Home valuation issues — including difficulty finding comparable sales — could make it difficult to prove a home is worth what someone is willing to pay for it. And studies have shown that predominantly black neighborhoods tend to be rated as less valuable than predominantly white neighborhoods by raters.
Also, while the number of neighborhoods where it is possible to obtain a mortgage has increased, there are still a number of census tracts in the city where no loans were granted in 2020. In fact, in 15% of census tracts there were no mortgage applications. Lynch said there are always parts of the city that are “substantially more desirable than others”.
The ability to get a mortgage is especially important for black residents, who can use property to build wealth, create economic equity and stabilize neighborhoods that have been decimated by foreclosures, the report said. Black residents make up more than 77% of Detroit’s population, but have more difficulty getting loans than white residents. While white home ownership has increased in the city, the report says that has not been the case for black or Hispanic residents.
“As a big city, it will be a substantial change if we start letting this go unfettered,” Goss said of the potential for demographic shifts if the trend continues. “That could make it ripe for catering to high-income white households. … This disparity creates all sorts of other problems.”
Goss said she fears more investment will flow to the city’s wealthier white enclaves, creating new inequalities between black and white residents, if steps aren’t taken to improve homeownership rates. blacks and make it easier for renters to buy homes in Detroit. . One of the goals of Detroit Future City, she said, is to keep the black middle class in the city, instead of losing residents to the suburbs as they get richer.
“Underlying these trends is the stark reality that disparities in lending by race persist, and until the lower incomes of Detroit residents are resolved, the demand and opportunities for homeownership will be limited,” the report said.
The value of a mortgage loan has increased, but it too remains low. In 2020, 40% of mortgages taken out in Detroit were under $100,000; that’s down from 52% in 2018. Loans worth less than $50,000 accounted for 9% of mortgages in the city in 2020, down from 18% in 2018.
Quicken Loans, Flagstar Bank and Huntington National Bank are the three main lenders in Detroit. Quicken Loans, which filed for an IPO and became Rocket Mortgage in the summer of 2020, had 313 loans that year, more than double Flagstar. And black borrowers are more likely than white borrowers to have Federal Housing Administration loans. In 2020, 47% of black borrowers did so, compared to 7% of whites.
The report offered solutions that could increase the number of mortgages and approval rates in the city. These include increasing the incomes of Detroit residents, developing different measures to determine creditworthiness, making more good quality housing available through rehabilitation, and improving the value of the city’s housing stock. According to the study, more nonprofit lending opportunities could also help fill the gap, including more loans from credit unions.
For Goss, seeing more black buyers at a variety of price points would be a win. Gallagher said that with the scope of need as wide as it is, the problem of insufficient mortgages will be difficult to solve. But he said the proposed solutions can make a difference.
“If we do these things together, I think we can move the needle on this stuff,” he said.