Black millennials increased African American homeownership in 2020, but the road ahead is 'going to be a challenge,' experts say

• Amid a global pandemic, Black millennials led a boom in African American homeownership in 2020.
• But racial disparities in wealth, education, employment, and homeownership still persist for Black Americans.
• Homeownership is "going to be a challenge for all millennials, but mostly for Black millennials," an expert told Insider.

During a pandemic that hit Black communities hard, millennial buyers represented the bulk of African Americans' home purchases in 2020.

Black adults between the ages of 26 and 39 sparked a nationwide rise in the homeownership rate for African Americans, CNN Business reported.

According to a November report released by the National Association of Realtors, 5% of home buyers during the first three quarters of 2020 were Black, compared to 4% in 2019. Despite a 1% increase, US Census data shows Black millennials raised the homeownership rate for African Americans more than two percentage points over the same time frame. The homeownership rate for Black Americans grew to 47% during the second quarter of 2020 compared to 44% during the first quarter.

In addition to historically low interest rates, pandemic fatigue, and fewer expenses, experts say the recent surge is also contributed to the "buying power" millennials have compared to older generations.

"This new surge or uptick in the homeownership rate is really about the buying power of millennials and the consciousness that, 'hey, in order for me to really have a stake in my community and in my country, I need to own,' and I do think that millennials really understand this idea," Andre Perry, a fellow at the Brookings Institution, told ABC News.

Lawrence Yun, chief economist at the National Association of Realtors, told Insider that homeownership is surging among millennials overall. Of those buyers, Black millennials have been buying homes at higher rates and have disproportionately contributed to the surge in Black homeownership, which "is the path to a middle-class lifestyle and wealth," Yun said.

Systematic racism contributes to the disadvantages Black people face when trying to buy or sell a home.

Although during the pandemic many Americans have rushed to purchase property, taking advantage of low mortgage rates which have led to homes selling rapidly, Black Americans still face hurdles to becoming homeowners or participating in the housing market.

T. Mitchell of Salt Lake County, who wanted to remain anonymous for her family's privacy, told Insider that her house was appraised for $100,000 less than its value when attempting to refinance for 2 points lower. She also said the interaction with the appraiser was "uncomfortable, but not unbearable."

"When the appraiser showed up, he wouldn't wear a mask and was taking pictures in a strange way. He was clicking the camera at hip level," said Mitchell. "I thought that was weird and later when I saw the photos in the appraisal they were unflattering."

Mitchell, who is a Mexican and white, has a blended, multiracial family. Her husband is Mexican and Black, and her two daughters from a previous marriage identify as Black. She said the maskless appraiser was staring at their family photos with a strange smirk on his face as he walked through their home.

When they got the appraisal, it was approximately $100,000 less than expected.

"He refused to comparable properties that were literally on my street and used inferior homes that were not in our neighborhood and lower-priced," said Mitchell. "We appealed his appraisal and he refused to change it or use our 5 comparable properties."

Some Black homeowners had gone extra lengths such as changing their identity to skirt racial bias.

When an appraiser visited the home of Paul Austin and his wife Tenisha Tate Austin - who spent $400,000 on renovations - they were told the property was worth $989,000. It was valued at just $100,000 more than what they originally purchased it.

The Austins had their white friend pose as the homeowner, the home value increased substantially to $1.4 million, according to ABC 7.

Abena and Alex Horton, a biracial couple, also received a lower home appraisal despite living in a predominately white neighborhood in Jacksonville, Florida, the New York Times reported.

When a second appraiser came to look at the house, Mrs. Horton, a Black lawyer, conducted an experiment: She removed anything that could be deemed as "Black" and "whitened" her home. She left her husband alone this time, according to the New York Times.

The new value of the home was $465,000 - $135,000 more than their first appraisal.

According to an MIT study released in October, Black people in the US are likely to pay around $13,000 more on their mortgages due to a variety of factors including higher interest rates, less opportunity to refinance, and higher property taxes.

As Insider's Barbara Smith previously reported, this extra amount has been referred to in the study as a "Black tax."

The 'Black tax' persists.

Shawn Rochester, entrepreneur and author of "The Black Tax," told Business Insider that the "segregation tax" is perpetuated by a systemic and unconscious bias against Black people. It also steepens the disparity between white and Black Americans in housing and homeownership.

For decades Black Americans were left out of government programs that helped other citizens build wealth. In 1863, they were denied access to the Homestead Act, which promised 160 acres of land to citizens in exchange for a small fee and five years of cultivating the land.

In recent years, discrimination has continued to widen the homeownership gap for Black Americans. A lack of affordable housing in some areas has kept Black people out of certain neighborhoods, but they're also excluded.

The Fair Housing Act of 1968, which prohibited housing discrimination based on race, religion, sex, and national origin, was a follow-up to the Civil Rights Act of 1964 and intended to address issues facing African Americans who had trouble renting or purchasing homes in certain residential areas because of their race or national origin.

But despite legislation and programs to bridge the homeownership gap, Black Americans still stagger behind their white counterparts. They pay higher costs in mortgage interest payments, insurance premiums, and property taxes. Also, Black-owned homes are appraised at lower values. Also, lower incomes and higher rates of poverty, combined with difficulties in getting mortgage approval mean that homeownership rates for Black Americans remain low.

When Black people were able to become homeowners around 1865, the value of their homes was lower in comparison to those of their white counterparts. Overall, the homeownership rate among white Americans is 73%, while among Black Americans the rate hovers at 43%, Business Insider's Joseph Zeballos-Roig reported.

According to a 2001 report from The Brookings Institution, this gap in home values, or "segregation tax" imposed on black homeowners, primarily resulted from a high degree of racial segregation in certain neighborhoods. The report analyzed the value of Black homes in the 100 largest metropolitan areas in 1990. Black homeowners receive 18 percent less value for their homes than white homeowners, according to the study.

The only factor that explained variations in the black-white home value-to-income ratio among metropolitan areas was the degree of residential segregation. The higher the level of segregation, the wider the gap between Black and white Americans, according to the report. The lower the segregation, the narrower the gap.

Bloomberg's Citylab released a study in 2019 that found homeowner associations (HOAs) tend to be run by richer white or Asian Americans. Critics of HOAs say the organization encourages "exclusion" and racial segregation. HOA residents are disproportionately more likely to be white or Asian, and disproportionately less likely to be black or of another race than non-HOA residents, the study says.

Future homeownership is going to be a 'challenge' especially for Black millennials

Though record-low mortgage rates have drawn many millennials to buy homes, the future is beginning to look bleak. Yun said there's not enough inventory, prices are starting to rise again, and mortgage rates are starting to pick up.

"It's going to be a challenge for all millennials, but mostly for Black millennials because of wealth disparity and discrimination," Yun said.

Since taking office, President Joe Biden has pushed for racial justice policies through executive orders, signing one on January 26 to advance equity and take the first steps to root out systemic racism in housing. Biden said he will direct the Department of Housing and Urban Development (HUD) to take steps necessary to redress racially discriminatory federal housing policies that have contributed to wealth inequality for generations.

A significant portion of Biden's housing plan is focused on affordable and accessible housing for low-income individuals. According to a March 2019 report by the National Low Income Housing Coalition, there's a shortage of affordable homes to Americans who desperately need them.

To combat this, the Biden administration's housing plan would push for the reinstatement of the HUD's risk-sharing program, which has helped secure financing for thousands of affordable rental units in partnership with housing finance agencies.

According to Yun, a combination of policy and tax incentives would fix inequality in homeownership for Black people. Biden proposed a tax credit for first-time homebuyers of up to $15,000 that would encourage Americans with modest means or middle-class roots to purchase a home.

"It would benefit all people, but mostly the younger generation since the older generation probably owns a home already," said Yun.