Black Detroiters are having a hard time buying houses in a city where long-held barriers to homeownership, such as mortgage discrimination and redlining, still affect residents.
Some, like Vincent Orr, are buying their homes for cash instead of turning to banks for mortgages.
Less than a quarter of Detroit homebuyers in 2019 were financed by mortgages, with a majority of those mortgages going to white homebuyers, according to the Wall Street Journal podcast episode, “Why It’s Hard to Buy a House in Detroit, Especially if You’re Black.”
Across the U.S., Black homeownship is down. The gap between white and Black Americans is larger today than it was over 50 years ago, CNBC reported.
In Detroit, Black homeownership is 36 percent lower than that of whites, according to the Wall Street Journal.
One of the main obstacles in Detroit is getting a bank to approve a mortgage. When a bank refuses to give a mortgage on a house in a neighborhood, this can spread throughout the neighborhood, making many Black neighborhoods undesirable and less valuable in terms of property. Banks think about mortgages in terms of size, and when the cost of the house is low — which can be the case in Black Detroit neighborhoods — banks are unwilling to make small mortgages since they won’t make a lot of money on the loan.
“Neighborhoods are ecosystems and when you have properties that aren’t mortgageable, often the entire neighborhood isn’t mortgageable,” Wall Street Journal Ben Eisen said on the podcast. “You end up with this cycle in which the house values fall further and stay lower and became more rundown … that just puts the idea of mortgage credit out of reach for many.”
Detroit homebuyer Orr opted for an alternative to a mortgage. He purchased his house from the Detroit Land Bank Authority home auction. Bidding started at $1,000. In June 2017, the native Detroiter won an abandoned home in the bidding process for $2,100 in cash. He spent $40,000 to make it livable, Business Insider reported.
Some Black people in Detroit who can’t buy a home with cash and can’t get a mortgage often turn to riskier prospects, such as rent-to-buy options that can leave tenants vulnerable to being evicted over past-due payments.
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When you can’t get a mortgage, you don’t have the protections that come with a mortgage and you can’t access the traditional building blocks of homeownership that build wealth, Eisen said. “You are sort of living in a way that doesn’t give you the piece of mind you would have otherwise, and that makes it harder to use homeownership to build wealth … because you can lose it at anytime.”
