The Great Recession was a big step backward for black homeowners

Gwynn Gittens had always been a renter, and every place she rented had white walls.  

When she saw the Lehigh Acres, Fla., spec house with its pale gold walls and Italian tiles, “It was just perfect,” Gittens said. “This was home.”

The year was 2007. Mortgage rates had topped 6%. 

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“We know it’s a little high right now,” said the bank representative of her $1,300 monthly note, “but after a year, you can look at refinancing.” 

Gittens and her husband had furthered their educations and expected their boat would rise. Instead, her husband lost his pipe fitter job in the housing crash, and the bank that promised to modify their mortgage foreclosed.

Every Southwest Floridian has a tale like the Gittens’ or knows someone who does. But the Great Recession flattened minorities — especially African Americans like them.

The dream that became a nightmare

It wasn’t supposed to happen this way. 

“We have a problem here in America because fewer than half of all Hispanics and African Americans own a home,” President George W. Bush said in 2002, promising to add 5.5 million minority families to the rolls of home ownership.

Back then, the median wealth of a typical black family was $63,000; a quarter of what it was for the median white family, according to an American Civil Liberties Union report. 

Modest as it sounds, this was a huge milestone for African Americans, many more of whom could qualify for an entry-level home. 

“Without the Great Recession, home equity values for black and white families at the same income and education levels were headed toward parity by 2050,” the ACLU found.  

If only subprime loans targeting minorities hadn’t pumped the market and then helped tank it. Lenders even steered well-heeled black families down the subprime path. A Department of Treasury report found high-income blacks twice as likely as lower-income whites to refinance with these costlier, riskier loans.

The come-on of predatory products are one of the reasons Lehigh Acres grew so fast in the boom years, said urban planner Daniel Herriges, and why its racial makeup, controlled in its segregation years by protective covenants, changed from 93% to 66% white. 

Today, most of Lehigh’s former homeowners, including the Gittens, rent homes owned by out-of-town investors.

From Miami to Los Angeles, lawsuits continue against banks that allegedly steered blacks and Hispanics to higher-cost, riskier loans, even when they qualified for better. 

Discrimination played a role in loan modifications and foreclosures, too, federal agencies found. 

Keenya Robertson’s organization, Miami-based Hope Fair Housing Center, joined 19 others in a complaint against Fannie Mae for neglecting foreclosed properties in minority neighborhoods.  

“Over the years, the level of maintenance that would happen was higher in white neighborhoods, and those homes were marketed,” Robertson said. “This sucked the equity out of black neighborhoods.”

It wasn’t just property managers and banks that let minority real estate wither. Cities, including Fort Myers, Fla., also contributed to their disinvestment and decline.

In 2007, when home values peaked at $110,000 in Dunbar, Fort Myers' traditionally African-American area, the city made it a Community Redevelopment Agency district. Funds for improvements had to come from increasing property values. 

There weren’t any. 

Instead came the crash, lopping Dunbar’s median home value to $16,000 in 2009. The district could have been sun-setted and restarted at that rock-bottom base, but the city did nothing for eight years.

It slashed spending in the area and kept an open dump site there, while using general revenue in other areas.      

Today’s median Dunbar home value is $65,000.

A century and a half of progress wiped out

For African Americans, especially, the Great Recession drew force from a long history of property discrimination.  

Union Army Gen. William T. Sherman offered freed slaves "40 acres and a mule" to start new lives after his march through the South in late 1864. Just as 40,000 black farmers began working 400,000 acres of abandoned land, Congress reversed the order, evicting most.

Jim Crow laws restricted black real estate ownership from the 1870s into the 1960s.

Property owners could make buyers sign restrictive covenants barring minorities from their neighborhood. Underwriters could keep properties from being occupied on the basis of race. 

Through a system called redlining, federal housing agencies mapped areas of cities not fit for investment on the basis of race as well as income. 

Property appraisers used the maps to lower values in those areas. Starved of private development, the neighborhoods declined.  

Through all of it, blacks have found ways to own property; just not worth as much or in as desirable locations as whites.

Doing it their way

Through the Great Recession, Barbara Parker kept her Fort Myers home because she owned it. Her approach to real estate — as a long-term homestead rather than a material asset — is one many African Americans share.  

“We didn’t buy homes to stay 10 years and sell,” said the retired Fort Myers educator. “That’s a businessman’s idea. Our goal is to settle down, raise a family and have somewhere to live when we grow old."

Parkers’ grandparents lived in sharecropper housing. At a time when banks didn’t lend to blacks, her parents’ landlord sold them his house. 

When her turn came, Parker bought a lot in Fort Myers’ Dunbar. Then she took a night job selling shoes.   

“This is what I wanted,” she said, “a front yard and a yard in back, a place to raise a family, and when I die, a place to leave to my kids.”

Eight years later, in 1990, she built the two-story, three-bedroom house she could afford. For Parker, a single mother, “borrowing money means you owe someone, and you don’t want to be in debt. I didn’t have anyone to depend on.”

Although the Great Recession brought more renters to her neighborhood, black homeowners remain a strong presence in Fort Myers.   

“When people in our community purchase their home, they’re here for life,” Parker said.

What could we do differently?

If the status quo continues, Latino families will need 84 years to attain the wealth of whites today, and black families will need 228 years, an Institute for Policy Studies report concludes.

It sounds daunting, yet solutions for these families are not only possible, they’re also “a huge opportunity,” said Alanna McCargo, a housing finance vice president at the Urban Institute. 

“Access to smaller lending is a concept found in other countries that I think is viable in the U.S.,” McCargo said. “Small loans are happening in pockets around the country. If the activity could be scaled up, more investment and funding would follow.”

McCargo is talking about access to down-payment grants and modest, non-predatory loans that lower-wage working people can afford. Look not to big banks for these solutions, she said, but to credit unions, micro-loan funds and others who make capital available to low-income communities through grants from the federal Community Development Financial Institutions Fund.

She points to Homewise, a New Mexico-based community lender that helps aspiring homeowners through every step, from saving to servicing the loan after they buy. In-house real estate agents match clients to homes, commission-free. Two 30-year loans cover 80% and 18% of the purchase price, requiring a $2,000 down payment.

The results have challenged a post-recession stereotype that entry-level wage earners can't handle a home loan. Urban Institute found Homewise's clients performed better on their low down-payment loans than similar buyers in their region. 

A short window of opportunity

As post-recession prices have inflated home values in traditionally white enclaves, minority neighborhoods offer a last bastion of affordability.

But black and Hispanic families need help to compete even on their home turf, especially against cash-rich investors.   

Terry Records of Records Results Real Estate is one Southwest Florida real estate agent who's researched down-payment grants to get entry-level buyers into homes. 

Along with East Fort Myers, Dunbar  offers opportunities, Records said.

"The renters I talk to can still buy a house in the Dunbar neighborhood," she said, "but once there is a bigger pool of people, they will use up the low end of the market."

Last April, an investor client of Records bought a two-bedroom, one-bath home on Pawnee Street for $35,000 on a double lot, rehabbed it for about $45,000 and re-sold it to a retiring African-American couple who were thrilled to own a home in the neighborhood of their youth, after renting in Cape Coral throughout their working lives.

The deals won't last long, though.

"I do anticipate the price will jump 10 or 20% for the same kind of house," Records said. "A house I'm looking at in Dunbar that’s $64,099 will be in the $90,000s 18 months from now."

Follow this reporter on Twitter @PatriciaBorns