Op-Ed: Retrofitting Racial Inequities: How improvement lending propels racial and geographic disparities in Cuyahoga County 

This is an all too familiar story: one where the historic injustices dyed into the fabric of the Cleveland Metropolitan Area through discriminatory, predatory, and racist real estate, lending, and government policy and practices structure unjust housing outcomes throughout the region today.  In Retrofitting Racial Disparities: Home Improvement Lending Outcomes in Cuyahoga County, the Fair Housing Center examined individual and neighborhood-level outcomes for home improvement loans in Cuyahoga County, Ohio between 2019 and 2022. The findings of the report shed light on how home improvement lending outcomes perpetuate racial and geographic disparities in housing and wealth accumulation and further calcify segregation in Cuyahoga County. 

Home improvement loans are a type of loan banks and lending institutions can provide homeowners to make repairs to or improve the quality of their homes. Home improvement and maintenance  projects serve a number of purposes. They help households increase the equity in their homes, make important and necessary repairs to preserve the longevity and safety of their homes, and adapt their homes to the on-going and future impacts of climate change. 

Home maintenance and repair is a necessary component of homeownership. However, the ability to address home repair needs or make major renovations to a home is highly structured by race, income, and geography in Cuyahoga County.  During a time of unprecedented spending on home repair and improvement nationally, the home improvement lending market disproportionately benefited white homeowners, white-majority neighborhoods, and upper income earners in Cuyahoga County.  These accrued individual and neighborhood level benefits occurred at the expense of Black homeowners and Black and Brown-majority neighborhoods, who were systematically denied access to lending dollars to improve the quality, value, and equity in their homes and neighborhoods. 

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Historical Context and Factors Shaping the Landscape of Home Maintenance and Renovation 

Historically, not only did federal housing policy, real estate industry practices, and lending institutions discourage homeownership among African Americans, but they even prohibited the disbursement of the same small home improvement loans available to white homeowners.  African Americans were often left to purchase older urban properties in desperate need of repair and often had very little money left for maintenance because of unfair and predatory real estate practices. Meanwhile, property investors and landlords in redlined neighborhoods made minimal investments to improve the quality of their properties, exploiting and extracting as much money as possible from African American renters. 

The legacy of racial segregation and dispossession structure the current inequities in housing in Cuyahoga County. Low-to-moderate income and African American homeowners tend to own and only be able to purchase homes that have more critical home repair needs, and are more likely to report the structural quality of their homes as “poor” compared to their higher-income and white counterparts.  Next, others have argued housing quality issues in owner-occupied homes throughout Rust Belt Cities is worse than assumed and severe housing quality issues disproportionately affect Black homeowners.  Overall, households with the least amount of money and ability to access loans to make home repairs are often limited to buying homes with the greatest need for repair and upgrading. 

Retrofitting Racial Disparities 

The Fair Housing Center found significant racial disparities in home improvement loan origination and denial rates in Cuyahoga County. When a loan is originated it means a lending institution is willing to start the process of approving a loan application and distributing the requested money to an applicant. Home improvement loan origination rates for white applicants (55.8%) were approximately 1.9 times higher than for Black applicants (29.3%).  While denial rates were 1.9 times higher for Black applicants (64.1%)  than white applicants (34.1%). African American denial rates were 23 percentage points higher than Cuyahoga County average, while white applicants were denied at a rate 7 percentage points lower than the county average. On the other hand, African American applicants had home improvement loans originated at a rate 19 percentage points lower than the county average, while white applicants had loans originated at rate 7 percentage points higher than the county average (See Table 1). 

Table 1: Applicant Outcomes Among Black and White Applicants

Across all of Cuyahoga County, white borrowers received 77.6% of all originated home improvement dollars, while Black borrowers only received 5.5% of all originated home improvement dollars. These trends illustrate that white applicants are having home improvement loans originated at a significantly higher rate than Black applicants, and white borrowers received 14 times the amount of home improvement loan dollars than Black applicants. 

Racial disparities in loan origination and denial rates persisted within each income level, with white applicants having higher origination and lower denial rates compared to Black applicants  (See Table 2). However, racial disparities across income categories are worth noting. For example, upper-income Black applicants were denied loans at a higher rate than middle-and-moderate-income earning white applicants, and upper-income Black applicants had loans originated at a rate only 7.6 percentage points higher than low-income white applicants. 

Table 2: Applicant Outcomes by Income and Race

Home improvement loan application, origination, and denial rates follow geographic patterns that suggest, like other aspects of the lending market, structural racism shapes how the home improvement loan market operates. From 2019 to 2021, lenders originated loans in white-majority neighborhoods at 2.7 times the rate as those originated in neighborhoods where over 80% of the population is non-white.   Across all Cuyahoga County, 91.7% of all home improvement loan dollars distributed by lenders went to borrowers living in white-majority communities, while borrowers living in upper-and-middle-income neighborhoods received 87.4% of all home improvement loan dollars (See Table 3).

Table 3: Loan Outcomes by Percent Non-White in Cuyahoga County, 2019-2021 

Implications 

The findings from Retrofitting Racial Disparities illustrate that home improvement loan origination and denial rates further solidify patterns of racialized wealth inequality and racialized disparities in home value in Cuyahoga County. Moreover, uneven access to home improvement loans possibly undermines the long-term safety and viability of homes in minority-majority and low income neighborhoods and for Black homeowners. Lastly, systematically denying African Americans from accessing home improvement loans undermines the ability of Black homeowners to make necessary improvements to their homes, which can impact the character and stability of a neighborhood. This unfortunately can also become fodder for perpetuating racist myths about Black inferiority and that the presence of African Americans in an area is detrimental to property values and neighborhood quality. The culmination of these trends further solidifies the stability and viability of white-majority and upper income neighborhoods, which entrenches and exacerbates inequalities that disproportionately benefit white homeowners in a myriad of ways.  

What’s to be done? 

The long struggle to address racial and economic justice in Cuyahoga County remains unfinished and is far from being achieved. To address the inequities analyzed above requires dismantling segregated living patterns, holding lending institutions accountable to their obligations under the Fair Housing Act and Community Reinvestment Act, and improving the livability and habitability of homes and rental units throughout the County, especially in Black and Brown majority neighborhoods. Individuals can decide to bank with institutions that are promoting racial and gender equity through their lending practices and are meeting their fair lending obligations. It’s also crucial to expand access to financial resources and programs to address home repair and deferred maintenance needs for low income and African American homeowners, especially in Black and Brown majority neighborhoods. People can organize to demand fairer lending practices from banks and advocate for the County take steps to establish Special Purpose Credit Programs aimed at expanding access to home improvement loans for low income and BIPOC homeowners and provide more funding and resources to increase the safety, livability, and quality of the rental housing stock. The County should vigorously pursue its obligation Affirmatively Further Fair Housing outcomes through taking tangible steps to desegregate living patterns in Cuyahoga County. Lastly, there needs to be increased funding from the County and individual municipalities to evaluate and monitor home improvement lending outcomes to identify lenders that are failing to meet their fair lending obligations. 

Author/Funding Blurb: 

The Fair Housing Center is a 501(c) (3) nonprofit organization whose mission is to protect and expand fair housing rights, eliminate housing discrimination, and promote integrated communities. This publication was supported with funding under a grant from the U.S. Department of Housing and Urban Development. The substance and findings of the work are dedicated to the public. The author and publisher are solely responsible for the accuracy of the statements and interpretations contained in this publication. Such interpretations do not necessarily reflect the view of the Federal Government.