Pandemic threatens to widen racial wealth gap

Blacks and Hispanics lost their homes at a far higher rate than whites in the 2007 housing crash, forcing many into rental units. Now, in the latest crisis, it's renters who are the hardest hit — and that's threatening to widen the country's already staggering racial wealth gap.

While congressional relief has allowed homeowners to delay payments on federally guaranteed mortgages — more than 60 percent of the market — renters are more vulnerable. The CARES Act banned evictions in federally backed apartment buildings, but that applies to only one in four rental units, and eviction protection doesn't help apartment dwellers pay the rent.

As a result, one of the next big battles on Capitol Hill will be over a push by leading Democrats, such as House Financial Services Chairwoman Maxine Waters and Sen. Sherrod Brown, to include billions of dollars in direct rental assistance in the next economic relief package.

Waters, of California, is lobbying hard to get the rescue package to include her legislation banning evictions and directing $100 billion in rental assistance to tenants in unsubsidized housing.

“I’ve warned everyone we must include my $100 [billion] plan to protect renters from evictions,” Waters tweeted on April 24. “I’m prepared to fight till hell freezes over to get it done!”

Immediate relief could head off a long-term danger for many renters: Struggling tenants — including a disproportionate number of minorities whose jobs have been wiped out by the crisis — will be unable to stay current on their rent, meaning they could be slammed with massive payments when the emergency ends. They will then face not only eviction but also a major hit to their credit scores, which would hurt their ability to build wealth for years to come.

Rep. Barbara Lee (D-Calif.) is seeking an immediate moratorium on evictions for “all types of rentals,” not just those that are federally subsidized.

“We haven't recovered from the last recession in terms of the loss of one's home,” Lee said in an interview. In communities of color, “we have a pandemic upon a pandemic.”

The growing frustration among tenants resulted in a series of rent strikes across the nation on Friday, with protesters from California to New York calling on state officials to freeze rents during the pandemic.

But getting federal help to apartment dwellers won't be easy. House Speaker Nancy Pelosi failed in her attempts to include rental assistance and forgiveness in the last relief package, with Republicans arguing that direct cash payments the government is already offering to millions of Americans could go toward rent.

And merely canceling rent payments — as progressives like freshman Rep. Alexandria Ocasio-Cortez (D-N.Y.) have advocated — would cripple many landlords who pay property taxes to fund things like schools. Even the moratorium on evictions is raising concerns that landlords will be unable to make basic payments, and housing advocates are worried that there will be a wave of evictions once the crisis passes.

Some Senate Republicans like Majority Leader Mitch McConnell, meanwhile, are starting to raise objections to the growing price tag of government relief, setting the stage for more fights over the costs of every assistance provision going forward.

Yet for black and Latino populations the situation is dire, since they are suffering higher rates of hospitalization and death because of the virus. It's a disparity that National Fair Housing Alliance President and CEO Lisa Rice says points to “multilayered” systemic inequality that has long linked race with location in America, with the legacy of decades of redlining, which is the practice of denying home loans to those in minority neighborhoods.

What's more, it’s easier to tailor government assistance for people who own their homes because “we already have this huge housing financial apparatus set up around homeowners,” said Zillow senior principal economist Skylar Olsen.

That gives a large advantage to whites: While about 74 percent of white households live in homes they own, only about 44 percent of black households and 49 percent of Hispanic households do, according to Census data.

“White residents are getting a better deal because they’re disproportionately homeowners,” Rice said.

And since owning a home is the primary way most Americans build wealth, the disparity in homeownership exacerbates the gap between the races. The median net worth of a white family was nearly 10 times the net worth of a black family and a little over eight times the wealth of a Latino family in 2016, according to Federal Reserve data.

“It does become self-reinforcing,” Olsen said. “If I have a barrier to homeownership, I don’t have that source to pass on that wealth, I don’t have that equity to draw on during bad times, … it really was kind of primed for a lot of reasons to get worse.”

Fannie Mae and Freddie Mac, the government-sponsored companies that own or guarantee half of the nation’s $11 trillion mortgage market, were created to encourage homeownership. Government support for renters — such as low-income housing vouchers administered by HUD — is paltry by comparison.

It’s also easier to tack missed payments onto the end of a mortgage, Olsen said, to avoid hitting people with massive bills when the emergency has passed.

“The real pain will come back when you have to start paying this back,” she said, since homeowners can modify their loans. “For the homeowner there’s more options — they can design it so that you can pay it back at the end of the term, … but with rent, how would that work?”

National Low Income Housing Coalition President and CEO Diane Yentel also warned that policymakers may be creating “a financial cliff for renters to fall off when eviction moratoriums are lifted and back-rent is owed.”

The black homeownership rate peaked at 46.5 percent in 2007, before a wave of foreclosures from the subprime meltdown sent the rate plummeting to pre-1970 lows. Hispanic homeownership also has failed to return to pre-crisis levels over the last 12 years.

Latinos have made gains since the 2008 recession but those who are U.S.-born — and make up 52 percent of the Hispanic workforce — have not fully recovered, according to a Pew analysis.

“Latinos were the hardest hit of any racial ethnic group in terms of wealth loss during the Great Recession,” said Sonja Diaz, director of UCLA’s Latino Policy and Politics Initiative. “Over the course of the last five years, Latinos have had targeted increases in their share of home ownership in the United States and in fact have been instrumental in increasing the national share of home ownership, [but] any recession associated with the coronavirus threatens that.”

Congressional Black Caucus Chairwoman Rep. Karen Bass (D-Calif.) said she is pushing for “all of the above” regarding rental assistance and eviction halts for the next relief package. And Rep. Brenda Lawrence (D-Mich.), who represents parts of Detroit, is pushing to include a moratorium on utility shutoffs.

Part of the problem with the existing eviction moratorium, according to housing advocates, is that it’s nearly impossible for most renters to figure out if the protection applies to them because they don't know whether their landlord has a federally backed mortgage. Waters’ bill includes $10 million for HUD to “carry out a national media campaign to educate the public of increased housing rights” during the pandemic.

Black and Latino households pay a higher share of their income on rent than white households in most major metropolitan areas, according to Zillow, which found that recent mass layoffs are already hurting minorities’ housing security, in an analysis released this week.

While any economic shock would slam those communities, this crisis has been particularly brutal. Racial minorities have been walloped by job losses and furloughs, economic data show, largely because they make up a significant portion of workers in the industries, like retail and food service, hit early and hard by shutdowns.

In the most recent monthly jobs report from the Department of Labor, the unemployment rate jumped by 0.9 percentage point from February to March, to 4.4 percent — a period that barely begins to take in the worst of the pandemic shock. While white and black workers both saw the same 0.9 percentage point increase, Hispanic or Latino workers saw a rise of 1.6 percentage point.

That exacerbated a gap in the overall unemployment rate by race. The unemployment rate for white workers stood at 4.0 percent in March, compared with 6.7 percent for black workers and 6.0 percent for Latino workers.

“We’ve had these racial unemployment gaps, and they’ve persisted through good economies and poor economies,” said Olugbenga Ajilore, a senior economist at the left-leaning Center for American Progress. “Once this epidemic hit, it just basically showed these cracks in the structure.”

It’s likely those gaps will be larger in the April jobs report, due May 8. Hispanic workers account for 18 percent of employment in the economy, but 21 percent in higher-risk industries, according to a recent Pew Research Center analysis of government data. Black workers account for 12 percent of employment overall but 14 percent in higher-risk industries.

At the same time, other data show minorities are less likely than white workers to be able to work remotely. A Labor Department analysis from late last year showed 16 percent of Hispanic workers said they were able to work from home — barely half of the 31.4 percent of non-Hispanic workers who reported the same.

“The Covid-19 pandemic has exposed in our country the disparate way in which people live,” CBC member Yvette Clarke (D-N.Y.) said. “It's going to take a lot of work and it's going to take a lot of reflection so that we don't find ourselves basically in a vicious cycle.”