to these problems by investigating race and equity in the Dayton region. Follow our work at DaytonDailyNews.com/path-forward.