Starter homes out of reach for black people in 80% of metro areas

Your race can have a significant impact on whether you'll get on the housing ladder, new research suggests.

According to a recent Redfin report, black families can only afford a starter home in 20% of America's biggest metro areas. By contrast, white buyers can comfortably shop in 64% of metros.

The affordability threshold is set based on a rule that no more than 30% of income is spent on housing costs.

Redfin also found a major divergence in affordability for black families across the nation. In Detroit, a black family would typically need to spend 16% of their earnings to buy their first home.

Among other affordable metros are St. Louis, Baltimore, Indianapolis, and Philadelphia.

On the other end of the spectrum, black families would have to spend more than they earn—more specifically, 104%—just to afford a starter home in San Francisco.

"It's essentially impossible for typical black families to afford starter homes in much of California, even with healthy earnings," Redfin's report explained.

While Redfin concedes that many white families couldn't afford to buy a starter home in much of California, the challenge of getting on the housing ladder is much less acute.

Reasons to be cheerful?

Black families hoping to own their own place face a double-edged sword.

On one hand, the cost of a starter home has surged by 8% in the past year alone—pushing lower-income buyers, many of whom are black, out of the market.

In an attempt to put the news in a slightly more positive light, Redfin senior economist Elijah de la Campa said:

"There are signs more black Americans could start getting their foot in the door: the share of U.S. mortgages taken out by black homebuyers has ticked up recently."

While there have been improvements in the racial wage gap over recent decades, a number of recent studies have shown there's more work to be done.

Back in 2022, for example, a Pew Research study found that American black women typically earn just 70% of a white man's median hourly earnings.

The latest figures from the Department of Labor also show that black adults are typically paid 24% less than their white counterparts.

More worryingly, data from the Bureau of Labor Statistics indicates this disparity begins very early.

White Americans between 16 and 24 years old have median weekly earnings of $1,157, compared with $908 for black and African-American workers in the same age group.

This isn't just about money, either.

As Redfin points out, racist policies in the 20th century have had an impact for generations—and today, black homebuyers remain twice as likely to see their application for a home loan rejected.

Even if they are successful, there's a decent chance they'll be on a higher interest rate.

One recent investigation on Long Island found some realtors denied home tours to black people because they didn't meet certain requirements, even though these rules weren't imposed on white consumers in a similar position.