Zillow Research Highlights Credit Insecurity Barrier to Homeownership, Particularly for Black Families

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In a recent study, Zillow Research has revealed that millions of people, particularly Black families, are unable to become homeowners due to a lack of credit access. This forces them to continue paying rent, which is often higher than the monthly mortgage payments they could afford.

Nicole Bachaud, senior economist at Zillow, pointed out the vicious cycle this creates. “Lack of credit access keeps people in a cycle of paying more in rent than they would pay each month for a mortgage on that same home,” she said. “Communities of color, particularly Black families, see this play out, keeping a path to economic stability and wealth generation locked.”

Credit insecurity, defined as the challenges individuals face when qualifying for credit, is especially prevalent in Black neighborhoods. Despite being able to afford a monthly mortgage payment, many Black households are compelled to remain renters due to limited access to traditional and safe credit building. This is a significant concern given that tenants nationwide spend $600 billion on rent annually, with these payments often not contributing to credit building.

The Zillow analysis also revealed a direct correlation between areas with high credit insecurity and lower homeownership rates. These areas typically have higher rental costs compared to mortgage payments, even with the current 22-year high mortgage rates. This indicates that lack of credit access is as much a barrier to homeownership as affordability.

New Orleans was identified as a city that most exemplifies this trend. In New Orleans’ credit-insecure census tracts — where 56.7% of the population is Black — a median renter household spends 77.5% of its income on rent. In contrast, a median homeowner household would spend only 28.6% of its income on a typical mortgage payment.

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The findings from Zillow’s research underscore the persistent racial disparities in homeownership and financial opportunities, a legacy of now-prohibited redlining practices. Policymakers are urged to explore solutions to improve access to credit for these communities, paving the way for economic stability and wealth generation.

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