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MIT Researchers: Hidden Black Tax On Homeowners Hurts Retirement Savings

MIT Researchers: Hidden Black Tax On Homeowners Hurts Retirement Savings

Black tax
MIT Researchers: Hidden Black Tax On Homeowners Hurts Retirement Savings/ Photo: August de Richelieu / pexel 

Home sweet home isn’t always the case for many Black-American homeowners subject to Black tax. It costs Black people more to own a home than it does whites. a new MIT study found. This makes it extremely hard for Black households to accumulate wealth at the same rate as their white counterparts, according to MIT researchers.

The study, published earlier this month, showed that Black Americans pay $743 more annually than white Americans in mortgage interest payments, $550 more per year in mortgage insurance premiums, and $390 more each year in property taxes, The Hill reported. This totals more than $13,000 over the life of the loan. The study also found that the inequities amounted to $67,320 in lost retirement savings for Black homeowners.

Using income data from the National Association of Real Estate Brokers (NAREB), the oldest minority trade association in the U.S., the study noted an income gap of $25,800 between Black and white Americans to be “exacerbated by this ‘Black tax’ on homeownership.”

A different study found that Black homeowners pay about 13 percent more in property tax.


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“State by state, neighborhood by neighborhood, Black families pay 13 percent more in property taxes each year than a white family would in the same situation, a massive new data analysis shows,” The Washington Post reported. 

In nearly every state, property tax assessments were higher in areas with more Black and Hispanic residents, according to a new working paper by economist Troup Howard of the University of Utah and Carlos Avenancio-León of Indiana University.

The inequities can be “traced to the long history of slavery, segregation, and race discrimination,” according to the study. But the research also pointed to “current policy choices that maintain the disparities.” 

Redlining has hurt Black homeowners in the past and present.

This discriminatory practice puts financial and other services out of reach for residents in certain areas and neighborhoods based on race or ethnicity. “It can be seen in the systematic denial of mortgages, insurance, loans, and other financial services based on location…rather than on an individual’s qualifications and creditworthiness. Notably, the policy of redlining is felt the most by residents of minority neighborhoods,” according to Investopedia.

The MIT policy analysis focused on disparate interest rates and mortgage insurance costs, which can be addressed at the federal level.

“We nonetheless point out that nearly a quarter of the disparity in homeownership costs for black homeowners is due to local property tax assessments. A fair homeownership system must reform these inequitable federal, state, and local policies,” the authors stated.

Homeownership by Black people is down at less than 45 percent nationwide compared to the 73 percent homeownership rate for white families.

The Black tax is also causing the wealth gap to grow. Home mortgage payments can widen the racial wealth gap, BET reported.

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When the Federal Reserve lowers interest rates, people refinance to lower their mortgage rate but more Black families are stuck at the old higher rates.

“Our data shows that,” said Ed Golding, executive director of the MIT Golub Center, and a principal author of the study, according to The Hill. Because of higher unemployment rates among Blacks that also means Black people are more likely to be in the group that can’t refinance, he said.

Black tax also comes into play when Black homeowners try to sell or refinance. They often get lower appraisals than whites.

The MIT study was written by Golding, Michelle Aronowitz, former deputy general counsel for enforcement and fair housing at the Department of Housing and Urban Development, and Jung Hyun Choi, a researcher with the Housing Finance Policy Center at the Urban Institute.