Puget Sound Trends: Racial Disparities in Mortgage Financing

Homeownership plays a key role in building equity and intergenerational wealth, but due to racial segregation, redlining, restrictive covenants and loan discrimination, homeownership can seem like a dream to many people of color. For this month’s Puget Sound Trend, PSRC examined discriminatory loan rates in the region. 

People of color are more likely to be denied a mortgage than white applicants with similar qualifications. According to the Federal Financial Institutions Examination Council and the Home Mortgage Disclosure Act Database, mortgage denial rates for Black people in the PSRC region are at the rate of 23%, compared to white residents in the region with a 15% denial rate.

Even when there was a control for income, people of color are still more likely to be denied mortgages, proving factors other than income are the cause of lack of access to mortgage financing. Loan denial rates for Black applicants are consistently higher than for white applicants across all income categories. 

With these disparities occurring, Washington State and PSRC are playing a role in advancing racial equity in housing. The State of Washington took a step in this direction by passing House Bill 1474, which promotes homeownership for those harmed by systemic discrimination. With VISION 2050 and the Regional Housing Strategy, PSRC calls for increasing housing access and affordability for all people. 

Black Homes Initiative is another program that aims to address racial inequities and housing to increase homeownership for Black households. Three key concepts for this project include growing the pool of homes available for purchase, supporting Black households who want to buy a home and obtain a mortgage, as well as improving the collaboration among public, private, and nonprofit organizations to create a more efficient “ecosystem” for Black homeownership. 

For a more in-depth examination into the inaccessibility of housing due to mortgage financing, check out the Puget Sound Trend