A racist legacy widens the homeownership gap
Those realities are reflected in hard statistics. According to the Federal Reserve Bank of Minneapolis, homeownership rates for Black households peaked in 1950 at just over 46%. During the same period, over 66% of white households owned a home. After that, Black homeownership precipitously declined with each passing decade. Today, only 25% of Black households own homes. By contrast, almost 77% of white households are homeowners.
So, how did Minnesota become home to one of the worst racial homeownership gaps in the United States? The answer lies in the legacy of racist laws, policies, and practices. Beginning in 1910, many property deeds in Minnesota incorporated clauses—or covenants—stipulating that only white people could purchase the property in all future transactions. Black people, and members of other ethnic and religious minorities, were barred from living in majority white communities because it was widely believed their presence would “lower property values” and “erode the social fabric.”
Most Black families were segregated to fringe areas with poor infrastructure and homes that were often not in good repair. The majority were locked into rental homes where they lived with the uncertainty of unsustainable rent increases and evictions. Those who had the resources to purchase their own homes, were confined to “redlined” communities where U.S. Government-backed FHA and conventional loans were not provided. And without those guaranteed loans, homeownership was prohibitively expensive.
Despite the fact racial covenants were outlawed by the U.S. Supreme Court in 1948, the boundaries they created in Minnesota remained impermeable. Racial covenants continued to be incorporated in new deeds until 1953 when the Minnesota Legislature banned the practice. Recognizing that discrimination was still pervasive, in 1961 state lawmakers passed legislation that prohibited housing discrimination based on race, religion, or national origin. Finally, the federal government adopted this policy as the law of the land when the Fair Housing Act was passed in 1968. Although it was a triumphant moment for civil rights, enforcement of the Act has been uneven across the nation. Here in Minnesota, the Act spurred the creation of the Metropolitan Council, which was tasked with ensuring that every jurisdiction in the Twin Cities region create some affordable housing. Dubbed the “fair share” model, it spurred decades of turf battles in local communities about where such housing would be located, and how much would be available.
Without stable and affordable housing, it was hard for many residents to find long-term employment or ensure good education for their children. So, even with covenants and redlining outlawed, many Black people remained trapped in neighborhoods where they could not afford to buy property and begin building wealth. The battles continue to this day, even as the damage from racial discrimination runs generations deep.
Playing the long game to advance Black homeownership
Helping her clients achieve homeownership requires an awareness of history, sensitivity to culture, and the knowledge to help them overcome persistent obstacles, said Taylor. One of her bigger challenges is teaching financial literacy, and helping clients navigate a banking and loan system that they inherently distrust.
“You have to care and be persistent, and want it as much as they do sometimes,” Taylor said. “It’s about preparing them for the invasiveness of underwriting a loan. You tell them what it’s going to look like, and it’s going to be hard. You help them understand that it’s going to feel like people are digging and doubting and working against them—like they don’t want you to have a home—but they’re not.”
For generations, the Black community has endured systemic discrimination in every avenue of life, from education and employment to housing and finances. Taylor says widespread distrust of banks is common, and more than a few of her clients save money by stowing cash in their homes. Although there is historic justification for these practices, it doesn’t serve them well when they want to buy a home.
“They might have saved a good deal of money that way,” Taylor observed. “But they’ve got no credit history. So, the first thing I tell them is, you can’t have that money under your mattress. You’ve got to put it in the bank.” Although she encourages her clients about the prospect of owning a home, she helps them understand it could be six months or more before they are approved for a loan and ready to house hunt. “We have to make sure they pay down those credit card bills and other debts so they’re in a better position for the underwriter.”
Whenever possible, Taylor advises clients to build strong credit, save enough to put 3% down, and finance through a conventional loan instead of relying on tools like down-payment assistance (DPA). Although DPA loans certainly help people obtain homes, the added debt burden reduces their equity, she said. Consequently, if the economy slumps and unemployment surges, those without work and with high debt are the first to default and find their homes foreclosed. Those with more equity have more leverage and options open to them. When clients do use DPA, Taylor counsels them to invest some of that “mattress money” in making improvements that boost their equity in the home.
It should be noted that while some DPA programs have limitations and requirements that may present challenges for some, a coalition of organizations, including Minnesota Realtors®, are working to create a new state-funded program with the needs of first-generation homebuyers in mind. If adopted by the Legislature, the First-Generation Homebuyers Down-Payment Assistance Fund would increase maximum DPA amounts, have flexible and efficient application and origination requirements, be available statewide rather than limited to a specific city or county or tied to a specific mortgage product, and would be administered and originated by local organizations in their communities. Buyers who remain in their home for five years would not have to pay back the loan.
Trapped by invisible redlining
Taylor added that some local home-purchase assistance programs have the unintended consequence of driving participants to the “redlined” neighborhoods first defined by the U.S. government in the 1930s. For example, the Minneapolis Homes: Financing Program is dedicated to eliminating “racial disparities in homeownership” and developing “affordable and accessible low-to-moderate-income households throughout the City of Minneapolis.” The catch is that most of the properties available for development are in communities where most residents are minorities.
“Basically, it has to be an impoverished neighborhood,” Taylor said. “So, the people participating in these kinds of programs are kept inside those redlines.”
That may change as the city implements Minneapolis 2040, an ambitious development plan for creating more equitable growth over the next 20 years. Among its more controversial provisions is rezoning single-family-home neighborhoods to allow for denser development options like triplexes. The new homes would offer more affordable entry into neighborhoods where the median list price ranges from $500,000 to $920,000. Critics of the plan contend that construction costs will make it impossible to meet affordable price targets, and that added population density will strain the capacity of schools and transit systems.
Homeownership creates stability and multigenerational wealth
Given the complexities and baked-in inequities of assistance programs, Taylor believes that taking the long track of saving money and building good credit is in the best interests of her clients.
“For generations, the message to Black people has always been the same. You can’t live here with purpose and intention because of covenants, withholding access to loans, and discriminatory real estate practices. It’s done immeasurable damage to the culture and the community,” Taylor said. “I work with a lot of first-time homebuyers, and many of them grew up thinking that homeownership wasn’t for them. That’s because if you’ve never owned a house and your mom and dad didn’t own a house, and your grandma didn’t own a house, you don’t even think about owning a house.”
When asked why homeownership is so important, Taylor reflected for a moment before telling a story about her father.
“My dad grew up picking cotton in Tennessee. When he was older, he and my mom did well enough to buy his mom a house in Memphis,” said Taylor. “When I was little, my brother and I would visit all the way from North Minneapolis and play in the backyard. My aunts and uncles still live there in Big Mama’s house. They own it. And that’s the difference between ownership and rent. Generations of stability have come from being able to stay there. It has made a lasting impact for them and their children. And that’s why I’m a real estate agent today. Because homeownership is the best path to building wealth that we have.”
Taylor added that one should never underestimate the value of the peace, comfort, and stability created by homeownership.
“You don’t have to worry about where you’re going to stay or if somebody’s going to kick you out, or increase your rent, or sell your house from under you. When you own a home, you’re relieved of all that stress. You might not even think about it, but it has a big impact on your mental health and ability to think about the future; to build a life for yourself and your family. That’s how you make a better life for the next generations.”
Writing the next chapters of Black history
For Taylor, history is an ongoing story. What began with emancipation 160 years ago continues with the struggles of Black communities across the nation. So, while a month of documentaries on PBS might be a welcome spotlight, it doesn’t begin to address lingering inequities. In her work as a Realtor®, Taylor hopes to begin righting historic wrongs by helping close the gaps in housing, wealth, and education. She’ll achieve this not just by putting people in homes, but by nurturing the next generation of Black Realtors®.
“I owe it to the people coming into real estate after me; to talk to them and put them on a path to be successful. I want to get to a place where I can create more opportunities for them,” Taylor said. As a mentor, she strongly urges other Black Realtors® to join committees at their local and state associations.
“A lot of them want to join the DEI [Diversity, Equity, and Inclusion] committee, but we don’t need more people there. We need them on the Forms committee, and Governmental Affairs, and Professional Development. That’s where we can lead and bring change. That’s where we start writing the next chapters of history,” Taylor said.
Editor’s Note: This article is from the January/February edition of The Minnesota Realtor® Magazine. You can access the entire issue here.