Racial Homeownership Gap Grows in Minneapolis and St. Paul

Black homeownership in Minneapolis and St. Paul has fallen by 32% over the past two decades.

Regrettably, the Minneapolis-St. Paul metro area is home to the largest homeownership gap between white and Black households in the entire country. And this gap is only growing. The Urban Institute dives into this issue in its recently released report and looks at the growing problem in the Twin Cities.

“Who Owns the Twin Cities: An Analysis of Racialized Ownership Trends in Hennepin and Ramsey Counties” examines the root causes impacting the homeownership gap between whites and non-whites and why the gap is still growing in the metro area.  

Although issues with racism and real estate have been present for almost a century, it has swelled in the last two decades. From 2000 to 2018, the white homeownership rate in the Twin Cities has remained steady at around 70%.

Meanwhile, the rate of Black homeownership has decreased in the same time period. Black homeownership has fallen by 32% over the past two decades from 31% in 2000 to just 21% in 2018.

The rate of Latinx homeownership did not see the same drop. Latinx homeownership dipped slightly from 2010 to 2018, but is up overall from 2000.

Homeownership is strongly desired by virtually all Minnesotans, and the positive impacts flowing from homeownership are substantial. This makes this issue especially urgent as an issue of public policy and community concern. 

Behind the Growing Equity Gap: Affordability Crisis, Predatory Lending, and Investor Activity

The MSP metro has the worst affordability and inventory of available homes in the Midwest, which pressures many segments of the housing market. These overall market challenges are exacerbated by a host of factors contributing to the region’s housing equity crisis. The Urban Institute’s report cited several additional factors impacting the equity gap.

During the Great Recession, predatory loan practices impacted families of color disproportionately. As a result, families were left with penalties like low credit scores and having their homes foreclosed on. These families, subsequently, struggled to buy homes in the post-Recession economy. White families, who were impacted at a lower rate, had fewer issues recovering financially and getting back into homeownership.

Investors took advantage of the cheap single-family homes in these areas that were flooding the market. These properties, in largely non-white neighborhoods, were bought at a fraction of the cost and converted to rentals at almost double the rate from before the Recession.

The Urban Institute’s report identifies these areas as “displacement neighborhoods,” areas where low-income families are pushed out as wealthier families move in and the overall price of living goes up, a trend known as “gentrification.”

These areas are parts of the metro where the homeownership gap is widening at some of the fastest rates. On average, the gap in ownership in these neighborhoods broadened by 10% from 2000 to 2018. As single-family homes in these neighborhoods were converted to rentals, and the price of housing inflated, many displaced families of color were left with renting in their neighborhoods as their only realistic option.

The report points out that from 2000-2018, Black households in Hennepin and Ramsey counties grew by 30,000. But, only about 2,000 of these new households became homeowners. Their neighborhoods suddenly lacked homes at an affordable price point, leaving many people behind on the path to homeownership.

Homeownership is a route to economic and social stability for many. However, this opportunity for wealth creation is not being experienced in an equal way between white and non-white individuals in the Twin Cities.