COLUMBIA — The malignant touch of the recession and the housing crisis has reached a wide spectrum of people. But chances are, if you're in Missouri and if you're black, you were affected more than others.
A Columbia Missourian analysis of U.S. Census statistics and federal mortgage data found that across the state, homeownership among blacks took a hit during the past decade. By 2010, blacks were less likely to own homes, had received a disproportionate share of high-interest, subprime loans and were receiving one-fifth as many home loans as they were before the recession.
Missouri: 42 percent
St. Charles County: 53 percent
St. Louis County: 52 percent
Jackson County: 42 percent
St. Louis City: 34 percent
Boone County: 26 percent
The loan statistics used in this story exclude the 15 percent of loans where race was not reported. Additionally, loan, income and homeownership figures listed for blacks and whites exclude those with Hispanic or Latino ethnicity. Income and homeownership statistics are based on data from the 2000 and 2010 U.S. Censuses and estimates from the 2010 American Community Survey.
From 2000 to 2010, the state's homeownership rate — the share of households that are owned, as opposed to rented — went from 70 percent to 69 percent.
But the rate for blacks declined more sharply than any other demographic — from 47 percent to 42 percent. And while homeownership for whites decreased by 1 percent, it still remained above state and national averages at 73 percent.
In Boone County, black homeownership declined from 29 percent to 26 percent. Of counties that have more than 2,000 black households, that is the lowest rate in Missouri.
It's impossible to pinpoint any one variable causing blacks to disproportionately lose ground in the housing market, but subprime lending hasn't helped. Subprime loans are given to borrowers who might have difficulty keeping up with the payment schedule and thus have higher interest rates and less favorable terms. They are also more likely to result in default or foreclosure.
From 2004 to 2010, blacks made up 7.3 percent of the overall loan pool in Missouri, yet they received 18 percent of all subprime loans.
Subprime lending in Boone County was less of a problem than in areas where blacks were highly concentrated. In St. Louis, for example, blacks made up one quarter of the home loan pool yet received half of all subprime loans.
Although these statistics paint a disturbing picture, they don’t prove that racial discrimination exists in the housing market, said Maurice Jourdain-Earl, founder of Compliance Tech, a research firm that analyzes lending practices.
“Race is a byproduct,” he said. "There's just not one thing you can point to."
Because blacks tend to have lower incomes and lower credit scores than whites, they’re more likely to be offered subprime loans, Jourdain-Earl said. But another problem is the lenders who blacks are often likely to encounter: Across the country, he said, lenders who were more inclined to offer subprime mortgages did an effective job of penetrating minority communities.
Blacks are more likely than whites to live in communities where the most available form of credit is not through a "mainline lending institution" such as a bank, said Chris Krehmeyer, CEO of Beyond Housing, a St. Louis organization that provides housing assistance to low-income families. They are more likely to be exposed to predatory lending than whites and are also less likely to trust mainline lenders, he said.
Loan officers driven by commission are "going to take that person for as much as they can," Jourdain-Earl said. "It becomes a question of mortgage choice — and the lack of choice — in communities of color."
Although subprime lending in Missouri has dropped considerably since peaking in 2006, the homeownership rate for blacks is unlikely to rise any time soon: Far fewer blacks are applying for home loans.
Blacks received 78 percent fewer loans in 2010 than in 2005. Lending to whites declined by 31 percent.
Many lenders have raised borrowing standards, making it more difficult for prospective home buyers to get a loan. But in Missouri, the decline in lending to blacks parallels the drop in the number of home loan applications they've filed: In 2010, blacks applied for 83 percent fewer loans than in 2005.
If discrimination is a variable affecting the decline in lending to blacks, Krehmeyer said, it's much less influential than factors such as unemployment, income and access to credit.
Although tighter lending standards prevent borrowers of all races who can't afford to keep up with mortgage payments from taking on a loan they don't have the means to pay back, Krehmeyer is concerned that standards have swung too far in the opposite direction and are too conservative. Some low-to-moderate income people who could keep up with a mortgage payment schedule can’t find a willing lender, he said.
Jourdain-Earl agreed that some lenders overreacted to the subprime mortgage crisis. "There are people right now with excellent credit who are going through the wringer just trying to get a loan," he said.
Income has also been a major influence. From 1999 to 2010, when inflation is factored in, average income among blacks in Missouri declined by 13 percent to $15,912 a year — compared to 8 percent for whites. The state average in 2010 was $23,920.
In Boone County, the income decline was even more pronounced: Average income for blacks has dropped to less than half of what whites earn. In 2010, blacks earned an average of $12,720, according to an estimate from the Census Bureau's American Community Survey. When inflation is taken into account, that's 19.5 percent less than they earned in 1999.
In Columbia, assistance for home buyers, such as a Columbia Housing Authority program that helps residents living in Section 8 rental housing transition into homeownership, is available. But according to Housing Authority CEO Phil Steinhaus, most Section 8 participants — a majority of whom are black — either have poor credit scores or aren't able to save enough money to make the 1 percent down payment required by the program.
Most of them are earning a household income of about $10,000 or less and don't have anything left after spending on basic needs, Steinhaus said,
Another problem is that many low-income residents know little about homeownership because "they didn't grow up where anyone in their family has owned a home," Steinhaus said.
The city also offers homeownership assistance, but fewer people are applying than in the past. In 2009, 52 people enrolled in the program, a number that was probably boosted by the federal government's first-time home buyer tax credit program, which has expired. Fourteen people applied this year; one was black.
Randy Cole, the city's director of Community Development, said fewer applicants were able to meet the program's income requirements. And the city's ability to help low-income residents become home buyers has been scaled back, he said. The federal grant that funds the city's homeownership assistance program has been cut, reducing the city's budget for the program from $162,537 in 2009 to $53,557 this year.
The city has identified a lack of affordable housing as a problem, and in 2008, an affordable housing committee released a report with a long list of recommendations. But according to a previous Missourian report, the city has fallen behind on about half of its 42 objectives.
"In the $80,000 to $100,000 range, there's not a lot out there," Steinhaus said.
Of the more inexpensive homes that are available, many are older and require expensive repairs, he said.
"It's a huge obstacle," he said.
While a shortage of affordable housing makes homeownership a challenge for low-to-moderate-income people, it's not a cause behind the statewide decline in black homeownership, said William Rogers, an economist who studies housing at the University of Missouri-St. Louis.
"Housing prices have fallen much more than incomes," Rogers said. "You're going to be hard pressed to say homeownership is more of a problem because of affordability."
A more influential factor, Rogers said, is that minorities were less likely than whites to have savings or wealth outside of their home and, consequently, were more affected when home values declined.
Nationally, as of 2009, median white household worth — assets minus debts — was 20 times that of black households, according to the Pew Research Center. From 2005 to 2009, household worth for blacks dropped by more than 50 percent to $5,677.
Declining household wealth and income and high unemployment — 16 percent among blacks, nationally — paint a bleak picture, and there is little evidence that the decrease in black homeownership will reverse in the immediate future, Jourdain-Earl said. "I really don't see an improvement anytime soon."