For many Americans, owning a home is an integral part of the American Dream. In New York City, where high home prices often make ownership prohibitively expensive, the American Dream looks remarkably different. The New York City Dream often involves triumphs other than being handed the keys to a home – like starting a small business, beginning a new career, or being the first in a family to move away from home. But in a city where just one-third of residents are homeowners compared to roughly two-thirds in the United States, how attainable is homeownership for those who seek it in the Big Apple?

Recent data reveals how race and ethnicity alter the path to homeownership in New York City. At each step in the mortgage process, from the initial application to final approval, the numbers point to a progressively less diverse pool of New Yorkers who are successful in securing the financing they need to own a home. For a sizable portion of the city’s black and Hispanic populations, the dream of homeownership may remain a dream deferred.

A Seat at the Table: Who Owns in New York City?

White and Asian residents are far more likely to be homeowners in New York City than black or Hispanic residents. In 2013, 41.6 percent of Asian residents in New York City were homeowners, the highest homeownership rate among the most common racial/ethnic groups. White residents were close behind with a homeownership rate of 41.4 percent. In sharp contrast, just 26.5 percent of black residents and even fewer Hispanic residents, 16.1 percent, were homeowners in New York in 2013.

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The citywide trend is mirrored in each of the five boroughs: a greater share of white and Asian New Yorkers are homeowners than their black and Hispanic counterparts. In Manhattan, where homes are the most expensive and often the hardest to find due to intense competition and low supply, the barriers to homeownership affect all racial groups. No group has a homeownership rate that exceeds 31 percent in Manhattan. In Staten Island, by contrast, homeownership is more prevalent for all racial groups. Almost four in five Asian residents in Staten Island own a home, the single highest homeownership rate in the city. Even Hispanic residents, who have the lowest homeownership rate in each of the four other boroughs, have a relatively high homeownership rate in Staten Island at nearly 46 percent.

The greatest disparity in homeownership rates between racial/ethnic groups occurs in the Bronx, where white residents are 4.6 times more likely to be homeowners compared to Hispanics and 2.5 times more likely than black residents. Just 10.1 and 18.7 percent of Hispanic and black residents in the Bronx are homeowners, respectively, whereas nearly one in two (46.8 percent) white residents are homeowners.

A Foot in the Door: Who is Applying for Mortgages in New York City?

For many, the path to homeownership involves a mortgage application. Mortgage data provided by the Home Mortgage Disclosure Act (HMDA) reveals that black and Hispanic New Yorkers are greatly underrepresented among applications for a conventional home mortgage. Despite making up a cumulative 51.3 percent of the city’s population, black and Hispanic residents submit just 11.2 percent of the city’s conventional mortgage applications. By contrast, Asian residents make up 13.4 percent of the city’s population yet account for 22.4 percent of all conventional mortgage applications. White residents account for 32.6 percent of the city’s population and account for 46.3 percent of all conventional mortgage applications.

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The racial disparity is more dramatic at the borough level. In the Bronx, for example, Hispanic people account for 54.6 percent of the population yet they represent just 25.4 percent of all conventional mortgage applications there. Similarly, black residents make up 31.3 percent of Brooklyn’s population but account for just 7.4 percent of the borough’s conventional loan applications.

A greater share of black and Hispanic New Yorkers turn to Federal Housing Administration (FHA) loan products. An FHA loan is insured by the federal government and typically has more generous credit score and income standards than conventional loans. FHA loans also require a smaller down payment, sometimes as little as 3.5 percent, making it more accessible to individuals with lower incomes who may struggle to save for the advised 20 percent down.

Whether due to greater exposure to the FHA market through community banks, the credit friendliness and lower down payment requirements, or possible discrimination in the conventional market, it’s clear that FHA loans are important to non-white borrowers. Whereas non-whites account for 53.7 percent of conventional loan applications in New York City, they account for 81.1 percent of FHA loan applications. The share of applications from black residents, in particular, increases significantly between conventional loans and FHA loans. Citywide, just 5 percent of all conventional loan applications are submitted by black people, but that share rises to 37.9 percent for FHA loan applications.

A similar option is to pursue loans that are insured by the U.S. Department of Veterans Affairs (VA). VA loans are available to individuals with former or active military duties and in some cases surviving spouses. Similar to FHA loans, VA loans typically have more generous credit score and income requirements than conventional loans. Unlike FHA loans, however, there is no down payment required or insurance premiums for VA loans. Since VA loans are restricted to certain approved buildings, they are fairly rare in New York City. The racial distribution of VA loan applications mirrors very closely the racial distribution of New York City’s population.

A Dream in Motion: Who Gets Approved for Mortgages in New York City?

Black and Hispanic people in New York City are far more likely to be denied a conventional mortgage than white and Asian applicants. Citywide, 33.6 percent of black applicants and 29.2 percent Hispanic applicants are rejected by a financial institution, compared to just 18.4 percent of all applications. White applicants have the lowest denial rate (15.8 percent) followed closely by Asian applicants (18.5 percent). In other words, conventional loan applications from black and Hispanic people are 2.1 and 1.8 times more likely to be denied compared to an application from a white applicant, respectively.

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The denial rates for black and Hispanic applicants in New York City are also higher than the denial rates for black and Hispanic applicants in the United States. The denial rate for black applicants across the U.S. is 27.6 percent, 6 points lower than in New York City, and the denial rate for Hispanic applicants across the U.S. is 21.9 percent, 7.3 points lower than in New York City.

This pattern is repeated in each of the five boroughs, at times to extremes. In Staten Island, for example, one of every two applications (51.1 percent) from black applicants is denied – the single largest denial rate in the city.

Denial rates among applications for FHA loans are less disparate across racial/ethnic groups. Citywide, 27.4 percent of all FHA loan applications were denied. Asian applicants had the highest denial rate (32 percent) followed by black (28.4 percent), Hispanic (26.8 percent) and white (23.0 percent) applicants. Across the U.S., just 17.4 percent of all FHA loan applications are denied.

Why Race Can Matter for an Aspiring Homeowner

While HMDA data does not point to racial or ethnic discrimination in the home mortgage finance system, it does reveal large disparities in outcomes between racial and ethnic groups in New York City. The striking differences within the pool of mortgage applicants is due in no small part to the substantial disparities in annual income among white, Asian, Hispanic and black households. The median household salary for whites in New York City was $62,000 in 2013. Asians also tend to be more affluent, with a median household income of $58,000. By comparison, black and Hispanic households in New York City earned a median income of $41,000 and $37,000 annually per household, respectively. Households earning a low annual salary must dedicate more income on living expenses, making it more difficult for them to accumulate the savings necessary for a down payment.

Credit-worthiness is another factor that makes certain households ineligible for home mortgages. Black and Hispanic residents face more obstacles here, too. According to a May 2015 report by the Consumer Financial Protection Bureau, black and Hispanic people are more likely than whites and Asians to lack sufficient credit histories to acquire a mortgage.[i] While the data is not broken out for New York City specifically, the report found that roughly 15 percent of black and Hispanic residents in the United States have no credit report at all. An additional 13 percent of black people and 12 percent of Hispanic people have unscored credit reports, meaning their accounts are either too new or too old to be scored by the nation’s three credit reporting agencies. Without proof of credit-worthiness, these “credit invisibles” are often shut out of the mortgage finance system entirely.

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[i] http://files.consumerfinance.gov/f/201505_cfpb_data-point-credit-invisibles.pdf