IU study finds residents in Black neighborhoods face barriers to home loans

INDIANAPOLIS — A news study from the Indiana University Public Policy Institute found that inequities still exist and there are barriers to home loans for residents in Marion County's Black neighborhoods.

According to a report from the IU Public Policy Institute, one in five people live in a majority-Black neighborhood in Marion County. The study found that homeownership rates in these areas are about 42 percent — lower than the county average of 54 percent — despite the fact that homes in these areas typically cost less than the average Marion County home.

"Owning a home is one of the most important ways families can build wealth and increase their financial security," Joti Martin, a policy analyst at the IU Public Policy Institute, said. "Yet, for far too many families of color, the dream of homeownership may still be out of reach because of inequities in home lending practices."

According to IU, Martin led a team of analysts who examined loan applications and denials in Marion County's majority-Black neighborhoods. Data from the 2018 Home Mortgage Disclosure Act enabled them to discover a number of inequities.

The study found Black residents in majority-Black areas are both the least likely to apply for a home purchase loan and the most likely to be denied when they do apply.

With respect to lender behavior, the study found lenders denied 11 percent of home purchase loan applications from residents in majority-Black neighborhoods compared to 3 percent in non-majority-Black neighborhoods. Lenders denied 32 percent of refinancing applications in Black neighborhoods compared to 22 percent in other areas. Analysts also found lenders denied 42 percent of home improvement applications from majority-Black neighborhoods compared to 36 percent of applications from different neighborhoods.

The study also found that Hispanic/Latinx residents are the least likely to secure a home improvement loan, regardless of where they live.

According to the report, higher rates of denials have long-term impacts on majority-Black neighborhoods and the people who reside there. The report encourages lending companies to connect residents to loan programs that offer features like down payment assistance or have relaxed mortgage requirements. It also encourages lenders to offer budgeting classes, credit counseling and other programs to help open the door to homeownership opportunities.