Redlining’s Legacy: Hurdles Remain to Break Down the Homeownership and Wealth Gap

Zillow believes everyone deserves to find a home free of discrimination and is committed to effecting change to address housing market inequities

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More than five decades after redlining — policies and real estate practices that effectively excluded Black families from owning homes in certain areas — was outlawed, injustices continue to affect the Black community’s access to housing in subtle yet impactful ways. This modern-day redlining limits Black home buyers’ access to loans as well as their ability to use housing as a tool for building generational wealth. 

There have been recent gains to celebrate: The gap between the value of the typical Black-owned home and the typical U.S. home is the narrowest it’s been in the past two decades. That said, the typical Black-owned home is still worth about 15% less than the typical home overall, and housing accounts for nearly 40% of the $3 trillion wealth gap between Black and white households in the U.S., showing the scale of the task that remains.

To create a more fair and equal housing market, we need new policies, programs and technology solutions that address gaps and help historically disadvantaged communities become homeowners.

The following are a few of the ways Zillow is pushing for a more equitable housing market.

Addressing appraisal bias

Appraisal bias that undervalues Black-owned homes is a well-documented issue and one that Zillow research has shown contributes to the racial wealth gap and limits the ability of Black homeowners to build generational wealth. 

This issue can be exacerbated if homes in majority Black neighborhoods are in turn overvalued for tax purposes, meaning Black homeowners are charged more than they should be in property taxes, yet receive less than fair value if they decide to sell their home. 

Zillow supports legislation and other efforts that would require training in implicit bias and fair housing laws for real estate assessors and appraisers. 

In addition, technological advancements such as 3D floor plans brought about by companies like Zillow make the use of remote appraisals a possibility. With this technology, homeowners’ assets can be valued more accurately and without potential human bias. 

Reducing rent burdens

For many, the path to homeownership starts with renting. Saving up for a down payment becomes an uphill battle for those struggling to afford their monthly rent payments, which now is as challenging as ever with rent prices at a record high

One way to improve affordability is lowering upfront costs and increasing transparency regarding the fees many renters pay in addition to their monthly rent. Zillow research has shown that these upfront costs — things like application fees and security deposits — are typically higher for Black renters; a larger share of Black renters pay an application fee than other races, and Black renters are more likely to submit at least two applications before finding a place to call home. 

Zillow has tools that help renters find and secure an affordable place to live, including an application option that allows people to apply to as many participating properties on Zillow as they’d like over a 30-day period for a flat fee. 

Other unexpected fees, such as a security deposit or a pet fee, can push an otherwise affordable rental out of a renter’s price range. Zillow is proud to partner with the White House in its effort to “turn on the lights” for renters by making them aware of these fees and offering solutions to help renters save money. Zillow’s Cost of Renting Summary gives renters a clear picture of their potential monthly bill, helping them easily compare options and find the home that’s right for them. 

Zillow’s tenant screening tool allows renters to include additional information to fully explain the information in background reports, a best practice that benefits both renters and landlords. And our rentals listing platform displays local legal protections with each listing — including where renters are protected from discrimination based on their source of income. Zillow has also submitted written testimony in support of bills that would establish source-of-income protections in localities where they aren’t currently in place.

Housing choice vouchers are an important and related part of the conversation. This program serves nearly 5 million people each year, but more can be done to help meet the growing need. Some families wait years to land a voucher, and their choices are limited without protections regarding the source of their income. Also, some landlords are understandably cautious about participating in these programs because of the red tape and uncertainties involved. 

Zillow supports increased funding for the housing choice voucher program; ways to boost housing provider education and outreach so that landlords feel more confident navigating these systems successfully; and improved administrative and payment methods for housing providers to retain their participation. An improved housing choice voucher program would benefit both tenants, providing them with increased access to secure housing; and housing providers, who can more easily accommodate tenants with reliable payments directly from government resources.

The down payment hurdle

Saving for a down payment has long been the biggest challenge for those aiming to buy their first home. In a 2021 Zillow survey, two-thirds of renters across 20 major metro areas cited saving for a down payment as the biggest hurdle to buying a home. Skyrocketing home values and rents mean that challenge is as tough as ever, and today’s housing affordability crisis perpetuates economic and racial inequities.

Zillow research has shown it takes longer for Black households to save for a down payment, largely due to income and wealth inequality. That may explain why Black home buyers typically put less money down, which means a higher monthly payment, especially with today’s higher mortgage rates.

Addressing the down payment barrier could make homeownership a reality for hundreds of thousands of income-ready Black households and consequently shrink the homeownership gap. Zillow includes information on down payment assistance resources on every for-sale listing on its site to help potential buyers connect to one of the more than 2,000 assistance programs available across the United States

Zillow continues to support programs that give first-time home buyers a boost in the form of financial assistance with down payments, closing costs and loans and dedicated tax-free savings accounts for funds earmarked for down payments.

Equal access to credit

Black people often face unequal access to housing financing programs, including discriminatory lending practices, higher interest rates, stricter requirements and insufficient access to banking services in their communities. Black mortgage applicants were denied a loan 146% more often than white borrowers in 2022 — 21.58% of Black applicants for conventional home purchase mortgages for primary homes were denied in 2022, compared to 8.75% of white applicants, according to 2022 Home Mortgage Disclosure Act data — with credit history the most common reason cited for those denials. This more limited access to credit is also likely to impact future generations, decreasing the amount of generational wealth to pass on. 

Improving access to traditional financial services, particularly in underserved communities of color, can play a role in narrowing the credit access gap and potentially reduce the disproportionate rate of mortgage denials experienced by Black mortgage applicants. 

Creating more avenues for borrowers to establish a credit history and build their credit score — such as using positive rental payment history as a factor to determine mortgage eligibility, as Fannie Mae and Freddie Mac now do — is one example of a policy change that will make a positive difference regarding this issue. 

More work to be done

To halt modern-day housing discrimination and put housing inequality behind us for good, it will take concerted, focused and sustained efforts from everybody involved. That means championing stronger policies at the federal, state and local levels to reduce bias, barriers and discrimination in housing. Private companies also have a critical role to play, delivering resources and tools that foster a housing market that works better for everyone. 

Zillow actively works to advance laws and policies that expand and improve equitable access to housing, such as:

  • Revising zoning laws to help increase housing supply and opportunities for underserved communities.
  • Increasing down payment assistance resources for qualifying borrowers.
  • Expanding rental protections, such as source-of-income protections. 
  • Increasing funding for the housing choice voucher program.
  • Training appraisers and embracing digital tools to reduce bias in appraisals. 
  • Expanding access to credit by embracing on-time rental payment reporting as a way to build credit.

We are proud to partner with organizations such as the National Fair Housing Alliance and the National Housing Law Project to help advance fair housing goals for renters and prospective buyers across the country.  You can help ensure that members of your community have fair access to housing by supporting efforts at the local, state and federal levels.