U.S. Department of Housing and Urban Development 

Office of Policy Development and Research 

Improving Homeownership 

Opportunities for Hispanic Families

A Review of the Literature 
Improving Homeownership 

Opportunities for Hispanic Families 

A Review of the Literature 

Prepared for 

U.S. Department of Housing and Urban Development 

Office of Policy Development and Research 

Prepared by 

Abt Associates Inc. 

Cambridge, MA

Alvaro Cortes 

Christopher E. Herbert 

Erin Wilson 

Elizabeth Clay 

March 2006 
The contents of this report are the views of the contractor and do not necessarily reflect the views or 

policies of the U.S. Department of Housing and Urban Development or the U.S. Government. 
Table of Contents 

Executive Summary ............................................................................................................................iii

Chapter 1 – Introduction.....................................................................................................................1

The Benefits of Homeownership .................................................................................................2

The Propensity for Homeownership ............................................................................................3

Hispanics in the U.S.....................................................................................................................6

Summary of Findings.................................................................................................................16

Chapter 2 – The Hispanic Homeownership Gap: Size, Trends, and Contributing Factors........19

Hispanic Homeownership Rate and Gap ...................................................................................19

Factors Contributing to Homeownership Gaps..........................................................................21

Determinants of Overall Homeownership Gaps Among Hispanics...........................................46

Summary of Findings.................................................................................................................48

Chapter 3 – Barriers to Hispanic Homeownership .........................................................................49

Lack of Information About the Homebuying Process ...............................................................50

Housing Market Barriers............................................................................................................56

Financial and Mortgage Market Barriers...................................................................................63

Summary of Findings.................................................................................................................75

Chapter 4 – Promoting Hispanic Homeownership..........................................................................77

Strategies to Overcome the Lack of Information.......................................................................79

Strategies to Overcome Real Estate and Housing Market Barriers ...........................................87

Strategies to Overcome Financial and Mortgage Market Barriers.............................................90

The Potential Impact of Various Approaches for Increasing Hispanic Homeownership ..........98

Summary of Findings...............................................................................................................103

Chapter 5 – Conclusion....................................................................................................................107

References .........................................................................................................................................111

Appendix A .......................................................................................................................................119

Table of Contents 

i 
Table of Contents

ii 
Executive Summary 

Homeownership rates have reached unprecedented levels in the U.S. According to 2005 Current 

Population Survey data, virtually every segment of the population has higher homeownership rates 

than a decade ago—although the gains have been largest among Hispanics. Between 1993 and the 

fourth quarter of 2005, ownership rates rose by 5.8 percentage points among non-Hispanic whites, 6.6 

percentage points among blacks, and 10.6 percentage points among Hispanics. Yet despite these 

gains, sizable gaps in homeownership rates persist among Hispanics compared to non-Hispanic 

whites. As of the fourth quarter of 2005, 76 percent of non-Hispanic whites were homeowners, 

compared to 50 percent of Hispanics. Thus, despite the rapid growth in Hispanic homeownership 

over the past decade the gap between whites and Hispanics is still 26percentage points. 

This report reviews the existing literature to examine what is known about the causes of the large 

gaps that exist between the homeownership rates of Hispanics and those of non-Hispanic whites as 

well as what is known about the best ways to narrow these gaps. More specifically, the goals of the 

report are three-fold: 

1. To describe the demographic and socioeconomic characteristics of the U.S. Hispanic 

population and how these characteristics relate to the Hispanic homeownership gap; 

2. To identify the main barriers to Hispanic homeownership, including both demographic 

and socioeconomic attributes of the Hispanic population and market factors such as the 

supply of mortgage financing, the prevalence of discriminatory treatment in both the 

housing and mortgage markets, and a lack of understanding and comfort with the 

homebuying and mortgage process by Hispanics; and 

3. To catalogue existing efforts to address these barriers and to discuss what is known about 

the potential effectiveness of these approaches. 

While the report mostly summarizes existing research, it also incorporates summary information on the 

Hispanic population derived from the decennial census and other publicly available national data sets. 

The report demonstrates that Hispanics are quickly becoming a sizable proportion of the U.S. 

population and cannot be viewed as a single homogeneous group but rather are an increasingly 

diverse community. Hispanic households come from many different countries and differ across many 

demographic and socio-economic characteristics. Some Hispanics are born abroad and speak English 

poorly, while others are native-born citizens and speak English fluently. Of those who have 

immigrated to this country, some have been in the U.S. for many years, while others have been in the 

U.S. for only a few years. Nationally, Hispanic households have been heavily concentrated in the 

South and West – particularly in California and Texas – and a few metropolitan areas in the 

Northeast, but are now growing rapidly in many areas of the country. These characteristics are 

important, not only because they highlight the enormous diversity among Hispanic households, but 

also because they are critical to understanding the causes of observed homeownership gaps and how 

these gaps may change over time. 

iii 
Hispanic homeownership rates are affected by many of the same demographic characteristics 

that influence homeownership rates among all households, but the rates are also shaped by 

characteristics that are particular to Hispanic immigrant communities. Hispanic 

homeownership rates and gaps are strongly related to the same factors that affect homeownership 

rates of all racial and ethnic groups, including age, income, level of education, net worth, household 

type, mobility, and place of residence. Hispanic homeownership rates also are shaped by nativity, 

country of origin, citizenship status, and number of years in the U.S. The literature analyzing 

Hispanic homeownership finds that the typical homeownership demand factors, most importantly 

income, age, and education, explain a large part of the Hispanic gap in homeownership rates. 

Another contributing factor for Hispanics is their concentration in higher cost urban areas and in the 

Western region of the country. In addition, the large share of immigrants in the Hispanic population 

is particularly important. Studies that control for differences between Hispanics and whites in terms 

of household characteristics and geographic location explain between half and three quarters of the 

overall Hispanic-white homeownership gap. But studies that include factors related to Hispanics 

immigration status, including the number of years residing in the U.S. and citizenship status, are able 

to account for much of the remaining difference in homeownership rates. 

Hispanics confront numerous barriers that are associated with information gaps about the 

homebuying process and with their ability to access the housing and mortgage finance markets. 

For example, surveys of Hispanic renters have found that information gaps about the homebuying and 

mortgage qualification processes have discouraged some Hispanics from pursuing homeownership 

because their misunderstandings about the process lead them to believe that homeownership is 

unaffordable or too complicated, that banks are not to be trusted, or that they would not qualify for a 

mortgage when, in fact, they would. Hispanics’ access to housing markets is limited by affordability 

problems as well as by discrimination in the housing market that makes housing search difficult. 

Access to housing finance is limited by poor credit histories, low wealth and income, and lack of 

proper documentation, which makes it difficult to meet standard underwriting guidelines. In addition, 

discrimination in the mortgage application process, can also frustrate Hispanics’ pursuit of 

homeownership 

Although the confluence of all of these barriers may seem insurmountable, government agencies 

and local communities have developed a litany of programs to help move Hispanic households into 

homeownership, although the success of many of these programs at addressing the specific needs 

of Hispanic families has yet to be firmly established. Some of these programs are designed to bridge 

information gaps through homeownership education and counseling and financial literacy courses that 

are targeted specifically at the Hispanic community through specialized outreach efforts and by 

offering materials and instruction in Spanish. Other programs attempt to improve the supply of 

affordable housing opportunities by granting development cost subsidies, providing regulatory relief, 

and reducing discriminatory practices in the housing marker. Many other programs use down 

payment and closing cost assistance, income subsidies for mortgage payment, relaxed mortgage 

underwriting guidelines, reductions in mortgage interest rates, and alternative approaches to resolving 

residency concerns both to help make homeownership affordable and to expand Hispanics’ access to 

mortgage financing. Most of these policies are designed to help all low-income households, but are 

marketed and tailored by local groups that serve Hispanic communities. Unfortunately, it is difficult 

to catalogue and assess the scale and geographic coverage of the myriad programs and services 

iv 
available to help Hispanics households because there is only anecdotal information about efforts to 

specifically aide these households. Also, remarkably little is known about the effectiveness of 

various approaches to improving homeownership among low-income households generally or 

Hispanics specifically. The research that does exist primarily has focused on estimating the 

importance of reductions in access to mortgage finance to increasing homeownership rates. These 

studies suggest that Hispanic homeownership could be improved by between 3 to 7 percentage points 

if constraints on the supply of mortgage financing were relaxed. But no study has evaluated the 

potential impact of efforts to address the informational gaps that are considered so important for 

immigrant households. 

Taken as a whole, this report suggests that Hispanics face a number of considerable barriers to 

homeownership in the U.S. A significant factor explaining the relatively low homeownership rates 

among Hispanics is that, compared to whites, a relatively large share of Hispanics have low-income 

and low wealth levels. While there are a number of policies aimed at assisting low-income and lowwealth households generally in becoming homeowners, the number of households assisted annually 

by these efforts is fairly small compared to the number of households eligible. The immigrant status 

of many Hispanics is also an important contributing factor to observed homeownership gaps. Some 

immigrants may prefer not to purchase a home because they may not plan on being permanent 

residents of the U.S., for some immigrants a lack of information about the homebuying process and 

an inability to meet mortgage underwriting criteria may be significant obstacles. While there are 

numerous examples of efforts by local and national organizations to address these informational and 

financial barriers to homeownership faced by immigrants, little is known about their effectiveness. 

There is a clear need for further research into the effectiveness of these efforts to ensure that the 

resources that are devoted to expanding homeownership opportunities for Hispanics are well targeted. 

The introductory chapter of the report begins with a brief synopsis of the benefits of homeownership 

and the factors that make homeownership both desirable and feasible. This chapter also presents a 

profile of Hispanics in the United States to help put the disparities in homeownership rates between 

Hispanics and whites in context. Chapter 2 then describes the size of the Hispanic-white 

homeownership gap and trends in the gap over time. The chapter then discusses specific 

demographic and housing market factors that contribute to these gaps, including both descriptive 

information as well as a review of the literature that has examined these issues. Chapter 3 categorizes 

the principal barriers to Hispanic homeownership and summarizes what is known about the extent 

and nature of these barriers. Chapter 4 identifies existing strategies for addressing each of these 

barriers, including examples of policies and programs employed by government agencies, non-profit 

and for-profit organizations. The chapter also reviews what is known about the effectiveness of these 

efforts. The report concludes with a summary of findings. 

v 
vi
Chapter 1 

Introduction 

Homeownership rates have reached unprecedented levels in the U.S. According to 2005 Current 

Population Survey data, virtually every segment of the population has higher homeownership rates 

than a decade ago—although the gains have been largest among Hispanics. Between 1993 and the 

fourth quarter of 2005, ownership rates rose by 5.8 percentage points among non-Hispanic whites, 6.6 

percentage points among blacks, and 10.6 percentage points among Hispanics. Yet despite these 

gains, sizable gaps in homeownership rates persist among Hispanics compared to non-Hispanic 

whites. As of the fourth quarter of 2005, 76.0 percent of non-Hispanic whites were homeowners, 

compared to 50.0 percent of Hispanics. Thus, despite the rapid growth in Hispanic homeownership 

over the past decade the gap between whites and Hispanics is still 26.0 percentage points. 

This report examines Hispanic homeownership rates and gaps in an effort to understand the major 

barriers that restrict homeownership opportunities for this group.1 First, the report uses decennial 

census data to discuss the size of the Hispanic homeownership gap and major trends since 1980. The 

descriptive analysis is supplemented by a review of the literature on homeownership that suggests 

which demographic and socioeconomic characteristics of the Hispanic population contribute to the 

gap. Second, the report delineates the barriers to Hispanic homeownership beyond the demographic 

and socioeconomic characteristics of Hispanic households and summarizes the literature that 

investigates these issues. These barriers include problems accessing mortgage financing, 

discriminatory treatment in both the housing and mortgage markets, and a lack of understanding and 

comfort with the homebuying and mortgage processes. Finally, the report discusses existing efforts 

to address these barriers and what is known about the potential effectiveness of these approaches. 

Thus, the report presents a comprehensive look at Hispanic homeownership rates and gaps that is 

informed by current data and existing studies. The rest of this introductory chapter provides a broader 

context by reviewing the nature of homeownership and of the Hispanic population of the U.S. 

Specifically, the introduction addresses the following issues: 

• Why study homeownership rates? Or put differently, what are the potential benefits 

associated with homeownership? Federal, state, and local policymakers generally view 

homeownership as a critical force behind an individual’s economic upward mobility and 

a community’s stability. The rationale underpinning these assumptions is worth 

delineating. 

This report is part of a series of studies commissioned by HUD to examine Hispanic homeownership. 

Other studies completed as part of this effort include: a review of underwriting guidelines used by Fannie 

Mae, Freddie Mac, FHA, and a representative subprime lender to identify potential barriers in the lending 

industry for Hispanic homebuyers; case studies of efforts to assist Hispanic buyers in three market areas 

(Orlando, San Antonio, and Washington, DC); and four empirical studies of data from the decennial census 

and the American Housing Survey examining specific aspects of Hispanic homeownership trends and 

barriers. See Cortes et al. (2006) for a summary of all of these reports. 

Chapter 1: Introduction 

1 

1 
• What factors drive a household’s propensity for homeownership? Homeownership rates 

and gaps are a function of both demand- and supply-side forces that drive a household’s 

decision to own rather than rent. 

• Who are Hispanics? The term “Hispanic” groups indiscriminately all persons of Spanish 

origin into a minority category, masking enormous diversity among Hispanics that is 

important to understanding how homeownership rates and gaps vary and change. 

The Benefits of Homeownership 

Promoting homeownership has long been an objective of housing policy in the U.S. and is reflected in 

a wide variety of federal, state, and local programs and policies. The Internal Revenue Service, the 

U.S. Department of Housing and Urban Development, state housing finance agencies, and local 

community development corporations are among the numerous actors that promote homeownership. 

Underlying these programs is the belief that homeownership provides benefits both to individuals and 

communities. 

Homeownership is thought to benefit individuals both economically and socially.2

 Economically, the 

preferential tax treatment of mortgage interest, property tax payments and imputed rent can provide 

homeowners with significant tax savings and thus the overall costs of owning a home can be lower 

than renting (Follain et al., 1993). However, low-income owners realize fewer of these benefits as a 

result of being in lower marginal tax brackets and being less likely to itemize deductions. Also, 

several recent studies have found that fluctuations in house prices coupled with high transaction costs 

can make homeownership a financially risky investment (Belsky and Duda, 2002; Goetzmann and 

Spiegel, 2002; Harding, Rosenthal, and Sirmans, 2004). Still, homeownership does provide the 

ability to accumulate wealth through principal payments and asset appreciation, even for low- and 

moderate-income homeowners (Boehm and Schlottmann, 2004; Pollakowski et al., 1991). 

The evidence is stronger for positive social outcomes associated with homeownership and includes 

findings that, compared to renters, homeowners are more likely than renters to participate in local 

organizations; engage in informal forms of social interaction (e.g., frequent interactions with 

neighbors); develop stronger commitments to their local areas; maintain their dwellings in good 

condition; stay in their local areas for longer periods of time; and show a higher sense of well-being 

(e.g., claim to be happier and to have a higher sense of self-esteem). These social benefits are 

apparent even after controlling for income, education and other socioeconomic characteristics 

(DiPasquale and Glaeser, 1999; Dietz and Haurin, 2003, Herbert and Belsky, 2006). 

Related to these individual benefits are the benefits to communities that come from homeownership, 

some of which derive from the benefits homeownership confers on individuals and others from the 

types of households that become homeowners. Homeownership is associated with healthier and more 

stable neighborhoods, because owners are economically and socially invested in their communities 

and have a stake in promoting their neighborhoods’ well-being. Homeowners help to make 

For a comprehensive review of the literature examining the extent to which low-income and minority 

households benefit from homeownership see Herbert and Belsky (2006). 

Chapter 1: Introduction 

2 

2 
neighborhoods more attractive places to live and work by investing in their properties, demanding 

higher quality public services, and participating in neighborhood improvement associations. Because 

homeowners are more likely to stay in their communities, they help provide neighborhood stability 

(Rohe, Van Zandt, and McCarthy, 2002). 

Despite these alluring benefits to individuals and spill-over effects for communities, many households 

choose to rent rather than own. The factors that contribute to a household’s tenure choices are 

discussed in the next section. 

The Propensity for Homeownership 

A household’s propensity to own rather than rent is driven both by the household’s demand for 

homeownership and by supply constraints that restrict access to homeownership.

3

 There are a variety 

of factors that fuel demand for homeownership, including the desires for greater control over the 

home and greater privacy, as well as the social status that is associated with being a homeowner. 

However, financial aspects of homeownership are very important. From a financial point of view, a 

household’s demand for homeownership can be thought of as a function of two factors: the relative 

cost of owning compared to renting and a household’s investment and consumption demands for 

housing. The supply constraints that restrict a household’s access to homeownership stem from the 

availability of suitable housing units and the availability of mortgage credit. Each of these factors is 

discussed in turn. 

The Demand for Homeownership 

The demand for homeownership has been examined using two approaches: a user cost model for 

owning compared to renting and an analysis of homeownership investment and consumption good. 

User Cost Model. The user cost model calculates a household’s relative cost of owning compared to 

renting a home, given cost factors that vary for each household. The model compares the cost of 

owning versus renting after considering the potential tax savings from homeownership, the expected 

return on a home over time, and the transaction costs of buying and selling real estate. The net effect 

of these cost factors often makes homeownership a financially attractive tenure decision. 

For decades, the U.S. tax code has offered homeowners considerable tax savings by allowing 

deductions for mortgage interest and property tax payments. Renters also benefit indirectly from 

these tax code provisions4

 if landlords pass their tax savings onto tenants in the form of lower rents. 

Both theoretical and empirical studies have demonstrated that the net effect of these tax provisions is 

to subsidize the cost of homeownership when compared to renting. An important factor in the tax 

advantages for homeowners compared to renters is that homeowners do not have to pay taxes on the 

equivalent of the rent received by landlords, that is, the value of occupying the housing unit. In 

essence, while homeowners get to deduct some of the costs of homeownership (property taxes and 

3 This section draws heavily from Herbert et al. (2005). 

4 Landlords are taxed on their cash rent but are permitted deductions for mortgage interest, property taxes, 

and maintenance expenditures. 

Chapter 1: Introduction 

3 
mortgage interest payments), they do not have to report any imputed rental income against these 

costs. One study estimated that the average amount actually paid by homeowners for each dollar in 

housing costs is approximately 74 cents (Hoyt and Rosenthal, 1990). 

The user cost model also considers the expected capital gain on a home over time. The tax code has 

historically treated capital gains more favorably for homeowners than for landlords by shielding a 

portion of these gains from taxation. Since 1998, capital gains of up to $500,000 for married couples 

and $250,000 for single persons are exempt from federal taxation.5

 This aspect of the tax policy 

permits homeowners to retain a higher share of expected capital, thereby reducing the user cost of 

homeownership and encouraging homeownership. 

The expected capital gain on a home depends in part on the length of stay in a home. Offsetting 

capital gains from selling a home are the transaction costs associated with buying and selling, which 

are not incurred by renters. Homeowners typically must pay 6 percent of the home’s sale price for the 

real estate agent’s services, as well as legal fees, taxes, and settlement services. However, the impact 

of these transaction costs declines with the length of stay in the home, because longer stays spread the 

costs over more years and defer the costs to a later period. Since capital gains increase and 

transaction costs decline with length of stay in the home, the appeal of homeownership is greater for 

households who are unlikely to want to move in the near future. 

Investment and Consumption Approach. Another major distinguishing feature of homeownership is 

that it represents both an investment and a consumption good. The investment demand for housing is 

influenced by the relative risk and return of housing compared to a household’s overall investment 

portfolio. On the consumption side, greater demand for housing is associated with household type, 

size, and income, and with other household characteristics that influence the demand for the public 

services that are bundled with residential location. 

When a household demands more housing to satisfy consumption needs than is sensible from an 

investment perspective, the household is likely to rent. For example, if a family expects relatively 

low investment returns on housing investment but also needs a large home to accommodate a new 

child, it is less likely to purchase a home to satisfy the increased consumption demand. The family is 

better off by renting. Alternatively, when housing is expected to appreciate greatly and a family’s 

consumption demands are modest, homeownership is a more sensible choice. In general, households 

with low income and wealth and high expected mobility would be expected to have limited 

investment demand for housing. This occurs because the tax benefits of homeownership would be 

limited, mobility makes the expected returns to homeownership low, and the concentration of assets 

in this one investment would be too high. Thus, limited investment demand for homeownership 

would be expected to lower the homeownership propensity of these households. 

Supply Constraints on Homeownership 

Availability of Single-Family Housing. Since the mid-1970s, researchers have studied the spatial 

concentration of minority households in central cities and its impact on access to opportunities. The 

In order to exclude gains up to these amounts the homeowner must have occupied the home for at least two 

years out of the last five years. 

Chapter 1: Introduction 

4 

5 
spatial mismatch hypothesis demonstrated that the concentration of minorities in inner-city 

neighborhoods and the suburbanization of employment opportunities reduced employment 

opportunities among minority households (Kain, 1992). Less well known is research that has applied 

the spatial mismatch theory to homeownership opportunities, showing how constraints on access to 

the supply of different types of housing (e.g., single-family versus multi-family) may contribute to 

lower minority homeownership rates (Kain and Quigley, 1975; Herbert, 1997). 

Because developers are subject to higher land prices in central cities, central city developers favor highrise and multi-family housing units on smaller lots over lower density developments covering large tracts 

of land. Therefore, city skylines are dominated by towering skyscrapers and tall apartment buildings 

rather than single-family units with chimneys. The relative lack of single-family housing units in central 

cities is important because: (1) single-family housing is more conducive to homeownership than multifamily housing; and (2) minority households are disproportionately located in central cities. As a result, 

minority households have limited access to single-family housing, which affects their tenure decision and 

likely contributes to lower homeownership rates when compared to non-minority households. 

Mortgage Finance Constraints. Mortgage lenders can deny a loan to a borrower if the borrower fails 

to meet their underwriting standards. The application of these standards in the mortgage market can 

limit access to homeownership and can contribute to homeownership gaps if these rules affect ethnic 

and racial groups differently. Compared to their non-minority counterparts, minority households may 

be more likely to encounter credit barriers and downpayment constraints that restrict the availability 

of mortgage credit and limit their tenure decision. Discrimination in mortgage lending may further 

restrict homeownership opportunities. 

Some minority households may be perceived as higher credit risks than non-minority households. 

For example, lenders may view minorities as higher credit risks if racial and ethnic discrimination in 

labor markets increases the likelihood that minorities will be laid off during an economic downturn. 

Lenders may seek to offset the higher risk through the underwriting process—this is evident, for 

example, in the higher interest rates charged by subprime lenders. The degree to which mortgage 

lenders offer higher interest rates to loan applicants perceived as posing greater default risk is a 

source of debate. Some argue that credit rationing and multiple loan rates arise if lenders group loan 

applicants on the basis of observable differences in credit risk. Low-risk borrowers are offered prime 

rates, while higher-risk borrowers are offered higher subprime interest rates. The higher rates might 

dissuade potential minority homebuyers if the expected capital gains no longer justify 

homeownership from an investment perspective. 

In addition to charging higher interest rates based on perceived credit risks, lenders may view 

observable demographic characteristics as potential indicators of higher rates of late payments or 

defaults (often called “statistical” discrimination) or may avoid doing business with particular groups 

outright. Both forms of discrimination are illegal and have been extensively examined by 

researchers. Based primarily on a study conducted by researchers at the Boston Federal Reserve 

Bank, the consensus from the literature is that, as recently as the 1980s and 1990s, there was indeed 

discrimination in the mortgage market (Munnell et al., 1996). 

Others argue that Fair Lending Laws and the threat of costly litigation create strong incentives for 

lenders to offer similar loan rates to all borrowers (Duca and Rosenthal, 1994). Lenders are 

Chapter 1: Introduction 

5 
particularly mindful of fair lending practices when the credit risk is associated with politically 

sensitive characteristics, such as race and ethnicity, sex, and age. 

Homeownership requires considerable household wealth to cover closing costs and downpayment 

requirements. There is substantial evidence that lack of wealth reduces the likelihood of becoming a 

homeowner and that minority households (especially blacks and Hispanics) have significantly less 

accumulated wealth than non-Hispanic whites. Moreover, downpayment constraints are particularly 

problematic for minority households who reside disproportionately in large central cities with high 

costs. The costs in these housing markets make it more difficult for households to accumulate the 

needed down payment, often a minimum of 3 to 5 percent of the total value. 

Both demand and supply factors influence a household’s propensity for homeownership and these 

factors are shaped, in turn, by the characteristics of households. The characteristics of Hispanics in 

the U.S. are less well documented than those of other groups, both because Hispanics are an 

enormously diverse group and because historical data is limited. The following section uses 2000 

Census data to provide a profile of Hispanics in the U.S. 

Hispanics in the U.S. 

Documenting changes in the composition of the Hispanic population in the U.S. over time is 

complicated by data collection challenges and by a lack of consistency in how Hispanics have been 

defined. In addition, collecting data on Hispanics is challenging because there are undocumented 

Hispanics in the U.S. who do not respond to government surveys and, therefore, are unaccounted for 

in census statistics. The number of such households is unclear, but studies suggest that the estimated 

undercount of Hispanics in the 2000 census is about 2.85 percent (Paral and Associates, 2004) and 

that the foreign born have a higher undercount rate (Robinson, 2001). 

Between 1930 and 1960, the U.S. Census used a variety of terms to define Hispanics that were 

commingled with racial classifications: “people who were born in Mexico or to parents born in Mexico” 

was used to define a separate Mexican category in the 1930 census. “Persons of Spanish mother 

tongue” was used in 1940. “White persons of Spanish surname” was used in 1950 and 1960, but only in 

five states in the Southwest. By 1970, the census began to separate racial classifications from Hispanic 

definitions. The Census used three different definitions of Hispanic origin for 1970 census reports: the 

Spanish language population (or “the population of Spanish mother tongue plus all other persons in 

families in which the head or wife reported Spanish mother tongue”); the Spanish heritage population 

(or “the population of Spanish language and/or Spanish surname in the five Southwestern states of 

Arizona, California, Colorado, New Mexico, and Texas, the population of Puerto Rican birth or 

parentage in New York, New Jersey, and Pennsylvania, and the population of Spanish language 

elsewhere”); and the population of Spanish origin or descent based on self-identification. 

In 1980, the census included a separate ethnicity question based on Spanish/Hispanic origin or 

descent that allowed respondents to select among seven national origin categories: Mexican 

American, Mexicano, Chicano, Puerto Rican, Cuban, Central or South American, and other Spanish 

origin. Similarly, the 1990 census asked respondents to record whether they were of 

Spanish/Hispanic origin and listed seven response categories: not of Hispanic origin; Mexican, 

Chapter 1: Introduction 

6 
Mexican-American, Chicano; Puerto Rican; Cuban; and other Spanish/Hispanic. Respondents were 

also allowed to write in a place of origin not listed on the form. Write-in responses were coded as 

either the country specified by the respondent, “South American” or “Central American” when the 

respondent wrote in these responses, or “other.” 

The 2000 census asked people to classify themselves as persons of Hispanic/Spanish/Latino origin 

based on their ancestry, lineage, heritage, nationality group, or country of birth. Race is collected 

separately from ethnicity. People of Hispanic origin may be of any race or multiple races, and 

respondents are allowed to choose from five response categories or write-in responses. Unlike the 

previous census, infrequent responses were coded as “other Central American,” “other South 

American,” or “other Spanish or Latino,” rather than identified with a specific country. However, 

even the 2000 U.S. Census had difficulties collecting accurate data on Hispanics, particularly with 

respect to country of origin and racial characteristics (discussed below). 

The following sections present a profile of Hispanic households in the U.S. They include information 

on the demographic, socio-economic, and immigration characteristics of Hispanic households, and on 

the geographic distribution of Hispanics across the U.S. Specifically, Hispanic homeownership rates 

tend to increase with age, income, level of education, net worth, and marriage formation, and are also 

shaped in less predictable ways by place of residence, nativity, country of origin, and degree of social 

integration (citizenship status and years in the U.S.). The relationship between these characteristics 

and homeownership is discussed in the 

following chapter. Exhibit 1-1: Country of Origin Among Hispanic 

Households in the U.S., 2000 

Demographic and Socio-Economic Other Hispanic 

Characteristics of Hispanic 15% 

Households 

Spaniard 

In 2000, there are 9.2 million 1% 

households of Hispanic origin in the South American 

5% 

U.S. and 35 million Hispanic persons, 

representing 8.7 percent of all U.S. Central American

households and 12.5 percent of the total 5%

Mexican U.S. population. As shown in Exhibit Dominican 54% 

1-1, 54 percent of Hispanic households 3% 

are of Mexican origin, 12 percent are of Cuban 

Puerto Rican origin, 5 percent are of 5% 

Cuban origin, and 3 percent are of 

Dominican origin.6

 South Americans Puerto Rican 

and other Central Americans constitute 12% 

10 percent of Hispanic households, and Source: Integrated Public Use Microdata Series (IPUMS) data from 

15 percent are “other Hispanics.”7 U.S. Census 2000 PUMS 1% sample. 

6 All data presented in the report are weighted to be representative of the population. 

7 In the 2000 Census, write-in responses that were not classified into one of the response categories associated 

with twenty different countries were coded as “Other Central American,” “Other South American,” or “Other 

Spanish or Latino.” It is unclear what types of write-in responses would be classified as “Other Spanish or 

Chapter 1: Introduction 

7 
1 

Exhibit 1-2 presents the racial characteristics of Hispanic and non-Hispanic households in the U.S. 

The racial classification of Hispanics has historically been problematic for the U.S. Census. In the 

1980 and 1990 census reports, Hispanic persons were treated as “white” when the “other race” 

category was recorded in order to maximize historical comparability with previous census.8

 Applying 

this convention to 2000 census data suggests that 91 percent of Hispanic heads of household are white 

(50 percent “white” and 41 percent “other race”), 6 percent of Hispanic heads of household are of two 

or more races, and only 2 percent of Hispanic households are black. 

Exhibit 1-2 

Racial Characteristics of Hispanic and Non-Hispanic Households in the U.S., 2000 

Race 

Percent of Hispanic 

Households 

Percent of non-Hispanic 

Households 

White 

Black or African American 

American Indian/Alaska Native 

Asian 

Native Hawaiian/Pacific Islander 

Some other race1 

Two or more races 

Total Number of Households 

50.4% 

2.0% 

1.0% 

0.3% 

0.1% 

40.5% 

5.8% 

9,187,972 

82.1% 

12.3% 

0.7% 

3.2% 

0.1% 

0.1% 

1.5% 

96,292,129 

In both the 1980 and 1990 Census, IPUMS classified Hispanic persons as “white” when “other race” category was 

recorded to maximize historical comparability. 

Source: Integrated Public Use Microdata Series (IPUMS) data from U.S. Census 2000 PUMS 1% sample. 

Exhibit 1-3 presents the socio-economic characteristics for Hispanic and non-Hispanic households in 

2000. More than two-fifths of Hispanic households (44 percent) earn less than $30,000 annually, and 

fewer than one-quarter earn more than $60,000 a year (22 percent). By contrast, only one-third of 

non-Hispanic households (34 percent) earn less than $30,000, and more than one-third (34 percent) 

earn over $60,000 annually. Thus, Hispanics are more likely to be low- or moderate-income 

households than their non-Hispanic counterparts. 

In addition, Hispanic households are relatively poorly educated. Almost one-half of Hispanic heads 

of household (46 percent) have less than a high school education, and only one-third have some 

education beyond high school. Very few Hispanic households have a professional or graduate degree 

(4 percent). By contrast, about one-sixth of non-Hispanic households (16 percent) have less than a 

Latino.” Most Caribbean countries are not included in the list of twenty response categories, but it is unlikely 

that these countries collectively comprise 15 percent of Hispanic households in the U.S. 

The Integrated Public Use Microdata Series (IPUMS) re-coded as “White” those who marked “other race” 

and identified themselves as being of Hispanic origin on the Hispanic origin question. 

Chapter 1: Introduction 

8 

8 
high school education, and more than half (56 percent) experience some type of education beyond 

high school. Nearly 10 percent of non-Hispanic households have a graduate or professional degree. 

Exhibit 1-3 

Socio-Economic Characteristics of Hispanic and non-Hispanic Households in the U.S., 2000 

Income 

Percent of Hispanic 

Households 

Percent of non-Hispanic 

Households 

<$10,000 

$10,000 and <$20,000 

$20,000 and <$30,000 

$30,000 and <$40,000 

$40,000 and <$50,000 

$50,000 and <$60,000 

$60,000 and <$70,000 

$70,000 or more 

12.7% 

15.9% 

15.8% 

14.0% 

10.9% 

8.4% 

6.2% 

16.2% 

9.3% 

12.3% 

12.7% 

12.2% 

10.6% 

9.0% 

7.3% 

26.6% 

Education 

Less than High School 

High school graduate, or GED 

Some college, no degree 

Associate degree 

Bachelors degree 

Professional/Graduate degree 

45.6% 

21.8% 

17.1% 

4.4% 

7.1% 

4.1% 

16.3% 

27.8% 

22.5% 

6.2% 

16.9% 

10.3% 

Age 

<30 

30-34

35-44

45-54

55-64

65-74

75+ 

20.8% 

14.4% 

26.9% 

18.0% 

9.7% 

6.5% 

3.8% 

12.0% 

8.9% 

22.2% 

20.4% 

13.9% 

11.5% 

11.1% 

Household Type 

Married couples with children 

Married couples without children 

Other Families with children 

Other Families without children 

Other1 

Total Number of Households 

37.8% 

19.9% 

14.7% 

9.2% 

18.3% 

9,187,972 

23.1% 

30.4% 

8.1% 

6.4% 

32.0% 

96,292,129 

Other household types include singles; separated, divorced, widowed people (without own children); and other 

unrelated people living together (without own children). 

Source: Integrated Public Use Microdata Series (IPUMS) data from U.S. Census 2000 PUMS 1% sample. 

Chapter 1: Introduction 

9 

1 
Exhibit 1-3 also suggests that Hispanic households are much younger than their non-Hispanic 

counterparts. More than three-fifths of Hispanic households (62 percent) are under age 45, compared 

to approximately two-fifths of non-Hispanic households (43 percent). A greater percentage of 

Hispanic heads of household are in each of the three youngest age categories compared to nonHispanics: under 30 (21 versus 12 percent); 30 to 34 (14 versus 9 percent); and 35 to 44 (27 versus 22 

percent). 

The majority of both Hispanic (58 percent) and non-Hispanic (54 percent) heads of household are 

married. Married couples with children and without children constitute approximately 38 and 20 

percent of Hispanic households. Non-Hispanic married couples are less likely to have children. 

Also, a larger proportion of Hispanic households were in other families with children. Across all the 

household types, 43 percent of Hispanic households have children compared to 30 percent of nonHispanic households. 

Immigration Characteristics of Hispanic Households 

Exhibit 1-4 presents information on the immigration characteristics of Hispanic households living in 

the U.S. in 2000. The majority (53 percent) are foreign-born, much larger than the proportion of nonHispanic households (8 percent). Despite the large proportion of foreign-born households, more than 

two-thirds of Hispanic households (68 percent) are U.S. citizens. (These data suggest that 

approximately one-fifth of Hispanic households are naturalized citizens.) By contrast, nearly all nonHispanic households (97 percent) are U.S citizens. 

The large proportion of foreign-born Hispanic households may suggest that a similarly large proportion 

of Hispanics have poor English-speaking skills. However, only about one-quarter of Hispanic heads of 

household report that they do not speak English (8 percent) or speak English poorly (18 percent). The 

majority of Hispanic households (75 percent) consider that they speak English fluently. 

Among Hispanic immigrant9

 households, most have been in the U.S. for many years. More than half 

of these households (54 percent) have lived in the U.S. for 16 years or more, and few (13 percent) 

have been in the U.S. for 5 years or less. In this respect, Hispanic immigrants are similar to other 

immigrant households. The vast majority of non-Hispanic households (60 percent) with foreign-born 

heads have lived in the U.S. for 16 years or more. These data suggest that many immigrant 

households have been in the U.S. long enough to be exposed to homeownership opportunities. 

An immigrant is defined as a foreign-born head of household, including persons born in Puerto Rico, other 

U.S. outlying areas, and persons born abroad to U.S. parents. There were 4,819,856 Hispanic immigrant 

households in 2000. 

Chapter 1: Introduction 

10 

9 
1 

Exhibit 1-4 

Immigration Characteristics of Hispanic and Non-Hispanic Households in the U.S., 2000 

Percent of Hispanic Percent of non-Hispanic 

Households Households 

Nativity 

Native born 47.0% 91.9% 

Foreign born 53.0% 8.1% 

Citizenship Status 

U.S. citizen 67.8% 96.9% 

Not a U.S. citizen 32.2% 3.1% 

English Speaking 

Yes, speaks only English 91.4% 

Yes, speaks very well 

17.8% 

37.1% 5.3% 

Yes, speaks well 19.9% 2.0% 

Yes, but not well 1.1% 

Does not speak English 

17.8% 

7.6% 0.2% 

Years in the U.S. for foreign born1 

12.8% 14.5% 

6-10 years 

0-5 years 

14.8% 12.8% 

11-15 years 18.7% 11.8% 

16-20 years 16.2% 12.3% 

21+ years 37.4% 48.6% 

Only includes households with immigrant heads of household, defined as any person who was foreign born, including 

persons born in Puerto Rico or other U.S. outlying areas and persons born abroad to U.S. parents. 

Source: Integrated Public Use Microdata Series (IPUMS) data from U.S. Census 2000 PUMS 1% sample. 

Geographic Distribution of Hispanic Households 

Exhibit 1-5 compares the geographic distribution of Hispanic households to that of other minority 

groups and to non-Hispanic whites. The geographic distribution of Hispanics across the U.S. is 

uneven. Hispanic households are heavily represented in the West (17 percent of the region’s 

households are Hispanic), slightly underrepresented in the South (8 percent of the region’s 

households) and the Northeast (7 percent of the region’s households), and considerably 

underrepresented in the Midwest (only 3 percent of the region’s households). 

Chapter 1: Introduction 

11 
Exhibit 1-5 

Percentage of Hispanic and Non-Hispanic Households in the U.S. by Region, 2000 

Northeast 

Midwest 

South 

West 

National 75.0%

68.0%

71.2%

84.7%

77.9%

3.2%

7.4% 9.8%

3.2% 1.5%

9.1%

1.6%

8.4% 17.1%

16.6% 4.6% 7.1%

3.0%

8.7% 11.2%

1.8%

1.5%

1.8%

3.7%

2.1%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 

Hispanic Non-Hispanic Whites Non-Hispanic Black Asian or Pacific Islander Other Races 

Source: Integrated Public Use Microdata Series (IPUMS) data from U.S. Census 2000 PUMS 1% sample. 

Chapter 1: Introduction 

12 
Exhibit 1-6 

Population Percent Hispanic, by State, 2000 

The distribution of the Hispanic population across states is shown in Exhibit 1-6 as the percent of each 

state’s total population. Hispanics represent 25 percent or more of the total state populations in Arizona, 

California, New Mexico, and Texas. Hispanics are also heavily concentrated in Colorado, Florida, 

Nevada, New Jersey and New York, constituting 12.5 to 24.9 percent of these states’ populations. 

Except for Illinois and Kansas, Hispanics are considerably underrepresented in the Midwest. 

Chapter 1: Introduction 

13 
Exhibit 1-7 presents the proportion of Hispanic and non-Hispanic households in metropolitan and nonmetropolitan areas. The overwhelming majority (78 percent) of Hispanic households reside within 

metropolitan areas and few households are found in non-metropolitan areas (2 percent). An equal share 

of Hispanic households (approximately 16 percent) live in and outside central cities, although the 

central city status of many Hispanic households living in metropolitan areas is not identified (46 

percent). By contrast, fewer non-Hispanic households are located in metropolitan areas (57 percent) 

and the proportion of households in non-metropolitan areas (4 percent) is double that of Hispanic 

households. Also, many fewer non-Hispanic households live in central cities (8 percent). 

Exhibit 1-7 

Household Distribution Among Metropolitan and Non-metropolitan Areas in the U.S., 2000 

Percent of Hispanic Percent of Non-Hispanic 

Households Households 

Metropolitan Area 

Central City 16.2% 7.5% 

Outside Central City 15.7% 13.7% 

Central City Status Unknown1 46.4% 36.2% 

Not in a Metropolitan Area 1.7% 4.1% 

Not Identifable2 20.0% 38.5% 

30 Largest Metropolitan Areas3 52.6% 32.6% 

1 The 1% sample data cannot identify the metropolitan status of households located in geographic units that contain 

fewer than 400,000 people. Because of the large population threshold, the central city status is unknown for many 

cases in metropolitan areas. 

2 The metropolitan status of households located in urban areas with less than 400,000 people are suppressed by the U.S. 

Census Bureau. 

3 The 30 largest metropolitan areas had a minimum of 601,524 households. 

Source: Integrated Public Use Microdata Series (IPUMS) data from U.S. Census 2000 PUMS 1% sample. 

The exhibit also suggests that Hispanic households are more heavily concentrated in the nation’s largest 

metropolitan areas than non-Hispanic households. More than half of all Hispanic households (53 

percent) live in one of the 30 largest metropolitan areas, while one-third of non-Hispanic households (33 

percent) live in these areas. 

Exhibits 1-5 through 1-7 demonstrate that, as of 2000, Hispanic households live predominantly in the 

South and West regions and most live within metropolitan areas. Exhibit 1-8 identifies the 30 

metropolitan areas with the highest concentration of Hispanic households in the U.S. Overall, 

approximately 56 percent of Hispanic households (or 5.1 million households) live in one of these 30 

metropolitan areas, and 19 of the 30 metropolitan areas are in California and Texas. Arizona (Tucson 

and Phoenix metropolitan areas) and New Mexico (Albuquerque metropolitan area) also have sizable 

proportions of Hispanic households. Only six metropolitan areas (Miami-Hialeah, FL; Jersey City, 

Chapter 1: Introduction 

14 
NJ; New-York-Northeastern, NJ; Hartford-Bristol-Middleton-New Britain, CT; Orlando, FL; and 

Bergen-Passaic, NJ) outside of the Southwest have very large concentrations of Hispanic households. 

Exhibit 1-8 

Metropolitan Areas with the Largest Proportion of Hispanic Households, 2000

Number of Hispanic Percent of the Total 

 Metropolitan Area Households Metropolitan Population 

1 McAllen-Edinburg-Pharr-Mission, TX 128,991 80.8% 

2 El Paso, TX 151,687 71.5 

3 Miami-Hialeah, FL 387,085 58.7 

4 San Antonio, TX 227,366 46.4 

5 Albuquerque, NM 73,975 33.9 

6 Fresno, CA 83,966 33.6 

7 Jersey City, NJ 76,605 33.6 

8 Los Angeles-Long Beach, CA 1,004,928 32.1 

9 Bakersfield, CA 60,231 28.4 

10 Riverside-San Bernardino, CA 231,786 27.9 

11 Modesto, CA 31,722 22.4 

12 Stockton, CA 40,833 22.3 

13 Ventura-Oxnard-Simi Valley, CA 54,479 22.1 

14 Houston-Brazoria, TX 321,180 22.0 

15 Tucson, AZ 72,189 21.6 

16 New York-Northeastern NJ 691,945 21.2 

17 Austin, TX 72,944 20.4 

18 Orange County, CA 181,940 19.3 

19 San Diego, CA 184,908 18.4 

20 Dallas-Fort Worth, TX 189,173 16.5 

21 Phoenix, AZ 184,638 16.3 

22 San Jose, CA 91,741 16.2 

23 Las Vegas, NV 75,572 14.8 

24 Hartford-Bristol-Middleton-New Britain, CT 25,612 14.4 

25 Denver-Boulder-Longmont, CO 105,948 13.6 

26 Orlando, FL 83,354 13.2 

27 Vallejo-Fairfield-Napa, CA 22,745 13.1 

28 Bergen-Passaic, NJ 64,799 13.1 

29 Fort Worth-Arlington, TX 73,145 13.0 

30 Oakland, CA 111,775 12.9 

Source: Integrated Public Use Microdata Series (IPUMS) data from U.S. Census 2000 PUMS 1% sample. 

The Los Angeles-Long Beach (CA), New York-Northeastern (NJ) and Miami-Hialeah metropolitan 

areas have the largest absolute numbers of Hispanic households. The ten metropolitan areas with the 

smallest percentage of Hispanic households included: Akron, OH (0.4. percent); Scranton-WilkesBarre, PA (0.6 percent); Cincinnati OH/KY/IN (0.7 percent); Pittsburgh-Beaver Valley, PA (0.7 

percent); Knoxville, TN (0.7 percent); Canton, OH (0.7 percent); Jackson, MS (0.8 percent); DaytonSpringfield, OH (0.9 percent); Baton Rouge, LA (1.1 percent); and Birmingham, AL (1.1 percent). 

Chapter 1: Introduction 

15 
Summary of Findings 

In summary, Hispanic households come from many different countries and differ across many 

demographic and socio-economic characteristics. Some Hispanic heads of household are foreign 

born or speak English poorly, while others are native-born or speak English fluently. Among 

immigrant Hispanic households, most have been in the U.S. for more than 21 years, but many 

households have been in the U.S. for a shorter time period. A large proportion of Hispanic 

households are located in the South and West, especially in California and Texas, although a few 

metropolitan areas in the Northeast also have very high concentrations of Hispanic households. 

These characteristics are important, not only because they highlight the enormous diversity among 

Hispanic households, but also because they are critical to understanding how Hispanic 

homeownership rates and gaps may change over time. As will be discussed in the next chapter, a 

number of studies have found that many of these characteristics are associated either positively or 

negatively with the likelihood that a household will become a homeowner. 

• Income. Higher incomes are associated statistically with higher homeownership rates, 

but most Hispanic households have low to moderate incomes. 

• Education. Homeownership rates increase as level of educational attainment rises, and 

many Hispanic households are poorly educated. 

• Age. Homeownership rates tend to increase for all populations as they age, but the age 

structure of the Hispanic population is young. 

• Household Type. Marriage is a strong determinant of homeownership, and the majority 

of Hispanic households are married. 

• Nativity. Native-born populations tend to have higher homeownership rates, but slightly 

over half of Hispanic households are foreign born. 

• Country of Origin. Hispanic immigrants from certain countries tend to have higher rates 

of homeownership than other Hispanic immigrants. 

• Citizenship status. Citizens’ homeownership rates consistently surpass those of noncitizen Hispanic households. 

• English Speaking. Immigrants fluent in English are more likely to be homeowners than 

immigrants with little English proficiency, especially immigrants who do not speak English at 

all. 

• Years in the U.S. Among immigrants homeownership rates increase with length of time spent 

living in the U.S., and of the slight majority of Hispanic households that are immigrants, a 

little less than half have lived in the U.S. for less than 16 years as of 2000. 

• Place of residence. Households living in high cost housing markets in some of the 

nation’s largest metropolitan areas are less likely to become homeowners, and Hispanics 

are disproportionately concentrated in large metropolitan areas. 

Chapter 1: Introduction 

16 
As the share of Hispanics in the U.S. increases, national homeownership rates will be influenced by 

the characteristics of Hispanics. Over the next twenty years, the number of Hispanic households is 

projected to grow substantially, and Hispanics will account for approximately 17 percent of the total 

U.S. population by 2020 (Masnick and Di, 2002; and Richie, 2001). Approximately 7.5 million net 

Hispanic households will be added to the U.S. population, compared to 4.7 non-Hispanic black 

households, 3.1 non-Hispanic Asians/others, and 8.5 non-Hispanic white households. The increase in 

the number of Hispanic households is expected to result from two factors. The Hispanic population’s 

younger age structure will foster faster new household formations among Hispanics, while few 

households will be lost to aging. Also, the duration of residence among the many immigrants who 

arrived during the 1980s and 1990s will increase during the next twenty years, and this will also lead 

to increases in household formation. Hispanics’ higher than average fertility rates will contribute 

further to Hispanic household formation in the more distant future. 

Moreover, the projected net growth in homeowners among Hispanic households is expected to be 4.6 

million by 2020, compared to 3.7 million blacks, 2.0 million Asians/others, and 11.9 million nonHispanic whites (Masnick and Di, 2002). This projection is based on a set of conservative estimates 

about the levels of foreign immigration and macro-economic and housing market conditions, and 

relies heavily on statistical associations between demographic and socio-economic characteristics and 

homeownership rates. These statistical associations will be discussed further in the next chapter. 

Chapter 1: Introduction 

17 
Chapter 1: Introduction 

18 
Chapter 2 

The Hispanic Homeownership Gap: Size, Trends, 

and Contributing Factors 

Since 1970, homeownership rates have steadily climbed for all segments of the population and rates 

are currently at historically high levels. Today, homeowners account for more than two-thirds of all 

households in the U.S. (69.0 percent as of the fourth quarter of 2005). Despite these gains, there are 

large homeownership gaps between non-Hispanic whites and minority populations, especially 

Hispanics. This chapter begins with a brief overview of trends in Hispanic homeownership from 

1980 to 2000 as documented by the decennial censuses. The analysis relies on data from the 

decennial census because of the rich detail afforded by these data. The second section accounts for 

the majority of the chapter and describes the socioeconomic factors that help explain the gap in the 

homeownership rate for Hispanics compared to non-Hispanic whites. The final section briefly 

summarizes the main findings. 

Hispanic Homeownership Rate and Gap 

In 2000, there were over 105.4 million households in the U.S., and approximately 69.8 million were 

homeowners. Yet, less than half of the 9.1 million Hispanic households were homeowners (45.6 

percent), compared to a large majority of the 79 million non-Hispanic whites (72.4 percent) (Exhibit 

2-1). The homeownership rate for non-Hispanic blacks (46.6 percent), Asians or Pacific Islanders 

(53.0 percent), and other non-Hispanic racial minorities10 (51.1 percent) was also considerably lower 

than the rate for non-Hispanic whites. As Exhibit 2-1 demonstrates, Hispanics had the largest 

homeownership gap (26.8 percentage points) of any minority group in 2000. 

Homeownership rates have improved for most groups since the early 1990s. The Hispanic 

homeownership rate increased by 3.5 percentage points during the decade (from 42.1 percent in 

1990), the largest gain among all racial and ethnic minorities and the only rate increase to exceed the 

increase among non-Hispanic whites. As a result, the homeownership gap between Hispanics and 

non-Hispanic whites narrowed slightly, by 0.11 percentage points, while it increased for non-Hispanic 

blacks by 0.65 percentage points), Asians or Pacific Islanders by 2.48 percentage points, and other 

non-Hispanics by 5.08 percentage points. Nonetheless, Hispanics evinced the largest homeownership 

gap compared to non-Hispanic whites than any other minority group.

11 

10 This category includes non-Hispanic household heads who selected two or more race categories on the 

Census. 

11 Data from the 2005 Current Population Survey indicates that gains in Hispanic homeownership rates have 

continued to outpace gains among non-Hispanic whites since 2000. From 2000 to the fourth quarter of 

2005, the non-Hispanic white rate increased by 2.2 percentage points (from 73.8 to 76.0), while the 

Hispanic rate grew by 3.7 percentage points (from 46.3 to 50.0). Over the same period, the homeownership 

rate among blacks increased by 1 percentage point. 

Chapter 2: The Hispanic Homeownership Gap: Size, Trends, and Contributing Factors 

19 
Chapter 2: The Hispanic Homeownership Gap: Size, Trends, and Contributing Factors 

20 

Exhibit 2-1 Homeo

w

n

ership Rates and Gaps1, 1980-2000 

Household Head Households 

1980 

Rate Gap Households 

1990 

Rate Gap Households 

Hispanic 4,010,898 44.1% -24.9% 5,812,158 42.1% -26.9% 9,187,972 Non-Hispanic Black 8,284,691 45.4% -23.6% 9,691,699 43.9% -25.2% 11,796,057 Non-Hispanic Asian or Pacific Islander 1,022,940 52.5% -16.5% 1,911,257 52.2% -16.9% 3,181,674 Other Non-Hispanic 485,017 52.6% -16.4% 628,292 52.9% -16.2% 2,236,977 Non-Hispanic White 66,590,515 69.0% 73,664,936 69.1% 79,077,421 Total 80,394,061 65.0% 91,708,342 64.2% 105,480,101 

1 Homeownership gaps are calculated in relation to the non-Hispanic white homeo

wnership rate. 

Sources: U.S. Census Bureau’s Integrated Public Use Microdata Series (IPUMS) using the 1980 1

% metro sample, the 1990 1% metro sample, and th
During the 1980s, homeownership rates decreased for nearly all minority groups. The Hispanic 

homeownership rate dropped from 44.1 percent in 1980 to 42.1 percent in 1990, and also declined 

during the 1980s for non-Hispanic blacks. The rate among non-Hispanic whites increased very 

slightly. Accordingly, homeownership gaps grew during the 1980s. The gap compared to the rate for 

non-Hispanic whites increased by more than 2 percentage points for Hispanics and by 1.5 percentage 

points for non-Hispanic blacks. In 1990, Hispanics again had the largest homeownership gap of any 

minority group (26.9 percentage points), slightly higher even than the gap for blacks (25.2 percentage 

points). 

These figures suggest that Hispanics confront significant barriers to homeownership, with gaps 

relative to whites that are even slightly larger than the homeownership gap among blacks. This gap 

has also been persistent. Despite the homeownership gains made by Hispanics during the 1990s, the 

homeownership gap in 2000 was even larger than in 1980. While the gap has narrowed some since 

2000, it was still 26.0 percentage points in the fourth quarter of 2005 according to data from the CPS. 

This trend raises a critical question: what factors contribute to this persistently large gap? The 

literature on homeownership rates and gaps is extensive, yet research has only recently focused on 

Hispanic homeownership rates and gaps in particular. That literature suggests that much of this gap – 

although by no means all – is related to differences between non-Hispanic white and Hispanic 

socioeconomic characteristics and place of residence. The following section examines these factors. 

Factors Contributing to Homeownership Gaps 

The literature on homeownership gaps identifies several demographic, socioeconomic, and 

geographic factors that are related to homeownership. Age, income, level of education, net worth, 

household type, mobility, nativity, country of origin, English proficiency, degree of social integration 

(citizenship status and years in the U.S.), and place of residence are important factors that help 

explain the gap in homeownership rates between Hispanics and non-Hispanic whites. Each of these 

factors is discussed in turn. 

The precise impact of these factors on homeownership is difficult to disentangle, since many of these 

factors are closely interrelated. For example, income and level of education tend to rise as age 

increases; an individual’s citizenship status is related to the number of years in the U.S; and 

household composition is likely associated with country of origin. Determining the independent 

effect of each of these factors has been the subject of recent studies and considerable debate. 

Age 

Exhibit 2-2 presents the Hispanic homeownership rates and gaps by age of the household head for 

1980-2000. As demonstrated in the exhibit, homeownership rates rise considerably with age but 

decline slightly among the elderly. In all years, the largest jumps in homeownership rates occur as 

households age from the under 30 to the 30-34 age group, presumably reflecting many first-time 

homebuyers in their early 30s. 

In 1980, the proportion of Hispanic homeowners rose steadily from 22 percent among the youngest 

households (under age 30) to 59 percent among the middle-aged households (45-54 age group). The 

Chapter 2: The Hispanic Homeownership Gap: Size, Trends, and Contributing Factors 

21 
22% 

40% 

52% 

59% 

58% 

56% 

55% 

-17% 

-26% 

-26% 

-23% 

-23% 

-20% 

-13% 

18% 

34% 

46% 

54% 

61% 

60% 

55% 

-15% 

-25% 

-26% 

-26% 

-22% 

-21% 

-17% 

21% 

57% 

61% 

64% 

60% 

-12% 

-23% 

-24% 

-24% 

-23% 

49% 

38% 

-16% 

-20% 

1 

homeownership rate declined gradually for older age groups to 55 percent among households age 75 

or more. Within each age bracket, significant shifts occurred between 1980 and 2000. For all cohorts 

under age 55, rates of homeownership were highest in 1980, then dropped by 4 or more percentage 

points in 1990, and then rose again in 2000, but not yet to 1980 levels. Meanwhile, rates for those 

over 55 stayed the same or rose after 1980. 

Exhibit 2-2 

Hispanic Homeownership Rates and Gaps,1

 by Age of Household Head, 1980-2000 

Less than 30-34 35-44 45-54 55-64 65-74 75 and 

30 Older 

Age 

Gaps Rates 

1980 Rate Gap 1990 Rate Gap 2000 Rate Gap 

Homeownership gaps for Hispanic households are calculated in relation to the homeownership rate of non-Hispanic 

whites. 

Sources: U.S. Census Bureau’s Integrated Public Use Microdata Series (IPUMS) using the 1980 1% metro sample, the 

1990 1% metro sample, and the 2000 PUMS 1% sample. 

Homeownership gaps narrowed with age. In all years, the gap between the homeownership rates of 

Hispanics and non-Hispanic whites was lowest among the youngest and oldest age groups. Within 

most of the age groups, there was minimal change in the gaps between 1980-2000. However, among 

households headed by a person 30 years or younger, the gap shrank by 5 percentage points despite an 

overall drop in the homeownership rate of this group of 1 percentage point between 1980 and 2000. 

Chapter 2: The Hispanic Homeownership Gap: Size, Trends, and Contributing Factors 

22 
In addition, the gap grew among the 75 or older cohort, despite a 5 percentage point rise in the 

homeownership rate among these older Hispanics, because older whites had increased their 

homeownership rate even more during the same period. 

These data confirm two important trends that have been identified in the literature: (1) age is positively 

associated with homeownership and (2) there is an age cohort effect on homeownership rates. 

The association between age and homeownership is two-fold. The investment demand for housing is 

lower among younger households because they are more mobile than their older counterparts and the 

high transaction costs of moving makes homeownership less attractive (Herbert et al., 2005). Thus, 

mobile, younger households will choose to rent rather than purchase a home. In addition, there is a 

strong positive association between age and income – on average, incomes increase with age – and 

income, in turn, is positively associated with homeownership. As a result of both factors, the demand 

for housing is likely to increase with age. 

Research has also found an independent effect of age on homeownership, after controlling for income 

and other socioeconomic characteristics (Borjas, 2002; Callis, 2003; Coulson, 1999; Flippen, 2001a; 

Krivo, 1986 and 1995; Masnick, 1997; Myers, 1998a and 1998b; and Painter et al., 2001). 

The effect of age on homeownership is particularly important for understanding homeownership gaps 

between Hispanics and non-Hispanic whites because of the younger age structure of the Hispanic 

population. In 2000, the percentage of Hispanic households under age 35 (35.2 percent) was nearly 

twice that of non-Hispanic whites (19.6 percent). In addition, the percentage of non-Hispanic whites 

age 65 and older was much larger (24.2 percent), compared to only 10.3 percent of Hispanics. The 

lower share of non-Hispanic white households in young age groups and higher share in older age 

groups contribute to the comparatively higher homeownership rate among non-Hispanic whites. If 

Hispanics had the same age distribution as non-Hispanic white households, their homeownership 

rates would increase by 7.4 percentage points, all else being equal. 

In addition to the effect of age on homeownership rates, there is an age cohort effect on 

homeownership. For example, the 45-54 age cohort in 1980 continued to evince the highest 

homeownership rate as the cohort aged over the next twenty years. In 1990, the 55-64 age group 

demonstrated the highest homeownership rate, and ten years later the same age cohort (now 65-74) 

also had the highest rate. Similarly, a recent study found that younger cohorts track across successive 

age groups with persistently lower homeownership rates (Myers, 1998b). This study showed that the 

decline in homeownership rates among the 34-44 age cohort in 1990 was driven by the lower 

homeownership rates carried into that age bracket by cohorts who were age 25-34 in 1980. 

The literature on age cohort effects often nests age (or birth) cohorts within immigration cohorts, or 

year of entry into the U.S. The dual cohort approach is applied to the study of immigrant populations 

to distinguish between the impact of aging, which may differ by age cohorts, and the effect of longer 

residency in the U.S, which is an assimilation effect. For example, a recent study indicated that the 

effect of age on homeownership among Hispanic immigrants is weakened (and almost eliminated) by 

controlling for immigration cohorts (Masnick, 1997). The effect of longer residency (or assimilation 

effect) will be discussed in more detail below. 

Chapter 2: The Hispanic Homeownership Gap: Size, Trends, and Contributing Factors 

23 
24% 

25% 

32% 

36% 

42% 

51% 

59% 

67% 

73% 

81% 

-25% 

-29% 

-24% 

-22% 

-21% 

-18% 

-17% 

-14% 

-13% 

-9% 

2 2% 

27% 

31% 

34% 

40% 

48% 

5 5% 

61% 

69% 

7 7% 

-24% 

-27% 

-27% 

-26% 

-25% 

-21% 

-20% 

-19% 

-16% 

-13% 

23% 

30% 

35% 

40% 

47% 

52% 

58% 

6 6% 

73% 

75% 

-22% 

-26% -26% 

-24% 

-22% 

-23% 

-21% 

-18% 

-15% 

-15% 

Income 

Exhibit 2-3 shows Hispanic homeownership rates and gaps by income deciles for 1980, 1990, and 

2000. (Appendix A presents the lower and upper boundaries to each income decile in dollar amounts 

foe each census year.) Higher income deciles have higher homeownership rates and lower 

homeownership gaps. In 1980, homeownership rates were dramatically higher in higher income 

deciles, with the largest difference (9 percentage points) occurring between the 5th and 6th income 

deciles. Rates differed substantially between the lowest- and highest-income households, ranging 

from 24 to 81 percent. This nearly 57 percentage point disparity in homeownership rates by income 

was larger in 1980 than in any other year. The same pattern was observed in 1990, although the 

disparity in homeownership rates between lowest- and highest-income households was slightly less 

(56 percentage points). Homeownership rates rose more evenly across all income groups during the 

1990s. In 2000, Hispanic households in the 2nd through the 7th income deciles experienced a 5-7 

percentage point increase in homeownership rates. 

Exhibit 2-3 

Hispanic Homeownership Rates and Gaps1

, by Income, 1980-2000 

Gaps Rates 

1 2 3 4 5 6 7 8 9 10 

1980 Rate Gap 1990 Rate Gap 2000 Rate Gap 

Homeownership gaps are calculated in relation to the homeownership rate of non-Hispanic whites. 

Sources: U.S. Census Bureau’s Integrated Public Use Microdata Series (IPUMS) using the 1980 1% metro sample, the 

1990 1% metro sample, and the 2000 IPUMS 1% sample. 

Chapter 2: The Hispanic Homeownership Gap: Size, Trends, and Contributing Factors 

24 

1 
While homeownership rates fell for many income groups during the 1980s, increases during the 1990s 

offset these earlier declines. Overall, from 1980 to 2000, low- to moderate-income households (deciles 

2 through 6) experienced increases in homeownership rates, ranging from one to five percentage points. 

The smallest gain occurred among households in the 6th decile, and the largest gain was realized by 

households in the 5th decile. High-income households (deciles 7 through 10) fared less favorably. 

Homeownership rates decreased by as much as 6 percentage points among the highest-income 

households between 1980 and 2000. However, the difference in Hispanic homeownership rates 

between the lowest- and highest-income deciles changed little between 1980 and 2000. 

Exhibit 2-3 also demonstrates that homeownership gaps for Hispanic households compared with nonHispanic white households declined considerably at high levels of household income. In 1980, the gap 

ranged from 25 percentage points among the poorest households to 9 percentage points among the 

highest income households. The largest difference (5 percentage points) occurred between the 2nd and 

3rd deciles, and homeownership gaps declined by nearly 2 percentage points with each increase in 

income decile, on average. Similarly, in 1990 the homeownership gap ranged from 24 percentage 

points among the poorest households to 13 percentage points among households with the highest 

incomes. The largest decline (4 percentage points) occurred between the 5th and 6th deciles. 

Homeownership gaps also were lower in 2000 at higher levels of household income, although the 

difference was much less dramatic, 7 percentage points between the lowest and highest income groups. 

Despite decreases in homeownership gaps within each decennial year, gaps widened within nearly 

each income decile throughout the twenty-year period—especially among moderate- and high-income 

households. For example, from 1980 to 2000 the homeownership gap increased by 4, 5, 3, 2, and 6 

percentage points across the 6th to 10th income deciles, respectively. Only households with the very 

lowest incomes (deciles 1 and 2) experienced net decreases (approximately 3 percentage points per 

decile) in homeownership gaps during the twenty-year period. 

These patterns are consistent with previous research that found an independent effect of income on 

homeownership, especially among Hispanics, even after controlling for numerous socio-economic 

characteristics (Krivo, 1986, 1995; Myers, 1998a; and Painter et al., 2001).12 One study conducted a 

series of simulations that eliminated the income and educational differentials between native 

Hispanics and non-Hispanic whites to estimate the effect on homeownership rates and gaps among a 

sample of recent mover households from the decennial census in 1980 and 1990 (Painter et al., 2001). 

The simulations using 1980 data suggested that nearly all of the homeownership gap was accounted 

for by these two characteristics, while in 1990 they accounted for 11 percentage points out of a total 

gap of 16 percentage points. However, the study also found that in 1990 among Hispanic immigrants 

from the early 1980s a sizeable homeownership gap remained even after controlling for education and 

income differences with whites. Another study nested income within age cohorts and found a 

decreasing effect of income across successively older birth cohorts. This finding suggests that 

younger adults have less time to accumulate wealth to finance a home purchase and, therefore, are 

more reliant on current income. In addition, current income is likely to have a minimal direct effect 

In addition, Flippen (2001) found that both homeownership rates and housing equity among Hispanic 

households increase with increased income. 

Chapter 2: The Hispanic Homeownership Gap: Size, Trends, and Contributing Factors 

25 

12 
on homeownership among older persons because they likely purchased their home when they were 

younger (Myers, 1998b). 

Household income varies significantly across metropolitan areas. Areas with high costs of living and 

expensive housing markets generally have higher median household incomes. By contrast, more 

affordable areas often have lower median household incomes. The relationship between household 

income and median housing value by metropolitan area has clear implications for homeownership 

opportunities. As discussed below, Hispanic households are concentrated disproportionately in 

expensive housing markets and also have lower median household incomes when compared to nonHispanic whites. This geographic distribution of the Hispanic population is an important factor in 

explaining Hispanic homeownership rates and gaps and is addressed in more detail below. 

Level of Education 

Exhibit 2-4 displays Hispanic homeownership rates and gaps by education level for 1980, 1990, and 

2000. Overall, homeownership rates are considerably higher and gaps smaller as education level 

increases. In 1980, the homeownership rate ranged from 41 percent among households with less than 

a high school education to 54 percent among college-educated households. The rate similarly rose in 

1990 from 37 percent of households with less than a high school education to 58 percent of 

households with advanced degrees. The greatest difference among rates by level of education 

occurred in 2000. There was a 22 percentage-point difference in homeownership rates between 

poorly educated households (40.4 percent) and highly educated households (62 percent). 

Exhibit 2-4 

Hispanic Homeownership Rates and Gaps1

, by Level of Education, 1980-2000

Level of Education 

19802

Rate Gap 

1990 

Rate Gap 

2000 

Rate Gap 

Less than High School 

High school graduate, or GED 

Some college, no degree 

Associate degree 

Bachelors degree 

Graduate degree 

Total 

40.8% 

45.1% 

49.6% 

54.3% 

44.1% 

-29.3%

-24.1% 

-15.4% 

-16.0% 

-24.9% 

37.4% 

42.5% 

45.8% 

51.2%

52.0% 

57.8% 

42.1%

-31.4% 

-27.6%

-19.8%

 -16.2% 

-16.7% 

-18.0% 

-26.9% 

40.4% 

45.3% 

49.9% 

53.8% 

55.4% 

62.0% 

45.6% 

-28.1% 

-27.6% 

-20.3% 

-18.8% 

-18.2% 

-17.4% 

-26.8% 

1 Homeownership gaps are calculated in relation to the homeownership rate of non-Hispanic whites. 

2 The comparability between the 1980 Census and the 1990 and 2000 Census was limited. In 1980, the response codes 

indicated highest grade of school attended or completed by the respondent. Persons who completed high school by an 

equivalence test (GED) were instructed to record “12th grade.” We coded the “12th grade” as a “High School graduate 

or GED,” which may include persons who attended the 12th grade but did not finish. In addition, we coded “4+ years 

of college” as “Bachelors degree.” 

Sources: U.S. Census Bureau’s Integrated Public Use Microdata Series (IPUMS) using the 1980 1% metro sample, the 

1990 1% metro sample, and the 2000 PUMS 1% sample. 

Chapter 2: The Hispanic Homeownership Gap: Size, Trends, and Contributing Factors 

26 
Homeownership rates increased across every educational level from 1990 to 2000. For example, the 

rate for households with a master’s degree or above increased 4 percentage points, from 57.8 to 62 

percent; the rate for households with a bachelors degree increased 3 percentage points, from 52 to 

55.4 percent; and the rate for households with a high school diploma or GED rose approximately 2 

percentage points, from 42.5 to 45.3 percent. By contrast, homeownership rates declined during the 

1980s across all the educational levels for which there is data. The decline was greatest among 

households with less than a high school education (4 percentage points) and households who had not 

completed college (4 percentage points). The decline in homeownership rates was less severe among 

households with high school diplomas (2 percentage points) and college degrees (2 percentage 

points). 

As Exhibit 2-4 also demonstrates, smaller homeownership gaps were associated with greater 

educational attainment. This pattern is most evident in 2000. The homeownership gap among 

households with less than a high school education was 28 percentage points, and declined 

successively by 0.5, 7.3, 1.5, 0.6, and 0.8 percentage points as educational levels increased. As a 

result, the smallest homeownership gaps occur among those with the highest educational attainment, 

but even among this group the gap was 17 percentage points. Also, gaps by educational level were 

higher in 2000 than in earlier decades for all but the least and most highly educated cohorts. 

Homeownership gaps narrowed in 1980 and 1990 as educational level increased, particularly between 

households with a high school education and households with some college education. The gap 

among households who attended some college decreased by 8.7 and 7.3 percentage points in 1980 

and 1990 when compared to households with a high school education. Surprisingly, homeownerships 

gaps widened slightly among households with college or advanced degrees. 

These trends are consistent with recent empirical work associating the likelihood of becoming a 

homeowner with educational status. The studies, however, also demonstrate that educational levels 

are positively correlated with other demographic characteristics, which are in turn positively 

associated with higher homeownership probabilities. As a result, the decline in homeownership gaps 

cannot be attributed solely to increases in educational level. To address this issue, researchers 

estimate statistical models (multivariate regression equations) that control for age, income, country of 

origin, and other characteristics, thereby isolating the independent impact of education on 

homeownership. These models suggest that the probability of homeownership among Hispanics is 

significantly lower (5 percentage points) for households without a high school diploma and 

significantly higher (3 percentage points) for college-educated households, even after controlling for 

numerous demographic characteristics (Painter et al., 2001). However, the effect of education on 

Hispanic homeownership is influenced by country of origin and birth cohort. For example, Krivo 

(1986) demonstrated that all Hispanic subpopulations experienced larger effects of education on 

homeownership than non-Hispanic whites, but the difference was statistically significant only among 

Mexicans and Cubans. Also, Myers et al., (1998) interacted educational attainment with birth cohorts 

to show that the effect of not completing high school among native-born males of Mexican origin is 

less detrimental on achieving homeownership among older cohorts (ages 55-74) than younger cohorts 

(ages 15-34). This finding suggests that the effect of educational attainment on achieving 

homeownership will vary by birth cohort. 

Chapter 2: The Hispanic Homeownership Gap: Size, Trends, and Contributing Factors 

27 
20.9% 

0.3% 

3.8% 

7.3% 

20.6% 

60.7% 

86.2% 

94.4% 

1.0% 

21.9% 

57.2% 

94.4% 

29.9% 

7.9% 

17.7% 

28.1% 

33.2% 

83.5% 

1 

Net Worth 

Exhibit 2-5 displays homeownership rates by household net worth13 for 2000. As the upward trend 

suggests, higher net worth is associated with higher homeownership rates regardless of ethnicity. For 

both Hispanics and non-Hispanic whites, the homeownership rate increased dramatically from about 

1 percent among households with zero net worth to over 94 percent among households with $50,000 

or more in net worth. Among Hispanic households, the largest percentage point increase (nearly 39 

percentage points) occurred between households with $5,000-$9,999 and $10,000-$19,999 in net 

worth. The largest increase (26 percentage points) in homeownership rates among non-Hispanic 

whites occurred between households with $10,000-$19,999 and $20,000-49,999 in net worth. 

Exhibit 2-5 

Hispanic and Non-Hispanic White Homeownership Rates, by Wealth1

, 2000 

100% 

75% 

50% 

25% 

0% 

Hispanic White 

Less 0 1-999 1,000- 2,500- 5,000- 10,000- 20,000- 50,000 

than 0 2,499 4,999 9,999 19,999 49,999 and 

higher 

Homeownership gaps are calculated in relation to the homeownership rate of non-Hispanic whites. Net worth is 

reported in 2000 dollars. 

Source: U.S. Department of Commerce, Bureau of the Census. November 1999-February 2000. Survey of Income and 

Program Participation (SIPP) 1996 Panel (Wave 12 Core Microdata File). ICPSR version. Washington, DC: 

U.S. Dept. of Commerce, Bureau of the Census (producer), 1999. Ann Arbor, MI: Inter-University Consortium 

for Political and Social Research (distributor), July 2002. 

Homeownership gaps fluctuated across the range of net wealth categories. The largest HispanicWhite homeownership gap occurred between $1,000 and $10,000. Hispanics relative disadvantage 

among these low-wealth levels may reflect their higher concentration in high cost markets in the West 

Net worth was calculated as the difference between the sum of the market value of assets owned by each 

member of a household and unsecured liabilities associated with each household member. Assets included 

savings accounts, equity in a home, mutual funds, vehicle ownership, 401K plans, and other financial 

assets. Liabilities included a variety of unsecured liabilities (e.g., credit card debt, medical bills, and 

educational loans). 

Chapter 2: The Hispanic Homeownership Gap: Size, Trends, and Contributing Factors 

28 

13 
and Northeast. Interestingly, Hispanic homeownership rates surpass that of non-Hispanic whites by 3 

percentage points among households with $10,000 to $19,999 in net worth. The 3 percentage-point 

gap continued among Hispanic households with $20,000 to $49,999 in net worth, and reached parity 

among the wealthiest households. This finding suggests that increased net worth negates barriers to 

homeownership among Hispanic households. 

However, it is important to note the share of both Hispanics and non-Hispanic whites within each of 

these net worth categories to properly interpret these patterns. Exhibit 2-6 presents the number and 

proportion of households in each net worth category for Hispanics and non-Hispanic whites. Both 

Hispanics and non-Hispanic whites are unevenly distributed across the net worth categories. A much 

larger share of Hispanics (46 percent) was found within the lower net worth categories (less than 

$5,000) than non-Hispanic whites (21 percent) and only one-quarter of Hispanic households had a net 

worth of $50,000 or more. By contrast, a smaller share of non-Hispanic whites had a lower net worth 

and over half (56 percent) were clustered into the $50,000 or more category. Moreover, nearly threequarters (72 percent) of all non-Hispanic white homeowners were in the highest net worth category. 

The clustering of non-Hispanic white homeowners effectively reduced the number of homeowners in 

other categories and likely contributed to the lower homeownership rates in relation to Hispanics. 

Exhibit 2-6 

Number and Proportion of Hispanic and non-Hispanic White Households, by Net Worth, 2000

Level of Net Worth 

Hispanic 

Number of 

Households Percent 

Non-Hispanic White 

Number of 

Households Percent 

Less than 0 

0 

1-999 

1,000-2,499 

2,500-4,999 

5,000-9,999 

10,000-19,999

20,000-49,999

50,000 and higher 

Total 

1,767,095 

941,463 

594,083 

491,482 

486,800 

640,165 

 612,367 

 1,357,106 

2,350,814 

9,241,376 

19.1% 

10.2% 

6.4% 

5.3%

5.3%

6.9%

6.6% 

14.7% 

25.4% 

100.0% 

8,653,922 

1,440,490 

2,154,112 

 1,944,273 

 2,190,616 

 3,988,688 

4,706,392 

9,968,424 

44,539,335 

79,586,252 

10.9% 

1.8% 

2.7% 

2.4% 

2.8% 

5.0% 

5.9% 

12.5% 

56.0% 

100.0% 

Source: U.S. Department of Commerce, Bureau of the Census. November 1999-February 2000. Survey of Income and 

Program Participation (SIPP) 1996 Panel (Wave 12 Core Microdata File). ICPSR version. Washington, DC: 

U.S. Dept. of Commerce, Bureau of the Census (producer), 1999. Ann Arbor, MI: Inter-University Consortium 

for Political and Social Research (distributor), July 2002. 

Net worth (and wealth) is frequently discussed in the literature as a major barrier to homeownership 

among all households (Collins et al., 2001; Gyourko et al., 1999; Quercia et al., 1998; and Savage, 

1999), especially low-income households (Haurin et al., 1996). In one study, an estimated one-third 

of renters in 1995 could not afford a house selling for half of the regional median housing price 

Chapter 2: The Hispanic Homeownership Gap: Size, Trends, and Contributing Factors 

29 
because they lacked the wealth to cover down payment and/or closing costs. Two-thirds of renters 

could not afford to buy a modestly priced house because of both inadequate wealth (limiting their 

ability to cover closing costs and down payments) and insufficient income (limiting their ability to 

afford the mortgage payments) (Savage, 1999). Low-income renters are particularly at a 

disadvantage since most of their resources are used to cover basic needs, and thus are unlikely to 

accumulate cash to cover down payment and closing costs. Low-income renters are also less likely to 

receive down payment assistance from family members than other households because of the 

intergenerational nature of poverty (Englehardt, 1998). 

Household Type 

Exhibit 2-7 presents the Hispanic homeownership rates and gaps by household type from 1980 to 

2000. Throughout the two decades homeownership rates were higher for married couples with and 

without children than any other type of Hispanic household. The presence of children consistently 

lowered the homeownership rate within all household types. Also, other families with children had 

the lowest homeownership rates among all the household types, and other Hispanic families without 

children displayed the largest homeownership gap. 

Exhibit 2-7 

Hispanic Homeownership Rates and Gaps1

, by Household Type, 1980-2000 

54% 

55% 

22% 

40% 

24% 

-27% 

-26% 

-26% 

-30% 

-20% 

48% 

59% 

20% 

40% 

28% 

-24% 

-23% 

-32% 

53% 

61% 

27% 

43% 

31% 

-26% 

-23% 

-31% 

-24%

-29% 

-22% 

-31% 

Rates Gaps 

Married Couples Married Couples Other Families Other Families Other 

with Children without Children with Children without Children 

1980 Rate Gap 1990 Rat e Gap 2000 Rate Gap 

Homeownership gaps are calculated in relation to the homeownership rate of non-Hispanic whites. 

Sources: U.S. Census Bureau’s Integrated Public Use Microdata Series (IPUMS) using the 1980 1% metro sample, the 

1990 1% metro sample, and the 2000 IPUMS 1% sample. 

Chapter 2: The Hispanic Homeownership Gap: Size, Trends, and Contributing Factors 

30 

1 
Hispanic married couples without children had the highest rate of homeownership during the twentyyear period and their rate steadily increased with each decennial census. Their homeownership rates 

increased from 55 percent in 1980 to 61 percent in 2000. Hispanic married couples with children 

experienced a decline in homeownership rates from 1980 to 1990 (from 54 percent to 48 percent), but 

rebounded in 2000 to 53 percent. The homeownership rates of other families with children and those 

without children lagged far behind their married counterparts. For example, in 2000 the differential 

in homeownership rates between married couples with children and other families with children was 

nearly 26 percentage points, and the differential between married couples without children and other 

families without children was nearly 19 percentage points. 

Homeownership gaps fluctuated across most of these household types. Between 1980 and 2000, 

homeownership gaps among married couples with children increased moderately (4 percentage 

points); gaps among married couples without children decreased slightly (0.3 percentage points); and 

gaps among other families without children increased somewhat (0.8 percentage points). Only other 

families with children experienced a sizable decline in homeownership gaps (3 percentage points) 

during the twenty-year period. Interestingly, homeownership gaps were at times higher among 

married couples than any other household type, which suggests that the positive effect of marriage on 

homeownership is greater among non-Hispanic whites. 

Nevertheless, households composed of married couples have the best chance of being homeowners 

(Callis, 2003; Coulson, 1999; Krivo, 1986, 1995; Flippen, 2001a; Myers and Lee, 1998; and Painter 

et al., 2001). Recent studies suggest that marriage is the strongest determinant of homeownership 

among persons of any racial and ethnic background (Myers and Lee, 1998) and is important even 

after accounting for immigrant characteristics (such as citizenship status) (Callis, 2003). 

Mobility 

As discussed in Chapter 1, given the high transaction costs associated with buying and selling a 

home, households that expect to move frequently will be less attracted to homeownership. One 

explanation for low Hispanic homeownership rates relative to whites might be that they are more 

likely to move than whites and so homeownership is less appealing. An examination of household 

mobility between 2002 and 2003 by the U.S. Census Bureau (Schachter, 2004) does find that overall 

Hispanics are much more likely to move than whites. But the likelihood of moving in a given year is 

strongly associated with household age, marital status, education level, and income, and may also be 

affected by race-ethnicity and nativity status. 

When mobility rates are analyzed using multivariate regression techniques, Schacter finds that 

households that are renters, younger (age 18 to 34), have higher levels of education, have incomes 

below the poverty level, and are unmarried and without children are more likely to move. The study 

finds that after controlling for these factors there is no statistically significant association between 

being Hispanic or foreign born and the likelihood of moving. In short, after taking into account 

differences between non-Hispanic whites and Hispanics in terms of age, income, education, and 

marital status, neither Hispanic or immigrant status further depress homeownership propensities due 

to higher expected mobility of these groups. 

Chapter 2: The Hispanic Homeownership Gap: Size, Trends, and Contributing Factors 

31 
Nativity 

Exhibit 2-8 shows Hispanic homeownership rates and gaps by nativity14 from 1980 to 2000. As 

shown, homeownership rates are about 10 percentage points higher among native-born Hispanics than 

foreign-born Hispanics in each decennial year. Homeownership rates decreased during the 1980s for 

both native- and foreign-born Hispanics by approximately 1 and 2 percentage points, but grew during 

the 1990s. The increase in homeownership among foreign-born Hispanics was somewhat faster 

during this period, so that the gap with native born Hispanics narrowed by two percentage points. By 

2000, nearly 50 percent of native-born Hispanics and 42 percent of foreign-born Hispanics were 

homeowners. 

Exhibit 2-8 also shows homeownership gaps for both native and foreign-born Hispanics compared to 

native and foreign-born whites. This comparison illustrates the extent to which overall Hispanic 

homeownership gaps are related to the high share of immigrants among Hispanics. As shown, while 

gaps for both native- and foreign-born Hispanics is lower than the gap for all Hispanics, both groups 

have similar, fairly large gaps. In addition, these gaps changed little during the twenty-year period. 

The gap among native-born Hispanics widened slightly from approximately 22 percentage points in 

1980 to 23 percentage points in 2000. The gap among foreign-born Hispanics, however, decreased 

from nearly 24 percentage points in 1980 to 22 percentage points in 2000. 

Exhibit 2-8 

Hispanic Homeownership Rates and Gaps1

, by Nativity, 1980-2000

Nativity 

19802

Rate Gap 

1990 

Rate Gap 

2000 

Rate Gap 

Native born 47.5% -21.8% 46.6% -22.8% 49.7% -23.2% 

Foreign born 38.7% -23.5% 37.0% -26.0% 42.1% -21.7% 

Total 44.1% -24.9% 42.1% -26.9% 45.6% -26.8% 

1 Homeownership gaps are calculated in relation to the homeownership rate of native and foreign non-Hispanic whites. 

Sources: U.S. Census Bureau’s Integrated Public Use Microdata Series (IPUMS) using the 1980 1% metro sample, the 

1990 1% metro sample, and the 2000 IPUMS 1% sample. 

Few studies have examined the disparity in homeownership rates among native- and foreign-born 

households. A recent study focused on homeownership in the immigrant population and surprisingly 

found that differences in numerous socioeconomic characteristics between natives and immigrants 

explained relatively little of the gap in homeownership rates (Borjas, 2002). The study demonstrated 

that differences in the residential location choices made by natives and immigrants played a key role 

in explaining the homeownership gap between these groups. In 1980, almost one-half of the 

homeownership gap between natives and immigrants was explained by differences in location. This 

influence, however, diminished over time and by 2000 one-third of the difference in homeownership 

A native born head of household does not include persons born in U.S. outlying areas (e.g., Puerto Rico) or 

persons born abroad to U.S. parents. 

Chapter 2: The Hispanic Homeownership Gap: Size, Trends, and Contributing Factors 

32 

14 
gaps between natives and immigrants was attributed to differences in location. This evidence 

suggests that recent immigrants are moving from the more traditional “gateway cities” (e.g., Los 

Angeles, Chicago, New York and Miami) to other locations throughout the U.S. The impact of 

residential location on homeownership is discussed in more detail below. 

Despite this descriptive analysis of Census data, nativity has not been found to be a critical variable in 

predicting homeownership among Hispanic households after controlling for numerous socioeconomic characteristics. The impact of nativity on homeownership is weakened by other 

characteristics, such as age cohorts, English language ability, and especially length of U.S. residence 

(Coulson, 1999; Flippen, 2001a; Krivo, 1995; Myers and Lee, 1998; and Painter et al., 2001). In one 

of these studies, the homeownership rates of immigrants residing in the U.S. the longest were 

indistinguishable from the rates of natives. Another study indicated that although foreign-born and 

Spanish speaking households were less like to be homeowners than natives, immigrants who have 

been in the U.S. longer are as likely to be homeowners as natives. Thus, the statistical importance of 

nativity gives way to other factors. 

Country of Origin 

Exhibit 2-9 presents Hispanic homeownership rates and gaps by country of origin from 1980 to 2000 

for all groups of Hispanics—natives and immigrants. Dominicans and Puerto Ricans had the lowest 

homeownership rates and highest homeownership gaps, and Spaniards and Cubans consistently fared 

better than other Hispanic households. Homeownership rates among Mexican households were 

slightly higher than the total rate for all Hispanics during the twenty-year period, but changed little 

across decennial years. 

In 1980, Puerto Rican households had the lowest homeownership rate (21 percent) and highest 

homeownership gap (48 percentage points), compared to Cuban (44 percent; 25 percentage points), 

Mexican (50 percent; 19 percentage points) and other Hispanic households (46 percent; 24 percentage 

points). The Puerto Rican homeownership rate increased considerably (13 percentage points) during the 

twenty-year period and peaked at 34 percent in 2000. In 1990, the Census expanded the number of 

response codes to include numerous nationalities and revealed an extremely low homeownership rate 

(13 percent) and large homeownership gap (56 percentage points) among Dominican households. Their 

rate also improved somewhat during the decade, but Dominican households in 2000 continued to have 

the lowest rate (20 percent) and largest gap (52 percentage points) among Hispanic households. 

By contrast, Spaniards and Cubans had the highest homeownership rates in 1990 (58 and 51 percent) 

and among the lowest gaps (11 and 18 percentage points). The rate among Spaniards increased 

during the 1990s. In 2000, 60 percent of Spanish households were homeowners, compared to 72 

percent of non-Hispanic white households (only a 12 percentage-point gap in homeownership rates). 

The Cuban homeownership rate increased during the decade by 7 percentage points to nearly 58 

percent and their gap declined to 15 percentage points. Homeownership rates among Mexicans 

remained nearly unchanged between 1980 (50 percent) and 2000 (48 percent), although the 

homeownership gap increased by 5 percentage points (from 19 to 24 percentage points). 

Chapter 2: The Hispanic Homeownership Gap: Size, Trends, and Contributing Factors 

33 
Exhibit 2-9 

Hispanic Homeownership Rates and Gaps1

, by Country of Origin, 1980-2000

Country of Origin 

19802

Rate Gap 

1990 

Rate Gap 

2000 

Rate Gap 

Mexican 

Puerto Rican 

Cuban 

Dominican 

Spaniard/ Spanish 

Central American 

South American 

Other Spanish, Hispanic, Latino3

All Hispanics 

49.6% 

21.3% 

43.8% 

45.5% 

44.1% 

-19.4% 

-47.7% 

-25.2% 

-23.5% 

-24.9% 

46.8%

25.3% 

50.8%

13.0% 

58.3% 

23.2%

35.7%

49.3% 

42.1% 

-22.3% 

-43.8% 

-18.3% 

-56.1% 

-10.8% 

-45.9% 

-33.4% 

-19.8% 

-27.0% 

48.4% 

34.4% 

57.7% 

20.2% 

60.3% 

31.5% 

41.3% 

50.4% 

45.6% 

-24.0% 

-38.1% 

-14.8% 

-52.3% 

-12.1% 

-40.9% 

-31.2% 

-22.0% 

-26.8% 

1 Homeownership gaps are calculated in relation to the homeownership rate of non-Hispanic whites. 

2 The response categories in the 1980 Census had limited comparability with the 1990 and 2000 Census. 

3 The 1990 Census asked respondents to record whether they were of Spanish/Hispanic origin and listed five response 

categories: not of Hispanic origin; Mexican, Mexican-American, Chicano; Puerto Rican; Cuban; and other 

Spanish/Hispanic. Respondents were also allowed to write-in a place of origin not listed on the form. Write-in 

responses were coded as either the country specified by the respondent, “South American” or “Central American” 

when the respondent wrote-in these exact responses, or “other.” The 2000 Census also provided five, similar response 

categories and allowed for write-in responses. However, infrequent responses were coded as “Other Central 

American,” “Other South American,” or “Other Spanish or Latino,” rather than as a specific country. 

Sources: U.S. Census Bureau’s Integrated Public Use Microdata Series (IPUMS) using the 1980 1% metro sample, the 

1990 1% metro sample, and the 2000 IPUMS 1% sample. 

Trends in homeownership differed considerably by excluding native Hispanics and limiting the 

Hispanic population to Hispanic immigrants.15 Exhibit 2-10 displays homeownership rates and gaps 

for Hispanic immigrants by country of origin from 1980 to 2000. Gaps are calculated in relation to 

all non-Hispanic immigrants.16 As the exhibit suggests, from 1980 to 2000 rates among all Hispanic 

immigrants were about 6, 7 and 4 percentage points lower, respectively, than rates among all 

Hispanics (as shown in Exhibit 2-9) in each decennial year. With few exceptions, Hispanic 

immigrants from each country had considerably lower homeownership rates in each decennial year 

compared to their total populations. Nonetheless, homeownership rates increased for all Hispanic 

immigrants during the twenty-year period. 

15 An immigrant household is defined as a foreign-born head of household, which includes persons born in 

U.S. outlying areas (e.g., Puerto Rico, Guam, U.S. Virgin Islands, American Samoa, and other U.S. 

possessions) and persons born abroad to U.S. parents. 

16 From 1980 to 2000, the non-Hispanic immigrant homeownership rate was 58.2, 56.1, and 55.5 percent, 

respectively. 

Chapter 2: The Hispanic Homeownership Gap: Size, Trends, and Contributing Factors 

34 
Exhibit 2-10 

Homeownership Rates and Gaps among Immigrant

1

 Hispanics, by Country of Origin, 1980-2000

Country of Origin 

19802

Rate Gap 

1990 

Rate Gap 

2000 

Rate Gap 

Mexican 

Puerto Rican 

Cuban 

Dominican 

Spaniard/ Spanish 

Central American 

South American 

Other Spanish/Hispanic/Latino3 

All Hispanic Immigrants 

40.8% 

11.6% 

44.0% 

32.8% 

38.6%

-17.4% 

-46.6% 

-14.2% 

-25.4% 

 -19.6% 

38.5%

25.0% 

51.6% 

12.5% 

52.0% 

22.2%

35.7% 

39.8% 

35.0%

 -17.6% 

-31.1% 

-4.5% 

-43.6% 

-4.1% 

-33.9% 

-20.4% 

-16.3% 

 -21.1% 

43.7% 

34.9% 

58.0% 

19.8% 

56.0% 

30.9% 

41.5% 

39.9% 

41.2%

-11.8% 

-20.6% 

+2.5% 

-35.7% 

+0.5% 

-24.6% 

-14.0% 

-15.6% 

 -14.3% 

1 Homeownership gaps are calculated in relation to the homeownership rate of all non-Hispanic immigrants. From 1980 

to 2000, the non-Hispanic immigrant homeownership rate was 58.2, 56.1, and 55.5 percent, respectively. An 

immigrant household is define as a foreign-born head of household, which includes persons born in U.S. outlying areas 

and born abroad to U.S. parents. 

2 The response categories in the 1980 Census had limited comparability with the 1990 and 2000 Census. 

3 The 1990 Census asked respondents to record whether they were of Spanish/Hispanic origin and listed five response 

categories: not of Hispanic origin; Mexican, Mexican-American, Chicano; Puerto Rican; Cuban; and other 

Spanish/Hispanic. Respondents were also allowed to write-in a place of origin not listed on the form. Write-in 

responses were coded as either the country specified by the respondent, “South American” or “Central American” 

when the respondent wrote-in these exact responses, or “other.” The 2000 Census also provided five, similar response 

categories and allowed for write-in responses. However, infrequent responses were coded as “Other Central 

American,” “Other South American,” or “Other Spanish or Latino,” rather than as a specific country. 

Sources: U.S. Census Bureau’s Integrated Public Use Microdata Series (IPUMS) using the 1980 1% metro sample, the 

1990 1% metro sample, and the 2000 IPUMS 1% sample. 

In particular, from 1980 to 2000 the homeownership rate among Puerto Rican and Cuban immigrants 

increased sharply by 23 and 14 percentage points. The rates of Dominican, Central American, and 

South American immigrants also increased considerably, by 7, 9, and 6 percentage points, 

respectively. The homeownership rate of Mexican and Spanish immigrants increased by 3 and 4 

percentage points during this period. By 2000, Cuban and Spanish immigrants had the highest 

homeownership rates (58 and 56 percent) and Dominican immigrants had the lowest (20 percent) 

among the Hispanic immigrant subgroups. 

Exhibit 2-10 also suggests that homeownership gaps between Hispanic immigrants and non-Hispanic 

immigrants were smaller than the gaps observed between all Hispanics and non-Hispanic whites. For 

example, the gap in 2000 between Mexican immigrants and non-Hispanic immigrants was about 12 

percentage points, compared to 24 percentage points between Mexican households and non-Hispanic 

white households. Similar patterns were observed for Puerto Rican, Dominican, Central American, 

and South American immigrants. Moreover, Cuban and Spanish immigrants had higher 

Chapter 2: The Hispanic Homeownership Gap: Size, Trends, and Contributing Factors 

35 
homeownership rates than non-Hispanic immigrants. The homeownership rate among non-Hispanic 

immigrants lagged behind the Cuban and Spanish rates by nearly 3 and 1 percentage points. 

Although not shown in Exhibit 2-10, the homeownership rate of Hispanic immigrants in 2000 was 

lower than the rate associated with the most common immigrants groups. The homeownership rates 

of immigrants from Europe (64 percent), East Asia17 (51 percent), India (48 percent), the Middle East 

(52 percent), other Asian nations (54 percent), and Oceania18 (51 percent) were much higher than the 

rate of households from Hispanic nations. Only immigrants from Africa (36 percent) had lower 

homeownership rates than Hispanics immigrants. Similar rate disparities were observed in 1990 and 

1980, except African immigrants had slightly higher homeownership rates in 1990 (37 percent). 

These data suggest that Hispanics face more significant barriers to homeownership than other 

immigrant groups. 

These patterns are supported by studies suggesting that country of origin is a key explanatory variable 

in predicting homeownership among Hispanic subpopulations (Borjas, 2002; Calis, 2003; Krivo, 

1986, 1995; and Masnick, 1997). These studies underscore large differences in skills and economic 

performance across national origin groups. In one such study, the effect of numerous socio-economic 

characteristics was measured across several Hispanic subpopulations and non-Hispanic whites. The 

study found that household characteristics did not have the same association with homeownership 

across all Hispanic subgroups. For example, the effect of income and education was larger on 

Mexicans, the impact of marriage was larger on Puerto Ricans; and the presence of children was 

larger on Cubans, compared to other Hispanic subgroups. Another study demonstrated that the 

correlation between homeownership and citizenship (discussed in more detail below) was greatest 

among European and smallest among Mexicans, Dominicans, and Central Americans. Thus, the 

cumulative impact of the numerous socio-economic characteristics on homeownership will vary 

among households from differing countries of origin. 

English Proficiency 

Exhibit 2-11 presents Hispanic homeownership rates by English proficiency from 1980 to 2000. The 

data show that Hispanics who speak English “very well” or exclusively are nearly twice as likely to 

be homeowners as those who are less English proficient, across all decades. The difference in 

homeownership rates by language skill is sharpest among those who are less proficient. Nearly 10 

percentage points separate those who do not speak English from those who speak it poorly. An 

average of 12 points separate Hispanics with poor language skills from those who speak English well. 

By comparison, the difference between those who speak well, very well or exclusively averages 

approximately 2 points. 

The dip in homeownership up to 1990 is felt almost equally across all of the groups. Among all 

proficiency groups except for exclusive English speakers, the 2000 rate surpassed the 1980 rate. 

17 Includes China, Japan, and both North and South Korea. 

18 Includes Australia, New Zealand, and numerous Pacific islands. 

Chapter 2: The Hispanic Homeownership Gap: Size, Trends, and Contributing Factors 

36 
Exhibit 2-11 

1980-2000 Homeownership Rates for Hispanics by English Speaking Skills Rates 

33.7% 

45.5% 

49.1% 49.6% 

23.1% 

31.1% 

43.3% 

47.5% 46.7% 

27.9% 

35.7% 

48.3% 

51.2% 

48.5% 

24.6% 

0.0% 

10.0% 

20.0% 

30.0% 

40.0% 

50.0% 

60.0% 

Does not speak Yes, but not well Yes, speaks well Yes, speaks very well Yes, speaks only

English English

 1980 Rate 1990 Rate 2000 Rate 

Sources: U.S. Census Bureau’s Integrated Public Use Microdata Series (IPUMS) using the 1980 1% metro sample, the 

1990 1% metro sample, and the 2000 IPUMS 1% sample. 

Degree of Social Integration 

The degree of social integration is a function of two factors: citizenship status and the number of 

years in the U.S. These factors will be discussed in turn, followed by a cross tabulation of 

homeownership rates by citizenship status and years in the U.S. 

Citizenship Status 

Exhibit 2-12 presents the Hispanic homeownership rates and gaps by citizenship status from 1980 to 

2000. Homeownership rates for Hispanic citizens are typically 20 percentage points higher than noncitizens. Naturalized citizens demonstrated higher homeownership rates than other groups. The 

tendency of naturalized citizens to have higher homeownership rates than native born Hispanics 

reflects the fact that naturalized citizens both tend to have characteristics that make homeownership 

more attractive and attainable. In addition, by definition naturalized citizens have made a decision to 

make the U.S. their permanent residence, which may also translate into a strong desire to put down 

permanent roots as homeowners. Among citizens, homeownership rates for Hispanics who were born 

in the United States or born abroad of U.S. parents were nearly identical throughout the twenty-year 

period, while the rate for naturalized citizens increased sharply during the 1990s. The Hispanic 

homeownership rate among naturalized citizens increased steadily from 51 percent in 1980 to 58 

percent in 2000. By comparison, the rate among Hispanics born in the U.S. or born abroad of 

American parents improved only marginally, from 48 percent in 1980 to 50 percent in 2000. The 

homeownership rate among Hispanic non-citizens remained nearly unchanged and was consistently 

Chapter 2: The Hispanic Homeownership Gap: Size, Trends, and Contributing Factors 

37 
1 

the lowest among all the groups throughout the twenty-year period. The rate among non-citizens was 

32, 29, and 32 percent from 1980 to 2000, respectively. 

Exhibit 2-12 

Hispanic Homeownership Rates and Gaps1

, by Citizenship Status, 1980-2000

Citizenship Status 

1980 

Rate Gap 

1990 

Rate Gap 

2000 

Rate Gap 

U.S. citizen 

Born in the U.S. 

Born abroad of U.S. parents 

Naturalized citizen 

Not a U.S. citizen 

Total 

48.2% 

47.5% 

47.5%

50.9% 

31.5% 

44.1% 

-21.1% 

-21.8% 

-8.0% 

-15.9% 

-17.6% 

-24.9% 

47.7% 

46.6% 

47.8% 

51.4% 

29.2% 

42.1%

-21.6% 

-22.8% 

-9.1% 

-19.3% 

-19.8% 

-26.9% 

52.2% 

49.7% 

49.7% 

58.0% 

31.9% 

45.6% 

-20.7% 

-23.2% 

-12.8% 

-15.2% 

-16.5% 

-26.8% 

Homeownership gaps are calculated in relation to the homeownership rate of non-Hispanic whites with the same 

citizenship status. Persons born in outlying U.S. territories (Guam, the U.S. Virgin Islands, the Northern Marianas) and 

the Commonwealth of Puerto Rico are U.S. citizens 

Sources: U.S. Census Bureau’s Integrated Public Use Microdata Series (IPUMS) using the 1980 1% metro sample, the 

1990 1% metro sample, and the 2000 IPUMS 1% sample. 

Hispanic households born in the U.S. consistently evinced the highest homeownership gap, which 

widened slightly from 22 percentage points in 1980 to 23 percentage points in 2000. Interestingly, 

the size of the homeownership gap associated with U.S. born Hispanics was more than twice the size 

of the gap associated with Hispanics born abroad of U.S. parents. From 1980 to 2000, the gap among 

Hispanics born in the U.S. was 22, 23, and 23 percentage points, compared to 8, 9, and 13 percentage 

points among Hispanics born abroad of U.S. parents, respectively. Given the similarity in 

homeownership rates for these two groups, the smaller gap among those born abroad reflects the fact 

that Whites born abroad also have fairly low homeownership rates. Homeownership gaps among 

naturalized citizens and non-citizens were similar, varying by less than 2 percentage points within any 

decennial year. Gaps among these Hispanic groups ranged between 15 and 20 percentage points. 

The research on the effect of citizenship on homeownership among all households supports these 

findings (Callis, 2003; Coulson, 1999; Masnick, 1997). In a descriptive analysis of Current 

Population Survey data, Callis (2003) found that in 2002 naturalized-citizen householders (of all 

origins) were more likely than natives to be homeowners in the Midwest, South, and West (but not in 

the Northeast or the total U.S.). Masnick (1997) indicated that among all foreign-born persons, 

citizens were exactly twice as likely as non-citizens to be homeowners, and the more recent the 

decade of arrival into the U.S. the greater the citizen’s homeownership rate exceeds that of noncitizens. The effect of arrival cohorts on homeownership is discussed next. 

Years in the U.S. 

Exhibit 2-13 presents homeownership rates among Hispanic immigrant households, by the number of 

years in the U.S. from 1980 to 2000. Homeownership rates increased dramatically as time spent in 

Chapter 2: The Hispanic Homeownership Gap: Size, Trends, and Contributing Factors 

38 
12% 

25% 

38% 

49% 

62% 

-11% 

-23% 

-22% 

-14% 

-5% 

10% 

18% 

30% 

41% 

51% 

-8% 

-21% 

-25% 

-20% 

-18% 

16% 

24% 

35% 

43% 

56% 

-3% 

-13% 

-15% 

-14% 

-16% 

1 

the U.S. lengthens. In each decennial year, the rate was 40 percentage points or more lower for 

households who had been in the U.S. for less than 5 years compared with households who had been in 

living in the U.S. for 21 years or more. Homeownership rates increased steadily, and there was no 

clear threshold in the number of years spent in the U.S. that was associated with very large increases 

in rates. In addition, gaps narrowed in every decennial year except 2000. 

Exhibit 2-13 

Hispanic Homeownership Rates and Gaps1

, by Years in the United States, 1980-2000 

0-5 Years 6-10 Years 11-15 Years 16-20 Years 21+ Years 

Gaps Rates 

1980 Rate Gap 1990 Rate Gap 2000 Rate Gap 

Homeownership gaps are calculated in relation to the homeownership rate of non-Hispanic immigrants with the same 

number of years in the U.S. 

Sources: U.S. Census Bureau’s Integrated Public Use Microdata Series (IPUMS) using the 1980 1% metro sample, the 

1990 1% metro sample, and the 2000 IPUMS 1% sample. 

In 1980, the homeownership rate rose steadily from 12 percent among households living in the U.S. 

for 5 years or less to 62 percent among households living in the U.S. for 21 years or more. The 49 

percentage-point increase was the largest increase observed across the three decennial years. In 1990, 

the rate similarly rose by nearly 42 percentage points and over half (51 percent) of households living 

in the U.S. for 21 years or more were homeowners. In 2000, only 16 percent of Hispanic immigrant 

households living in the U.S. for five years or less owned homes, while 61 percent of households in 

the country for 21 years or more were homeowners. 

From 1980 to 2000, gaps in homeownership rates between Hispanic immigrants and non-Hispanic 

immigrants with the same tenure in the U.S. steadily declined for those living in the United States for 

Chapter 2: The Hispanic Homeownership Gap: Size, Trends, and Contributing Factors 

39 
shorter periods of time; fluctuated for residents living in the U.S. for ten to twenty years; and 

increased for long-term residents. The gap among household living in the U.S. for 5 years or less 

declined from 12 percent in 1980 to 3 percent in 2000. Most households that have lived in the U.S. 

for 6 to 20 years experienced a decline in their homeownership gap, ranging from about 6 to 9 

percentage points. The gap increased for long-term residents from 5 percent in 1980 to 16 percent in 

2000. 

Interestingly, the exhibit also suggests that Hispanic immigrants who arrived during the mid-1990s 

had the largest homeownership rate (16 percent) in their first five years of residency compared to 

immigrants who arrived during the mid-1980s (10 percent) and mid-1970s (12 percent). A more 

detail examination of arrival cohorts is presented in Exhibit 2-14. The exhibit highlights several 

important trends: 

• Homeownership rates increased for all arrival cohorts (for which there are data) as 

residency in the U.S. increased, although earlier arrival cohorts had higher rates than 

more recent immigrants. For example, that 49.1% of the 1960-64 cohort owned after 

being in the country for 15-20 years, compared to 41.0% of the 1970-74 cohort and 

43.4% of the 1980-84 cohort. 

• Hispanic immigrants who arrived between 1960-1964 consistently had the highest 

homeownership rate among other Hispanic immigrants throughout the twenty-year 

period. Their homeownership rate was 49 percent in 1980, 54 percent in 1990, and 63 

percent in 2000. 

• Homeownership rates increased dramatically among Hispanic immigrants who arrived 

between 1975-1979, from 13 percent in 1980 to 51 percent in 2000. Immigrants who 

arrived during the early 1980s had the largest percentage point increase (nearly 26 

percentage-points) within a decade. 

• Hispanic homeownership gaps with non-Hispanic immigrants increased for some arrival 

cohorts and decreased for others. During the time period for which there is data, gaps 

increased for Hispanic immigrants who arrived between 1975-1979 (nearly 1 percentage 

point) and 1984-1989 (almost 7 percentage points). Gaps decreased overall for all other 

arrival cohorts, especially among immigrants who arrived between 1970-1974 (11 

percentage point decline). 

These trends are firmly supported by recent studies on length of residency and arrival cohorts that 

have found a persistent positive impact on homeownership as length of residency increases (Borjas; 

2002; Callis, 2003; Coulson, 1999; Krivo, 1995; Masnick, 1997; Myers and Lee, 1998; and Painter et 

al., 2001). These studies have found length of residence to be significant statistically regardless of 

other contributing factors, such as age group, immigrant status, and country of origin. For example, 

one such study found that recent arrivals initially have far lower odds of homeownership than 

households who have been in the U.S. for longer periods of time, but this gap is progressively 

reduced across immigration cohorts as duration in U.S. increases. 

Chapter 2: The Hispanic Homeownership Gap: Size, Trends, and Contributing Factors 

40 
Exhibit 2-14 

Homeownership Rates and Gaps1

 Among Immigrant Hispanics, by Year of Arrival, 1980-2000

Year of Arrival 

1980 

Rate Gap 

1990 

Rate Gap 

2000 

Rate Gap 

1960 - 1964 49.1% -13.6% 53.6% -11.5% 63.1% -12.3% 

1965 - 1969 38.2% -21.8% 45.2% -17.5% 56.6% -16.9% 

1970 - 1974 25.0% -22.6% 41.0% -19.6% 56.2% -11.0% 

1975 – 19792 12.5% -10.8% 29.8% -24.6% 51.1% -11.7% 

1980 - 1984 17.8% -20.9% 43.4% -13.9% 

1984 - 1989 9.7% -8.3% 33.2% -15.0% 

1990 - 1994 23.1% -13.4% 

1995 - 2000 16.1% -2.7% 

1 Homeownership gaps are calculated in relation to the homeownership rate of non-Hispanic immigrants with the same 

years of tenure in the U.S. 

2 The 1980 IPUMS data coded this category as 1975-1980. 

Sources: U.S. Census Bureau’s Integrated Public Use Microdata Series (IPUMS) using the 1980 1% metro sample, the 

1990 1% metro sample, and the 2000 IPUMS 1% sample. 

The reasons why recent immigrant waves have lower homeownership probabilities than other 

immigrant cohorts at a similar length of residence in the U.S. is likely due to lower endowments, 

including income, educational level, marital status, and employment skills. That is, recent immigrant 

households are more likely to be poor, uneducated, headed by singles, and unskilled compared to 

immigrant households in the past. As a result, recent immigrants experience greater difficulties in 

overcoming the barriers to homeownership. 

Place of Residence 

Exhibit 2-15 presents homeownership rates among Hispanic households, by metropolitan status from 

1980 to 2000. Total homeownership rates were consistently largest in the South, lowest in the 

Northeast, and higher among households residing in non-metropolitan areas than in metropolitan 

areas. During the twenty-year period, rates increased in both the Northeast and Midwest, and 

declined slightly in both the South and West. Homeownership gaps remained relatively stable across 

the decennial years. 

In the Northeast, overall homeownership rates steadily increased during the twenty-year period from 20 

percent in 1980 to 25 percent in 2000. Total rates in each decennial year were approximately 20 

percentage points lower than in any other region. In addition, there were sizable differences in 

homeownership rates among households living in metropolitan and non-metropolitan areas. Rates were 

much higher in non-metropolitan areas than in metropolitan areas by 30, 27, and 20 percentage points in 

each decennial year, respectively. Homeownership gaps changed little during the twenty-year period, 

especially among households in metropolitan areas. Gaps in metropolitan areas changed from 43 

Chapter 2: The Hispanic Homeownership Gap: Size, Trends, and Contributing Factors 

41 
1 

percentage points in 1980 to 45 percentage points in 2000. However, gaps in non-metropolitan areas 

widened from 25 percentage points in 1980 to 30 percentage points in 2000. 

Exhibit 2-15 

Hispanic Homeownership Rates and Gaps1

, by Metropolitan Status, 1980-2000

Metropolitan Status 

1980 

Rate Gap 

1990 

Rate Gap 

2000 

Rate Gap 

Northeast 

Not identifiable 

Not in metro area 

In metro area 

Total 

Midwest 

Not identifiable 

Not in metro area 

In metro area 

Total 

South 

Not identifiable 

Not in metro area 

In metro area 

Total 

West 

Not identifiable 

Not in metro area 

In metro area 

Total 

49.7% 

19.7% 

20.4% 

58.2% 

43.0% 

45.0% 

60.9% 

53.3% 

54.5% 

60.8% 

45.3% 

47.3% 

-24.4%

-43.2% 

-44.5% 

-17.9%

-27.3% 

-27.2% 

-15.7%

-15.9% 

-17.2% 

-9.7% 

-17.4% 

-16.8% 

44.5%

 47.8% 

20.7% 

21.1%

56.8%

 53.0% 

43.5% 

44.7%

55.0%

 60.0% 

50.3% 

51.6%

41.1%

58.7% 

42.0% 

43.7%

 -23.8% 

-25.3% 

-46.1% 

-46.4% 

-15.7% 

-21.5% 

-26.4% 

-26.7% 

-19.2% 

-16.4% 

-18.4% 

-19.7% 

-24.9% 

-10.4% 

-20.3% 

-19.8% 

40.4% 

44.1% 

24.5% 

25.0% 

53.2% 

50.8% 

47.6% 

48.2% 

57.6% 

58.6% 

52.5% 

53.3% 

57.8% 

59.1% 

45.7% 

46.9% 

-33.0% 

-29.9% 

-45.1% 

-45.4% 

-22.9% 

-25.5% 

-26.0% 

-26.4% 

-19.4% 

-19.7% 

-20.7% 

-21.4% 

-15.2% 

-12.6% 

-20.9% 

-20.7% 

Homeownership gaps are calculated in relation to the homeownership rate of non-Hispanic whites. 

Sources: U.S. Census Bureau’s Integrated Public Use Microdata Series (IPUMS) using the 1980 1% metro sample, the 

1990 1% metro sample, and the 2000 IPUMS 5% sample. The 5% sample was used for 2000 because the 1% 

sample in 2000 was designed to suppress information for geographic units containing fewer than 400,000 

people. As a result, the 1% sample in 2000 contains large proportions of unidentifiable areas, which produced 

unreliable homeownership rates and gaps. 

Homeownership rates and gaps changed little in the Midwest. The total homeownership rate 

increased modestly in the Midwest by 3 percentage points during the twenty-year period. Nearly half 

(48 percent) of Hispanic households in the Midwest were homeowners in 2000. Between 1980 and 

2000, rates among households residing in non-metropolitan and metropolitan areas changed slightly 

from 58 and 43 percent in 1980 to 51 and 48 percent in 2000. Similarly, homeownership gaps 

Chapter 2: The Hispanic Homeownership Gap: Size, Trends, and Contributing Factors 

42 
remained relatively stable from 1980 to 2000. Gaps widened among non-metropolitan households 

(from 18 to 26 percentage points) and remained essentially unchanged among metropolitan 

households (dropping only from 27 to 26 percentage points). 

In the South, homeownership rates were comparatively higher than in other regions. The rate among 

non-metropolitan households was 61 percent in 1980, and declined only slightly to 59 percent in 2000. 

The rate among metropolitan households also dropped slightly from 53 percent in 1980 to 52 percent in 

2000. Homeownership gaps, however, widened more sharply during the twenty-year period. Gaps in 

non-metropolitan areas increased from 16 percentage points in 1980 to 20 percentage points in 2000. 

The change in metropolitan areas was similar, with gaps in homeownership rates increasing from 16 

percentage points in 1980 to 21 percentage points in 2000. Overall, the total homeownership rate (53 

percent) in 2000 was higher than in any other region. 

Finally, in the West, homeownership rates remained high among non-metropolitan households (61 

percent in 1980; 59 percent in 1990; and 59 percent in 2000) and slightly below the region’s total rate 

among metropolitan households (45 percent in 1980; 42 percent in 1990; and 46 percent in 2000). 

Non-metropolitan Hispanic households in the West had the highest ownership rate among all 

Hispanic households in any decennial year. Accordingly, homeownership gaps were relatively low 

among non-metropolitan households, ranging from 10 percentage points in 1980 to 13 percentage 

points in 2000. Gaps among metropolitan households were considerably higher than in nonmetropolitan areas, widening from 17 percentage points in 1980 to 21 percentage points in 2000. 

As the geographic distribution of Hispanic households demonstrates, Hispanic homeownership rates 

are consistently lower within metropolitan areas than in non-metropolitan areas, which is true of all 

households generally (Herbert et al., 2005). This finding is particularly important to understanding 

Hispanic homeownership rates and gaps because Hispanics are highly concentrated in metropolitan 

areas. For example, in 2000, approximately 92, 75, 70, and 81 percent of Hispanic households lived 

in metropolitan areas within the Northeast, Midwest, South, and West, respectively. The share of 

Hispanics across metropolitan and non-metropolitan areas were similar in 1990 and 1980. Thus, the 

overwhelming majority of Hispanic households are concentrated in areas with low homeownership 

rates. 

The low Hispanic homeownership rates within metropolitan areas are due in part to the high cost of 

housing relative to Hispanic household income. Exhibit 2-16 lists thirty metropolitan areas with the 

highest proportion of Hispanic households in 2000 and provides four types of information for each 

area: (1) proportion of Hispanic households as a percent of the total household population; (2) median 

Hispanic household income; (3) Hispanic median income as a percent of Area Median Income 

(AMI),19 and (4) median value of owner-occupied housing. The list of metropolitan areas is sorted by 

homeownership rate in descending order. 

To account for the significant variation in household income across market areas, policymakers measure 

household income as a percent of the AMI and use this measure to determine eligibility for participation in 

housing assistance programs. There are a variety of cutoffs used to determine for program eligibility. For 

example, under some homeownership programs (e.g., HOME and Mortgage Revenue Bonds), program 

participants must have income below area median. The GSE housing goals provide credit for loans made 

to households with income below 60 percent of AMI, or below 80 percent of AMI but residing in lowincome neighborhoods. However, rental housing programs generally have more stringent income limits. 

Chapter 2: The Hispanic Homeownership Gap: Size, Trends, and Contributing Factors 

43 

19 
Exhibit 2-16 

Hispanic Median Household Income and Metropolitan Median Housing Values in 30 Metropolitan 

Areas with the Highest Proportion of Hispanic Households, 2000 

Metropolitan Area 

2000 

Median 

Hispanic 

Household 

Income 

Hispanic 

Median Income 

as a Percent of 

Area Median 

Income (AMI) 

Median 

Value of 

OwnerOccupied 

Rate Gap Housing

McAllen-Edinburg-Pharr-Mission, TX

El Paso, TX 

Albuquerque, NM 

Riverside-San Bernardino, CA 

San Antonio, TX 

Tucson, AZ 

Modesto, CA 

Miami-Hialeah, FL 

Orlando, FL 

Bakersfield, CA 

Phoenix, AZ 

Ventura-Oxnard-Simi Valley, CA 

Stockton, CA 

Denver-Boulder-Longmont, CO 

Oakland, CA 

Fort Worth-Arlington, TX 

San Jose, CA 

Vallejo-Fairfield-Napa, CA 

Houston-Brazoria, TX 

Las Vegas, NV 

Fresno, CA 

Austin, TX 

Orange County, CA 

San Diego, CA 

Dallas-Fort Worth, TX 

Los Angeles-Long Beach, CA 

Bergen-Passaic, NJ 

Jersey City, NJ 

Hartford-Bristol-Middleton-New Britain, CT 

New York-Northeastern NJ 

71.8% -8.6% 

62.7% -4.1% 

61.2% -6.3% 

60.3% -11.7% 

57.8% -9.4% 

56.4% -11.7% 

55.5% -11.9% 

54.1% -14.1% 

54.1% -18.0% 

50.9% -17.7% 

50.9% -22.3% 

50.7% -22.8% 

50.1% -18.5% 

50.0% -20.7% 

49.7% -18.8% 

47.3% -20.8% 

46.6% -19.6% 

46.6% -23.9% 

46.3% -23.7% 

45.3% -19.8% 

44.7% -22.9% 

43.3% -14.6% 

42.4% -26.3% 

39.7% -22.7% 

39.5% -26.4% 

37.7% -20.6% 

35.7% -37.4% 

19.5% -21.0% 

18.3% -49.2% 

14.4% -28.6% 

$22,351 

$26,657 

$32,676 

$37,252 

$31,357 

$30,177 

$35,015 

$33,536 

$34,093 

$27,263 

$33,915 

$46,404 

$33,282 

$38,115 

$49,780 

$35,547 

$55,572 

$45,624 

$32,616 

$37,863 

$28,079 

$38,356 

$44,676 

$34,555 

$35,542 

$33,820 

$44,526 

$33,613 

$27,050 

$28,791 

89.9% 

85.8% 

83.6% 

87.9% 

80.1% 

82.1% 

87.3% 

93.2% 

81.4% 

76.9% 

75.8% 

77.8% 

80.6% 

74.5% 

83.9% 

77.3% 

74.8% 

85.4% 

73.0% 

89.2% 

80.3% 

78.4% 

76.0% 

73.4% 

73.5% 

80.2% 

75.0% 

83.4% 

51.8% 

70.1% 

$52,400 

$69,600 

$124,700 

$138,500 

$77,100 

$114,600 

$125,300 

$124,000 

$109,100 

$93,300 

$127,900 

$248,700 

$142,400 

$176,600 

$289,100 

$90,300 

$446,400 

$191,100 

$90,200 

$136,200 

$106,800 

$128,100 

$270,000 

$227,200 

$108,100 

$209,300 

$233,300 

$150,300 

$147,600 

$233,700 

Total 45.6% -26.8% $35,603 79.4% $159,397 

Sources: U.S. Census Bureau’s Integrated Public Use Microdata Series (IPUMS) using the 1980 1% metro sample, the 1990 

1% metro sample, and the 2000 IPUMS 1% sample. 

For example, the Section 8 program is generally limited to households with incomes below 50 percent of 

AMI, and rental projects under the HOME program are aimed at households below 65 percent of AMI. 

Housing developments that use Low-Income Housing Tax Credits can choose to reserve either a minimum 

of 20 percent of the units for households at or below 50 percent of the area median income, or at least 40 

percent of the units for occupancy by households at or below 60 percent of area median income. 

Chapter 2: The Hispanic Homeownership Gap: Size, Trends, and Contributing Factors 

44 
The exhibit suggests that Hispanic homeownership rates are higher and gaps are lower in areas where: 

• Hispanic median income is a higher proportion of the area median income; and 

• Median housing values are lower. 

For example, the Hispanic median income as a percent of AMI was above 80 percent in nine of the ten 

metropolitan areas with the highest homeownership rates. In the McAllen-Edinburg-Pharr-Mission 

(TX) metropolitan area, the Hispanic median income as a percent of AMI was 90 percent and 72 percent 

of Hispanic households were homeowners. Similarly, in the El Paso (TX) metropolitan area the 

Hispanic median income as a percent of AMI was 86 percent and 63 percent of Hispanics were 

homeowners. In both McAllen-Edinburg-Pharr-Mission and El Paso, the median value of owneroccupied housing was inexpensive ($52,000 and $69,600), and not surprisingly, homeownership gaps 

were below 10 percentage points. None of the top ten metropolitan areas with high Hispanic 

homeownership rates had median housing values above the national median ($159,397). 

By contrast, Hispanic homeownership rates are much lower in metropolitan areas where the Hispanic 

median income was a lower proportion of AMI and median housing values were higher. For 

example, the Hispanic median income as a percent of AMI was below 80 percent in seven of the ten 

metropolitan areas with the lowest homeownership rates. In the Bergen-Passaic (NJ) metropolitan 

area, the Hispanic median income as a percent of AMI was 75 percent and the homeownership rate 

among Hispanic households was only 36 percent. Similarly, in the New York-Northeastern (NJ) 

metropolitan area the Hispanic median income as a percent of AMI was 70 percent and only 14 

percent of Hispanic household were homeowners. In both the Bergen-Passaic and New YorkNortheastern metropolitan areas, the median value of owner-occupied housing was expensive 

($233,300 and $233,700), and homeownership gaps (37 and 29 percentage points) were higher than 

the national total (27 percentage points). Half of the metropolitan areas with the lowest 

homeownership rates had median housing values above the national median ($159,397). 

Indeed, place of residence has consistently been found to be an important factor in determining 

homeownership (Borjas, 2002) and its impact on Hispanic households is unique in two important 

ways. First, most Hispanics enter the U.S. through gateway cities, particularly cities in California, 

Texas, New York and Florida, that tend to be high cost housing markets (McArdle, 1995). The 

weighted average median house value for Hispanics across the 107 metropolitan areas with the 

highest proportion of Hispanics was $147,987, compared to $121,205 for non-Hispanic whites in 

these areas.20 This suggests that Hispanic households are located disproportionately in higher cost 

housing markets, which contributes to the gap in homeownership rates between Hispanics and nonHispanic whites. One recent study even found that expensive housing markets create greater barriers 

to homeownership for Hispanics than for non-Hispanic whites (Krivo, 1995). 

These figures are derived by using the share of the population of Hispanics and non-Hispanic Whites in 

each market as a weight in estimating the average house value across these markets. For example, a market 

where 4 percent of Hispanics reside would have a weight of .04 in estimating the average, while if 2 

percent of Whites live in that market the weight for Whites would be .02. 

Chapter 2: The Hispanic Homeownership Gap: Size, Trends, and Contributing Factors 

45 

20 
Second, the concentration of Hispanic households into ethnic enclaves (or barrios) is prevalent. The 

impact of ethnic enclaves on homeownership opportunities is unclear (Borjas, 2002; and Flippen, 

2001b). On the one hand, Hispanic barrios may help immigrants circumvent any discrimination 

otherwise encountered outside the enclave. In this scenario, access to housing and mortgage markets 

is facilitated by Hispanic realtors and bankers that live in the community. Neighbors with similar 

preferences and cultures may also make a community more welcoming and desirable, thereby 

increasing demand for housing. On the other hand, ethnic enclaves could create incentives for 

immigrants not to leave the community. The attractiveness of these enclaves may result in greater 

rates of segregation from whites, which may, in turn, depress Hispanic homeownership rates by 

limiting homeownership opportunities or preventing Hispanics from acquiring the skills needed in the 

larger labor market. 

Determinants of Overall Homeownership Gaps Among Hispanics 

All of the factors identified in the preceding section have been found to have clear affects on Hispanic 

homeownership rates and gaps. However, determining which of these factors affect rates and gaps 

more heavily than other factors is challenging. Moreover, if these factors only offer a partial 

explanation of the Hispanic-white gap, it leaves open the question of what other factors may be 

influencing rates and gaps. Several studies have attempted to determine which factors are most 

important in explaining differences in homeownership rates between Hispanics and whites and how 

much of this gap can be explained by available data. 

Wachter and Megbolugbe (1992) use data from the 1989 American Housing Survey and find that 

household characteristics (income, age, education, family type, and gender) and market factors (house 

prices and geographic location) together explain 78 percent (or 32 percentage points) of the 41 

percentage point gap in homeownership rates between non-Hispanics (including blacks) and 

Hispanics. These researchers conclude that income is the most important characteristic accounting 

for the Hispanic homeownership gap, followed by martial status and gender. However, there were a 

number of important variables that were not included in their statistical models because of limitations 

with the available data, including wealth, immigrant status, and credit history. 

Using data from the 1996 CPS to analyze Hispanic homeownership rates, Coulson (1999) is able to 

include measures of Hispanic immigrant status, including how long individuals have lived in the U.S. 

and whether they are citizens. Unlike most studies of racial and ethnic differences in homeownership 

rates, Coulson does not include measures of race and ethnicity directly in the regression model. 

Instead, the estimated homeownership rate for each racial-ethnic group is compared to their actual 

rates to determine whether the model over or under predicts homeownership rates for each group. 

Coulson finds that only a relatively small portion of the difference in homeownership rates between 

whites and Hispanics is unexplained by the household characteristics and housing market variables in 

the model. Of the 31 percentage-point difference in Hispanic-white homeownership rates, only 2 

percentage points is unexplained. The most important explanatory factors among Hispanics include 

their higher share of immigrants, younger age, and concentration in high cost housing markets. 

Coulson further examines these differences for different ethnic groups and finds the largest 

unexplained gaps in homeownership rates are for Puerto Ricans (9 percentage points), followed by 

Cubans (7 percentage points) and “other” Hispanics (4 percentage points). Mexicans are not found to 

Chapter 2: The Hispanic Homeownership Gap: Size, Trends, and Contributing Factors 

46 
have any unexplained difference in homeownership rates from whites once household and market 

characteristics are taken into account. 

Flippen (2001a) is notable because of the extensive set of explanatory variables used in the study. 

The study used data from the 1991-92 Health and Retirement Survey to study racial differences in 

homeownership rates among whites, blacks, and Hispanics. The data included information on: 

inheritance amounts; age; marital status; number of children; health status; cognitive ability; levels of 

education and income; occupation, self-employment and retirement status; number of prior layoffs; 

expected years of life remaining; geographic location, including region and urban location; risk 

tolerance; and length of planning period. Although the list of variables includes proxies for hard to 

measure concepts such as income uncertainty and risk aversion, the study does not include measures 

for immigrant status and the sample is limited to individuals between age 51 and 61. The unadjusted 

gap in Hispanic-white homeownership in the sample was 27 percentage points, of which differences 

in observable personal characteristics explained 21 percentage points, which leaves a residual 

component of 6 percentage points. Differences in income and employment characteristics between 

whites and Hispanics were the most important factors, together accounting for half of the overall 

homeownership rate differences. The geographic concentration of Hispanics in higher cost housing 

markets, especially in the West and in urban areas, was also found to be important. Since the sample 

is restricted to a single age group, age is not found to be a factor contributing to lower 

homeownership rates among Hispanics in the sample. 

Finally, Gabriel and Rosenthal (2005) analyze data from the Survey of Consumer Finance to identify 

the factors associated with homeownership trends by race and ethnicity between 1983 and 2001. The 

models used in the study control for household demographic characteristics and geographic location, 

but also incorporate information on whether the household is constrained in its access to credit. 

However, the models do not control for immigrant status. Gabriel and Rosenthal find that roughly 

half of the average Hispanic gap during the study period was explained by available variables (14 

percentage points out of a total gap of 30 percentage points). The remaining portion of the gap is 

attributable to factors not captured in the models, including immigrant status and discriminatory 

treatment. Gabriel and Rosenthal also do not attempt to identify the specific household and housing 

market factors that are most important in producing the overall disparity in white and Hispanic 

homeownership rates, although credit barriers account for between 2 and 5 percentage points of the 

overall gap. 

Interestingly, Gabriel and Rosenthal also examined white-black gaps in homeownership rates but find 

that the included variables in the models explain a much larger share of the observed differences 

compared to Hispanics. On average, the included variables accounted for 19 percentage points of the 

total gap of 26 percentage points. The larger unexplained Hispanic gap may reflect the barriers faced 

by the large share of immigrants among Hispanics. 

Looking at these studies as a whole, it is clear that immigration status is quite important in explaining 

the overall gap in homeownership rates between Hispanics and whites. This is most evident in 

Coulson’s analysis, which is able to account for the vast majority of the Hispanic-white 

homeownership gap in large part because it is the only one of these studies to include variables 

related to immigrant status. Other studies that rely on household and housing market characteristics 

but do not control for immigration status are only able to explain roughly between half and threeChapter 2: The Hispanic Homeownership Gap: Size, Trends, and Contributing Factors 

47 
quarters of the overall Hispanic-white homeownership gap. The importance of immigration status is 

also implied by the findings of Gabriel and Rosenthal. A much larger portion of the Hispanic-white 

gap is unexplained by available household and housing market characteristics when compared to 

blacks. In general, the studies also confirm the importance of lower income and education levels 

among Hispanics as well as their younger age profile in contributing to the Hispanic-white 

homeownership gaps. Also, Hispanics concentration in higher cost urban markets and in the West are 

another important contributing factor. The work by Garbriel and Rosenthal confirm that credit 

barriers do contribute to the Hispanic-white homeownership gap, but the magnitude of the impact is 

fairly small, ranging from 2 to 5 percentage points over a 20-year period. 

Summary of Findings 

This chapter highlighted major trends in Hispanic homeownership from 1980 to 2000 and identified 

numerous socio-economic and residential factors that contributed to sizable gaps in homeownership 

rates between Hispanics and other groups. By 2000, Hispanic homeownership rates (45.6 percent) 

lagged far behind non-Hispanic Whites (72.5 percent), and were even somewhat lower than other 

racial minorities, including non-Hispanic Blacks (46.6 percent), and Asian or Pacific Islanders (53.1 

percent). Hispanic households had the largest gap in homeownership rates among all minority 

groups. 

The data analysis and literature review found that age, income, level of education, net worth, 

household type, nativity, country of origin, degree of social integration (citizenship status and years in 

the U.S.), and place of residence were all important factors that contributed to the gap in 

homeownership rates between Hispanics and non-Hispanic whites. Specifically, the data 

demonstrated that Hispanic homeownership rates increase and gaps decrease with age, income, and 

wealth, and educational status. Marriage was also a strong determinant of homeownership and, as 

expected, married couples displayed much higher rates of homeownership than other household 

types. 

While immigrant status is associated with lower homeownership rates, there are also substantial gaps 

in homeownership rates for native Hispanics. Among the immigrant-related characteristics, country 

of origin, citizenship status, and years in the U.S. were found to be important correlates of Hispanic 

homeownership. Homeownership rates increased with citizenship and length of stay in the U.S., 

although arrival cohort effects were evident as homeownership rates of more recent immigrant groups 

have not risen as much overtime as earlier immigrant cohorts. Lastly, the concentration of Hispanics 

in high cost housing markets also affected Hispanic homeownership rates. 

Studies that have attempted to explain the gap in homeownership rates between Hispanics and whites 

generally find that differences in household and housing market factors explain between half and 

three-quarters of the overall gap. Differences between whites and Hispanics in income, educational 

attainment, age, and geographic location are particularly important factors. One study that also 

included measures of immigration status, including years in the U.S. and citizenship status, was able 

to explain the vast majority of differences in Hispanic and white homeownership rates. Together, 

these results suggest that Hispanics confront many of the same barriers facing other low-income and 

minority households, but also confront immigration-related barriers that are particularly acute among 

Hispanics. These issues are explored in detail in the next chapter. 

Chapter 2: The Hispanic Homeownership Gap: Size, Trends, and Contributing Factors 

48 
Chapter 3 

Barriers to Hispanic Homeownership 

As described in the previous chapter, the socio-economic and immigrant characteristics of Hispanic 

households are strongly associated with their homeownership rates and gaps. The relationship 

between these characteristics and the likelihood that a Hispanic household will become a homeowner 

does not occur in a vacuum. Institutional and market barriers faced by Hispanic households affect 

both whether they view homeownership as a real opportunity and their ability to navigate through the 

homebuying process successfully. 

Exhibit 3-1 groups these institutional and market forces into three types of barriers and demonstrates 

how these barriers affect the homebuying process. The three barriers include: 

• Lack of information. Many Hispanic households lack information about the U.S. 

homebuying process. The confluence of language barriers, a lack of formal relationships 

with financial institutions, and a general lack of information – or misinformation – about 

the mortgage and homebuying process dissuades some Hispanic households from 

attempting to buy a home. Lack of information affects every stage of the homebuying 

process. 

• Real estate and housing markets. High-cost housing and the potential for 

discrimination in the real estate and housing markets are other important barriers to 

Hispanic homeownership. Many Hispanics live in high-cost housing markets that lack 

decent, affordable housing—especially households living in “gateway cities” that are the 

primary U.S. entry point for immigrants. Discrimination in the real estate and housing 

markets also affects a Hispanic household’s likelihood of homeownership either by 

discouraging Hispanics from considering homeownership or by limiting their housing 

search to certain (often less desirable) neighborhoods. 

• Financial and mortgage markets. Poor credit histories, low household incomes, few 

assets, and non-traditional forms of employment may put conventional mortgage 

products out of reach for many Hispanic households. The extent to which new lending 

products can fill this void is unclear. Hispanic households may also confront racial and 

ethnic discrimination in the banking and mortgage lending industry. 

This chapter discusses each of these barriers in turn. The next section discusses how lack of 

information, including both understanding the homebuying and mortgage qualification processes and 

general financial literacy, affects a households’ decision to pursue homeownership, search for a 

home, and obtain mortgage financing. The second section discusses how housing affordability and 

racial/ethnic discrimination in real estate markets may discourage households from considering 

homeownership or limit their housing options. The third section focuses on the difficulties many 

Hispanic households confront when trying to satisfy mortgage underwriting guidelines. The last 

section summarizes findings from this chapter. 

Chapter 3: Barriers to Hispanic Homeownership 

49 
1. Deciding to Pursue

Homeownership

2. Searching for 

and Finding a 

Suitable Home

3. Obtaining 

Mortgage Finance

Mortgage

Qualification

Process

Financial

Literacy

Affordability

of Housing

Racial/Ethnic 

Discrimination

in Housing

Racial /Ethnic 

Discrimination in

Mortgage Market

Poor Credit

History

Lack of Proper 

Documentation

Homebuying

Process

Low Wealth

and Income

Exhibit 3-1: Barriers in the Homebuying Process 

Homebuying 

Process 

Lack of 

Information 

Financial & 

Mortgage 

Markets 

Real Estate 

& Housing 

Markets 

1. Deciding to Pursue 

Homeownership 

Homebuying 

Process

Lack of

Information

Financial &

Mortgage 

Markets

Real Estate 

& Housing 

Markets

2. Searching for 

and Finding a 

Suitable Home 

3. Obtaining 

Mortgage Finance 

Mortgage 

Qualification 

Process 

Financial 

Literacy 

Affordability 

of Housing 

Racial/Ethnic 

Discrimination 

in Housing 

Racial /Ethnic 

Discrimination in 

Mortgage Market 

Poor Credit 

History 

Lack of Proper 

Documentation 

Homebuying 

Process 

Low Wealth 

and Income 

Lack of Information About the Homebuying Process 

The U.S. housing market during the past few years has been among the strongest in history, and 

Americans of all ethnicities and races are feeling confident about homebuying. A national survey of 

both renters and owners conducted by the Fannie Mae Foundation (2003) finds that Hispanics view 

homeownership as a safer investment than putting their money into an IRA or 401(k) plan, a savings 

or money market account, mutual funds, or the stock market. Among both English-speaking and 

Chapter 3: Barriers to Hispanic Homeownership 

50 
Spanish-speaking Hispanics,21 the main reasons to buy a home are that homeownership provides a 

feeling of owning something of their own (82 percent and 79 percent) and that homeownership is a 

good long-term investment (77 percent and 78 percent). Other studies suggest that Hispanics want to 

become homeowners in order to have “something for their children,” to save money on rent, and to 

stop “dealing” with landlords (Congressional Hispanic Caucus Institute, 2004). Other researchers 

have found that immigrant groups see homeownership as an integral part of becoming an American, 

and they are three times more likely as all adults in the U.S. to rank homeownership as their number 

one priority (Schoenholtz and Stanton, 2001). Hispanics also believe that homeownership allows 

them to live in a neighborhood they enjoy and that paying rent is not a good investment (Fannie Mae, 

2003; Ratner, 1996). 

While Hispanics today have extraordinary faith in homeownership as a desirable investment and a 

source of personal satisfaction, they are less likely to have accurate information about 

homeownership than other populations (Fannie Mae, 2003; National Association of Hispanic Real 

Estate Professionals, 2000; Lee, Tornatzky, and Torres, 2004). The level of understanding about the 

homebuying process generally, the importance of a person’s financial history, and the mortgage 

qualification process is considerably lower among Hispanics, especially Spanish-speaking Hispanics, 

than the general population. Overall, the information gap dissuades many Hispanics from considering 

homeownership and undermines Hispanics’ confidence in completing the homebuying process 

successfully. 

The Homebuying Process 

Fannie Mae’s 2003 National Housing Survey finds that only 44 percent of Spanish-speaking Hispanics 

and 64 percent of English-speaking Hispanics have accurate information about the homebuying process, 

compared with 60 percent of African Americans and 69 percent of the total population.22 As Exhibit 3-

2 suggests, when Hispanics, particularly Spanish-speaking Hispanics are asked specific questions about 

the homebuying process they are less likely to have an accurate understanding of the process. For 

example, the majority of English-speaking Hispanics (58 percent) and a large majority of Spanishspeaking Hispanics (75 percent) believe that housing lenders are required by law to give borrowers the 

best possible rates on loans. A little more than a quarter of English-speaking Hispanics and about twothirds of Spanish-speaking Hispanics believe that borrowers must accept a 30-year commitment to 

obtain a mortgage. Spanish-speaking Hispanics, in particular, are less likely than other groups to have 

accurate information. Forty percent of Spanish-speaking Hispanics believe that information on buying 

a home is only available in English, and approximately 60 percent believe they need an attorney to fill 

out the paperwork when buying a house. 

21 In the Fannie Mae 2003 National Housing Survey, English-speaking Hispanics were defined as those 

Hispanics who both speak and read English most frequently at home. Similarly, Spanish-speaking 

Hispanics were defined as those Hispanics who speak and read Spanish most frequently at home. 

22 The Fannie Mae survey divided Hispanics into two groups based on the use of Spanish in the home. 

Hispanic respondents that reported Spanish as the most frequent language used in the home for both 

speaking and reading were categorized as “Spanish Hispanics,” while those that reported English as the 

most frequently used language were categorized as “English Hispanics.” For clarity, the terms Spanishspeaking and English-speaking Hispanics are used for these two groups in this report. 

Chapter 3: Barriers to Hispanic Homeownership 

51 
78%

25%

27%

39%

60%

47%

42%

65%

70%

93%

60%

59%

74%

70%

89%

Misconceptions about the U.S. homebuying 

process are exacerbated by cultural 

differences and past experiences in the home 

country. In the U.S., the homebuying 

process is a highly regulated activity, from 

the point of housing construction or 

renovation to the point when a buyer closes 

on a home. By contrast, in Mexico, there 

are an estimated 12 to 16 million homes that 

have been built without formal approval, 

and clouded titles may prevent households 

from selling or buying homes (Schuetz et 

al., 2004). As a result, many homes in 

Mexico are passed along in the family, and 

members of these households are never 

exposed to, or learn about, the process of 

buying a home. A recent study found that 

many of these households believe that 

becoming a homeowner in the U.S. is much 

more difficult than in their home county. 

Despite knowing very little about the 

homebuying process, many Hispanic 

immigrants said that it was much “tougher” 

to become a homeowner in the U.S. than in 

their home country. Many participants in 

the study expressed the following view: 

“While America gives you some 

advantages, it is more difficult to own a 

Exhibit 3-2: Percentage who know that the following 

statements are false 

“Information on buying a homeis only available in English”

89% 

93% 

60% Spanish Hispanic

General Population

English Hispanic

“You need to hire anattorney tofilloutyour paperworkwhen you 

buy a house”

70% 

70% 

39% Spanish Hispanic

General Population

English Hispanic

“Ifyou want a mortgage, you have to accept a 30-year

commitment”

74% General P General Population

English Hispanic

Spanish Hispanic

65% 

27% 

“Housing lenders are requiredby lawto give you the best

possible ratesonloans”

59% General Population 

42% 

General Population

English Hispanic

25% Spanish Hispanic

“Theperson buying the home pays thereal estate professional”

60% General Population

English Hispanic

78% 

47% 

Spanish Hispanic

Source: Fannie Mae National Housing Survey, 2003, p. 7 

home in the U.S.” (Bendixen and Associates, 2004, p. 14). 

Even for those household members who have gone through the homeownership process in their home 

county, prior experiences do not always resolve misconceptions about the U.S. homebuying process. 

Indeed, for many Hispanic immigrants, these misconceptions are worsened by their prior experiences 

with homebuying in their countries of origin (Schoenholtz and Stanton, 2001). For example, many 

Hispanic immigrants who come from countries where a very large down payment (up to 50 percent of 

the house value) is required to purchase a home assume this requirement applies to the U.S. market as 

well. According to the National Council of la Raza (2002), this “old country knowledge” deters 

many Hispanic immigrants from pursuing the homeownership path. 

Financial Literacy 

Financial literacy – knowing and understanding the basic principles of spending, using credit, saving, 

and investing – typically is learned through routine interactions with financial institutions, especially 

banks. However, a number of low-income and immigrant Hispanic households distrust mainstream 

financial institutions and eschew relations with them (Congressional Hispanic Caucus Institute, 

2004). For example, a 1999 survey of residents of low-income neighborhoods in New York and Los 

Chapter 3: Barriers to Hispanic Homeownership 

52 
Angeles found that 45 percent of Hispanics did not have a transaction account with a bank, compared 

to 31 percent of blacks and 9 percent of whites (Dunham, 2001).23 Focus groups conducted in 

Alabama and Nevada suggest that Hispanics’ view banks as “insecure,” “unforgiving,” and 

“unwelcoming.” Focus group participants describe losing their life savings because of bad banking 

practices, losing their property to bank foreclosure, and other “horrible” or “disappointing” 

experiences (Bendixen and Associates, 2004). This distrust is reinforced by the lack of outreach to 

Hispanic communities by financial institutions and by the general absence of financial professionals 

who are bilingual and bicultural (National Council of La Raza, 2002). 

A recent study focusing on homeownership achievement among Mexican-Americans in three major 

metropolitan areas concluded that the lack of a formal relationship with a bank was a common 

characteristic of survey respondents who were least able to progress in the homebuying process (Lee, 

Tornatzky, and Torres, 2004). This study conducted a telephone survey of 1,400 households about 

their interest in becoming homeowners, their perceptions regarding obstacles to achieving 

homeownership, and the characteristics of the households. The study divided households into two 

groups: those actively pursuing homeownership or recently purchased a home, and those who would 

like to buy a home but are not actively pursuing this goal at present. They found that a key 

distinguishing feature of those not actively pursuing homeownership was a lower likelihood of having 

a bank account. While 77 percent of those actively seeking a home to buy had an account, only 52 

percent of inactive households did. Inactive households were also less likely to have a credit card (40 

percent compared to 60 percent of active households). The authors conclude that this lack of formal 

relationship both signaled a lack of comfort and familiarity with formal financial networks and a lack 

of a credit history, both of which are needed to become a homeowner. 

There is also some evidence that the lack of formal ties to financial institutions may contribute to 

Hispanics developing poorer credit histories. A recent study by Bostic et al. (2004) estimates credit 

scores for respondents to the Survey of Consumer Finance in 2001. They find that 63 percent of 

Hispanic renters have low credit scores (below 660), compared to 54 percent of black renters and 35 

percent of white renters. 

Undocumented Hispanics,24 in particular, may exist completely in the informal economy, working in 

jobs that pay in cash and purchasing all goods and services in cash. According to a recent estimate 

there are approximately 1.5 million undocumented Hispanic households (or 5.8 million 

undocumented Hispanics) in the U.S. Many of these undocumented households have the 

characteristics associated with potential homeownership (discussed in chapter 2), and an estimated 

23 These shares of unbanked households are derived from data presented in Dunham (2001). Since these data 

are for low-income neighborhoods in two cities, it is not known how representative they are for Hispanics 

generally. Aizcorbe et al. (2003) present tabulations of the share of families without transaction accounts 

based on the 2001 Consumer Finance Survey for the entire nation. These data show that 31.5 percent of 

families with income in the bottom quintile do not have transaction accounts and that 24.8 percent of 

minorities do not have transaction accounts, compared to 5.3 percent of whites (the survey does not have 

enough observations to provide tabulations for Hispanics separately). Thus, the survey data for New York 

and Los Angeles are not inconsistent with national data. 

24 An undocumented person is defined as a foreign born person who is not a U.S. citizen and does not have 

legal immigration status. 

Chapter 3: Barriers to Hispanic Homeownership 

53 
216,000 of these households could become homeowners if they had improved access and information 

to the homebuying process (Paral and Associates, 2004). 

Whether by habit or necessity, these Hispanics do not interact with formal aspects of American 

society, especially banks, and tend to rely on the alternative financial sector (Barr, 2004) and personal 

connections (Neighborhood Reinvestment Corporation, 2004). In a research brief on banking the 

poor, Barr (2004) notes that in lieu of bank-based transactions, unbanked households often use check 

cashers to cash checks, pay bills, and wire funds; payday lenders for short-term consumer loans; and 

tax preparers and refund anticipation lenders to file for an earned income tax credit (EITC). Check 

cashing fees vary widely nationally from about 1.5 percent to 3.5 percent of the face value, which 

amounts to approximately $1.5 billion in annual fees. Payday lenders carry an average annual interest 

rate of over 470 percent, and an average loan of $300 for a single, two-week loan generates about $54 

in interest. Some borrowers take out multiple loans from payday lenders to repay a previous payday 

loan and incur additional “rollover” fees. Some low-income households, especially households who 

do not speak English and have difficulty understanding the tax-filing process, rely on tax preparers 

and refund anticipation lenders that can consume a considerable portion (an average of 13 percent) of 

a low-income household’s EITC. Overall, the use of the alternative financial sector significantly 

reduces take-home pay, hinders a household’s ability to accumulate wealth and establish credit, and 

may expose a household to higher risk of robbery or theft. 

The lack of a relationship with financial institutions also leads some Hispanics to seek advice from 

informal sources such as a family member or friend (Ratner, 1996; Real Estate Center, 2004; Rhine 

and Toussaint-Comeau, 2000; Congressional Hispanic Caucus Institute, 2004) or to rely on “cultural 

brokers” such as bilingual real estate agents, housing advocates, or lenders (Ratner, 1996). In some 

cases these advisors are not a good source of advice or cannot be trusted. Focus groups conducted in 

11 cities25 throughout the country suggest that Hispanics are quick to trust “anyone who speaks their 

language and knows their community,” but often these trusted sources were predatory lenders and 

realtors (Congressional Hispanic Caucus Institute, 2004). 

Even Hispanic households who are more trusting of banks and other financial institutions may have 

problems opening savings or checking accounts because of poor financial literacy. Without adequate 

financial planning skills, households live paycheck to paycheck, are overwhelmed by daily expenses, 

and find it difficult to set money aside to meet basic banking requirements, such as annual fees and 

minimum balances. Some households who lack basic English speaking and writing skills are put-off 

by the lack of bi-lingual and bi-cultural professionals in the banking industry, and thus find it difficult 

to place their trust in them. A survey of Texans found that nearly half of Hispanics felt that “[real 

estate] agents don’t take the time to understand one’s needs” and, unlike other ethnic groups, 

Hispanics are more likely to first ask their parents for real estate advice rather than an agent (Real 

Estate Center at Texas A&M University, 2004). Other households are unable to become new 

accountholders because banks do not accept foreign identification papers and households do not 

A total of 467 housing advocates and practitioners, industry experts, and Latino consumers participated in 

focus groups in the following cities, Atlanta (GA), Chicago (IL), Durham (NC), Kansas City (KS), Las 

Cruces (NM), Las Vegas (NV), Los Angeles (CA), Miami (FL), New York (NY), San Antonio (TX), and 

San Juan (PR). 

Chapter 3: Barriers to Hispanic Homeownership 

54 

25 
29%

39%

22%

50%

55%

64%

64%

65%

73%

understand how to obtain proper U.S. identification (or are unable to obtain proper identification due 

to their legal status). 

The Mortgage Qualification Process 

Surveys of Hispanics in the U.S. suggest that Hispanics understand the value of establishing a good 

credit history and they know that a credit history is a key criterion for becoming a homeowner. 

However, Hispanics are less clear about what defines a good credit history, what qualifies as 

acceptable creditworthiness to secure a mortgage, and what steps can be taken to repair their credit 

history (Bendixen and Associates, 2004; Ratner, 1996). In an ethnographic study of minority 

pathways to homeownership, several focus group participants believed that their credit rating was 

downgraded when they paid their bills on time because creditors were making less money. Some 

participants noted that they were advised to let a few payments slip as a way to build their credit, and 

others thought that having a loan on an expensive car would improve their credit rating because it 

demonstrated their ability to pay off a loan. 

The lack of understanding about credit is particularly troubling among Hispanics. In Fannie Mae’s 

national survey (2003), credit concerns are the most frequently cited reason why both Englishspeaking Hispanics (49 percent) and Spanish-speaking Hispanics (46 percent) have not purchased a 

home. By contrast, 42 percent of Blacks and 39 percent of the general population cite credit concerns 

as the main reason for not purchasing a home. Nearly half of all Hispanics in the U.S. worry that 

their credit is not good enough to qualify for a mortgage. Only 15 percent of Spanish-speaking 

Hispanics report having a great deal of experience with credit and debt, compared to 40 of the total 

population and 41 percent of English-speaking Hispanics. 

Exhibit 3-3: Percentage who know that the following As Exhibit 3-3 suggests, many 

statements are false Hispanics, especially Spanish-speaking 

“You need to have a perfect credit rating to qualify for a Hispanics, have inaccurate information 

mortgage” 

22% 

64% 

73% 

about mortgage credit decisions. To 

General Population qualify for a mortgage, almost 80 

English Hispanic percent of Spanish-speaking Hispanics 

Spanish Hispanic believe that they need a perfect credit 

rating; approximately 60 percent believe “You need to havestayed in the samejob for at least five

years to qualify for a mortgage” they need to stay in the same job for at 

39% 

55% 

65% least five years; and 70 percent believe General Population 

they must always pay their bills on time 

English Hispanic or carry some debt. These percentages Spanish Hispanic are significantly lower, 27, 35, and 36 

“If you haven’t always paid your bills on time or havecarried percent, respectively, among the general

some de some debt, you won’t qualify for a mortgage” population. Overall, two-thirds of the 

29% 

50% 

64% General Population general population correctly answered 

English Hispanic these three questions on mortgage credit 

Spanish Hispanic decisions, compared to approximately 

half of English-speaking Hispanics and 

less that one-third of Spanish-speaking 

Source: Fannie Mae National Housing Survey, p. 10 Hispanics. 

Chapter 3: Barriers to Hispanic Homeownership 

55 
The Information Gap and the Homebuying Process 

As summarized above, a variety of studies and surveys have concluded that information gaps about 

the homebuying process, the importance of establishing a financial history, and the mortgage 

qualification process are significant barriers to homeownership among Hispanics. In part, this gap 

can be attributed to a lack of educational materials written in Spanish and the lack of professionals in 

the homebuying process who speak Spanish. Conversely, the information gap can partially be related 

to a lack of English fluency among potential Hispanic homebuyers (National Association of Hispanic 

Real Estate Professionals, 2000). These issues will be discussed in more detail in chapter 4. Overall, 

however, information gaps dissuade some Hispanics from pursuing homeownership either because 

their misconceptions about the process lead them to believe that homeownership is unaffordable or 

too complicated, that banks are untrustworthy, or that they do not qualify for a mortgage due to their 

credit history. In short, the information gap undermines Hispanics’ confidence in completing the 

homebuying process. 

Indeed, according to the national survey conducted by Fannie Mae (2002), Spanish-speaking 

Hispanics are much less confident they can complete the homebuying process compared to the 

general population. Scored on a five-point scale, English-speaking Hispanics are nearly as confident 

as the general population in completing the homebuying steps (3.8 compared to 3.9), and Spanishspeaking Hispanics are less confident (3.4). Echoing the general findings for Spanish-speaking 

Hispanics, the survey finds that Spanish-speaking Hispanics are especially less confident about 

obtaining a mortgage (3.2 compared to 3.9) and finding a real estate professional they can trust (3.1 

compared to 3.5). 

Confidence in completing the homebuying process is further depressed by perceptions among 

Hispanics that housing prices are increasing too rapidly and feelings of discrimination in the housing 

market (Fannie Mae, 2003). The issues of housing affordability and the potential for housing market 

discrimination are discussed in the following section. 

Housing Market Barriers 

The U.S. housing market has boomed since the late 1990s. Fueled by low interest rates and steady 

residential construction, the boom has encompassed all regions of the nation, geographic areas, and a 

range of submarkets (Joint Center for Housing Studies, 2004; Fannie Mae, 2004). It has outlasted an 

economic recession and considerable job losses during the past few years. Nevertheless, the fear 

among many observers is that the boom will squeeze many homeseekers out of the market if housing 

prices rise faster than household incomes and if all households, especially immigrants, are unable to 

freely access homeownership opportunities. These fears are not completely unfounded. A recent 

study suggests that, at the national-level, a median-income, first-time homebuyer with 10 percent 

down payment will no longer qualify for a median-priced home beginning in 2004. At the 

metropolitan-level, a median-priced home will remain affordable or nearly affordable for medianincome buyers in only 3 of 11 major urban markets (Fannie Mae, 2004). In addition, while nearly 

one-third of household growth is attributed to immigration, there are concerns that persistent (albeit 

diminished) about the incidence of discrimination in the housing market, which may continue to limit 

Chapter 3: Barriers to Hispanic Homeownership 

56 
homeownership opportunities among minorities. Discrimination in the housing market is discussed 

below. 

The pressing issues of housing affordability and discrimination in the housing market are particularly 

important to Hispanics. As described in previous chapters, many Hispanics are concentrated in 

gateway cities that tend to be high cost housing markets. Hispanic incomes in 1999, however, lag far 

behind the national median household income. In addition, many Hispanic households are 

concentrated into ethnic enclaves (or barrios), which may help them circumvent discrimination 

otherwise encountered outside the enclave or may create incentives for them not to leave the enclave. 

Regardless, both deliberate and de facto residential segregation restrict the available housing options 

among the nation’s largest growing minority population. 

The impact of housing affordability and discrimination on the Hispanic homebuying process are 

discussed in the following section. Overall, these factors can both chill interest in pursuing 

homeownership by putting it out of reach of many Hispanic households and also make the housing 

search more difficult. 

Housing Affordability 

The increasingly common perception among Hispanics is that homeownership is an unaffordable 

dream. A study conducted by Fannie Mae suggests that the confluence of dramatic housing price 

appreciation with the slow pace of income growth is making homeownership increasingly 

unaffordable for median-income working households, especially households seeking to purchase a 

home for the first time (Fannie Mae, 2004).26 The Fannie Mae study creates annual homeownership 

affordability ratios – or the amount of qualifying income27 required to obtain a median-priced home 

loan divided by median family income – for both the nation and 11 major metropolitan areas from 

1990 to 2008 (projected). Ten of the 11 metropolitan areas in the study (all except Seattle) are among 

the 30 metropolitan areas with the largest number of Hispanic households in the nation. Ratios are 

created separately for first-time homebuyers and repeat homebuyers.28 A ratio equal to 100 suggests 

that a median-income family is just able to afford a median-priced home; ratios above 100 equate to 

unaffordable conditions while those under 100 equate to affordable conditions. Of course, this is a 

fairly crude measure of affordability both because it focuses on single points in the income and house 

price distributions and because it ignores household wealth, which is an important factor in 

determining whether a household can afford to purchase a home. Nonetheless, it is a useful short 

hand measure for comparing affordability across market areas. 

26 Data on estimated median family income come from three sources: the national median-income data from 

the U.S. Bureau of the Census Current Population Survey, the metropolitan median-income data from the 

U.S. Department of Housing and Urban Development, and the occupational average wage data from the 

U.S. Bureau of Labor Statistics’ Occupational Employment Statistics Survey. Data on qualifying income 

for purchasing the median-priced home comes from the National Association of Realtors, Federal Housing 

Finance Board, and the U.S. Bureau of the Census. 

27 The qualifying income calculation is based on a 28 percent qualifying ratio for monthly housing payment 

(principal, interest, taxes, and insurance, or P.I.T.I.) to gross monthly income. 

28 It is assumed that first-time homebuyers have 10 percent down payment and repeat buyers have 20 percent. 

The mortgage interest rate is assumed to increase by 0.5 percentage-points yearly. 

Chapter 3: Barriers to Hispanic Homeownership 

57 
1 

Exhibit 3-4 presents the homeownership affordability ratios among first-time homebuyers for all 11 

metropolitan areas in the study. Based on the Fannie Mae analysis, a middle-class homebuyer in 

Atlanta, Washington DC, Houston, and Philadelphia is able to afford a median-priced home, each 

having an affordability ratio below 100. Middle-class families in Chicago are just able to buy a 

median-priced home (ratio is 100). Families in 6 out of the 11 metropolitan areas (Boston, Denver, 

Los Angeles, New York, San Francisco, and Seattle) are not able to afford a median-priced home. 

With affordability ratios ranging from 118 to 198, middle-class families purchasing a median-priced 

home would need approximately 1.2 to 2.0 times the area median income to qualify for a mortgage 

with 10 percent down payment. 

Exhibit 3-4 

2000 Homeownership Affordability Ratios for First-Time Homebuyers in 11 Large Metropolitan Areas 

Hispanic Hispanic 

Income to Median Median Homeownership Homeownership 

Metro Area a Mortgage Income Income Ratio Ratio 

Qualify for Family Family Affordability Affordability

Atlanta 1 $48,800 $63,100 $42,600 77 115 

Washington, DC 1 $69,300 $82,800 $50,000 84 139 

Houston 1 $48,900 $56,700 $33,000 86 148 

Chicago 1

 $67,700 $67,900 $40,500 100 167 

Philadelphia 1

 $52,700 $57,800 $28,000 91 188 

Denver 1 $73,600 $62,100 $36,200 118 203 

Seattle $83,800 $65,800 $40,000 127 210 

Los Angeles 1

 $73,400 $52,100 $33,400 141 220 

San Francisco 1

 $148,400 $74,900 $49,000 198 303 

New York 1

 $88,800 $56,200 $27,600 158 322 

Boston 1

 $121,200 $65,500 $29,100 185 416 

Among the 30 metropolitan areas with the largest number of Hispanic households in the nation. 

Sources: Fannie Mae, 2004

However, using 2000 IPUMS data to produce comparable income measures for Hispanic families,29 

none of these metropolitan areas are affordable to Hispanic families earning a median income. For 

example, the median income among Hispanics families in Atlanta is approximately $42,600, or over 

$20,000 less than the median family income for all families. After adjusting the affordability ratio to 

reflect Hispanic median family incomes, the homeownership affordability ratio increases in Atlanta to 

115. This suggests that a first-time Hispanic homebuyer in Atlanta would need to earn 115 percent of 

the area median income to qualify for a mortgage with 10 percent down payment. 

The Fannie Mae study uses family median-income data from the U.S. Department of Housing and Urban 

Development, which does not contain income data by ethnicity. In order to produce comparable median 

family income for Hispanics, we used 2000 IPUMS data for a household of four. 

Chapter 3: Barriers to Hispanic Homeownership

58 

29 
The large share of Hispanics in Denver, Los Angeles, and New York face even greater affordability 

gaps. The 2000 Hispanic median family income in these housing markets is $36,200, $33,400, and 

$27,600, respectively. Using these Hispanic median family incomes, the adjusted affordability ratios 

are 203 in Denver, 220 in Los Angeles, and 322 in New York. These extraordinarily high ratios 

suggest that a Hispanic median-income family would not be able to purchase a median-priced home 

in these markets. 

As these figures suggest, housing affordability is largely a function of the relationship between 

incomes and housing prices. But housing affordability among Hispanics is also affected by the 

degree in which Hispanics are clustered or segregated into particular residential areas. It terms of 

housing affordability effects, ethnic clustering and segregation perpetuates a dual housing market 

that, in turn, engenders supply restrictions in minority neighborhoods. A dual housing market 

relegates Hispanics and other minorities to neighborhoods near the city core, which are characterized 

by older, low-quality, multi-unit housing that is less suitable for ownership (Rosenbaum, 1994, 1992; 

Harding, Rosenthal, and Sirmans, 2004). Multifamily buildings have less appeal for ownership 

because they offer less privacy, higher management costs to coordinate the activities of all owners, 

and less control since all owners must agree on maintenance and renovation investments. These 

structural characteristics diminish homeownership opportunities among Hispanics and other 

minorities and lead to higher housing prices. A shrinking affordable housing stock has also been 

associated with neighborhood gentrification, limited incentives and financing for affordable housing 

development, zoning regulations that restrict the development of multi-family units, and 

environmental regulations that increase building costs (Congressional Hispanic Caucus Institute, 

2004). 

The impact of supply constraints on Hispanic homeownership appears to be far-reaching, affecting 

rural areas as well as major cities (although only 2 percent of Hispanics households live in rural 

areas). In a national study of housing for rural farm workers, one-third of the housing was moderately 

or severely substandard. Researchers found that many of the housing units lack proper kitchen or 

bathroom facilities and have significant structural damage (Council of Economic Advisers, 1998). 

These structural characteristics diminish both the well being of Hispanics and opportunities for 

homeownership. 

Racial and Ethnic Discrimination in the Housing Market 

Racial and ethnic discrimination in the housing market has been researched extensively, although 

mostly with a focus on black households.30 The nature and impact of discrimination among Hispanics 

is less understood. In theory, discriminatory practices confronted by blacks similarly apply to 

Hispanics. For example, during the homebuying process both Roychoudhury and Goodman (1996) 

and Ondrich et al. (1998) suggest that a real estate agent may discriminate against minorities by: 

• limiting information that is shared with a potential homebuyer about available housing 

units or neighborhood amenities; 

• limiting the number of housing units shown to and inspected by a potential homebuyer; 

For a more thorough summary of the literature on racial discrimination in the housing market, see Herbert 

et al., 2004. 

Chapter 3: Barriers to Hispanic Homeownership 

59 

30 
• limiting information about financing, available financial and mortgage products, and 

referrals to mortgage professionals; 

• limiting the ongoing encouragement or assistance offered to the potential homebuyer; and 

• steering households to certain types of neighborhoods based on the potential 

homebuyer’s socioeconomic and racial characteristics (e.g., the real estate agent may 

steer minority households towards predominantly minority or integrated neighborhoods 

and white households to predominantly white neighborhoods). 

These researchers suggest that minorities are oftentimes treated differently in the homebuying process 

when compared to whites, which explains in part why minorities tend to be segregated residentially 

and less likely to be homeowners. To study the extent of differential treatment, studies rely on paired 

testing techniques. In a paired test, two individuals pose as identical homebuyers except one is a 

minority and the other is white. The two individuals visit real estate agents to inquire about available 

housing opportunities. The paired test methodology reveals whether real estate agents treat minorities 

differently than Whites during the housing search process. 

The 2000 Housing Discrimination Study (HDS 2000) sponsored by HUD and conducted by Turner et 

al. (2002b) is the largest paired-test study to date. The study is based on 4,600 paired tests conducted 

in 23 metropolitan areas nationwide.31 Based on the Hispanic/white paired tests,32 Turner et al. find 

that discriminatory treatment experienced by Hispanic homebuyers has declined since 1989, but many 

Hispanics still face significant levels of discrimination. Reflecting the stages of homebuying 

highlighted by Roychoudhury and Goodman (1996) and Ondrich et al. (1998), Turner et al. focus on 

five critical aspects of the interaction between a potential homebuyer and a real estate agent: 

1. Information in response to inquires about the availability of an advertised home or other 

similar home; 

2. Ability to inspect the advertised home or similar home; 

3. The types of neighborhoods where homes were made available to homeseekers; 

4. Assistance from real estate agents on mortgage financing options; and 

5. Extent to which real estate agents help the homeseeker complete the transaction. 

Exhibit 3-5 presents the overall results from Turner et al. for each indicator. The overall consistency 

indicator – a measure of the extent to which the different forms of treatment consistently favor one 

31 The study conducted paired tests for both rental and sales markets. We focus on the findings from the sales 

market. Also, of the 23 metropolitan areas, Hispanic only paired tests were conducted in 4 metropolitan 

areas: San Antonio, Pueblo, San Diego, and Tucson. Both black and Hispanic paired tests were conducted 

in 6 different metropolitan areas: Los Angeles, New York, Chicago, Houston, Denver, and Austin. Black 

only paired-testing was conducted in the remaining 10 metropolitan areas. 

32 The paired testers were assigned similar characteristics, which included: number of bedrooms desired by 

the household; geographic preference; reason for moving; household income (monthly and annually); 

employment history; household assets and debts; credit status; and tenure at current residence. 

Chapter 3: Barriers to Hispanic Homeownership 

60 
tester over the other – suggests that non-Hispanic whites were consistently favored in 19.7 percent of 

tests and Hispanics were favored in 12.3 percent of the tests. The net consistency measure, which is the 

difference in favorable treatment between whites and Hispanics (7.4 percent), is statistically significant, 

indicating that non-Hispanic whites were significantly more likely than Hispanics to be consistently 

favored throughout the home search process. The net consistency measure dropped slightly (3.0 

percentage points) from 1989, although the decrease is not statistically significant. 

Exhibit 3-5 

Differential Treatment Among Non-Hispanic White Homeseekers and Hispanic Homeseekers, 

2000 

% NonHispanic Change 

White % Hispanic Since 1989, 

Overall Indicator Favored Favored Net Measure Net Measure 

Housing availability 46.3% 44.4% 1.9% -10.5%* 

Housing inspection 38.3% 40.9% -2.6% -14.7%* 

Geographic steering - inspected 14.7% 9.7% 5.0%* 3.5% 

Financial assistance 38.6% 24.2% 14.4%* 13.1%* 

Agent encouragement 30.6% 27.5% 3.1% -14.5%* 

Overall consistency measure 19.7% 12.3% 7.4%* -3.0% 

* Indicates significance in net measure and change in net measure at the 95% level (using a two-tailed test). 

Sources: Turner et al. (2002b), pp. 3-17 through 3-19. 

Focusing on the indicators that revealed differential treatment among homeseekers, non-Hispanic 

whites received more favorable treatment than Hispanics in terms of receiving information about 

home financing (Financial Assistance) and inspecting homes in predominantly non-Hispanic 

neighborhoods (Geographic Steering). The issue of Financial Assistance was the area of greatest 

disparity in treatment between whites and Hispanics, with 14.4 percent of whites receiving more 

favorable treatment on net. The Financial Assistance indicator is based on a range of treatments. 

More specifically, real estate agents were significantly more likely to offer non-Hispanic whites help 

with financing (22.2 percent of Non-Hispanic white-favored, 10.5 percent Hispanic-favored); 

recommend lenders (19.6 percent of Non-Hispanic white-favored, 12.8 percent Hispanic-favored); 

and to discuss down payment requirements (24.9 percent of Non-Hispanic white-favored, 15.4 

percent Hispanic-favored). This is the one area where discriminatory treatment of Hispanics was 

statistically significantly worse than in 1989, with the net measure for systematic discrimination in 

financing assistance increasing by 13.1 percent points. 

The other indicator where non-Hispanic whites were favored was in Geographic Steering. In 14.7 

percent of paired tests, non-Hispanic whites were shown homes in less predominantly Hispanic areas, 

compared to 9.7 percent of Hispanics. The 5 percentage point difference in treatment is statistically 

significant, although the net measure of discrimination did not change significantly since 1989. This 

finding suggests that Hispanic homeseekers are slightly more likely to be directed to neighborhoods 

that primarily consist of minority households. 

Chapter 3: Barriers to Hispanic Homeownership 

61 
However, Turner et al. also found that Hispanic and non-Hispanic white homebuyers received 

comparable treatment along several other indicators in the housing search process, including: 

receiving information about available housing opportunities; the number of housing inspections by 

the potential homebuyer; and real estate agent encouragement. On several measures, Hispanics were 

treated more favorably than non-Hispanic whites. For example, Hispanics were more likely (15 

percent) to be given information on an advertised unit and inspect more units (38.1) than nonHispanic whites (12 percent and 35.7 percent). Since 1989, the change in the net measure across each 

of these indicators decreased significantly. Thus, there were several areas where discriminatory 

treatment of Hispanics appears to have eased since 1989. 

These results varied somewhat by metropolitan region. Hispanic homeseekers face higher levels of 

discriminatory behavior by real estate agents in New York City and Austin, Texas. Levels of 

discriminatory treatment were similar to national patterns in Chicago, Denver, Los Angeles, San 

Antonio, Houston, and San Diego, while discriminatory treatment was slightly lower in Pueblo, 

Colorado and Tucson, Arizona. 

Affordability, Discrimination and the Homebuying Process 

The impact of housing affordability and discrimination on Hispanic homeownership is unclear. On 

the one hand, affordability concerns and the perception of discrimination may chill interest in 

pursuing homeownership by putting it out of reach of many Hispanic households or by making 

housing search excessively difficult. A Fannie Mae survey exploring issues related to minority 

homeownership gaps found that Spanish-speaking Hispanics were more likely than the general public 

or English-speaking Hispanics to have concerns about encountering discrimination in the homebuying 

processs (Fannie Mae, 2003), which may discourage minority households from beginning the 

homebuying process or shorten a housing search prematurely. Another implication may be that 

Hispanic households may be more likely to accept less suitable housing for their needs and pay higher 

housing search costs than white households (Yinger, 1997). Indeed, others suggest that Hispanics are 

much less likely to become homeowners due to a combination of location and discrimination that 

causes segregation (Flippen, 2001b; Krivo, 1986). One analysis tested whether discrimination may 

be less evidence among younger minorities by including interactions between minority status and age 

in statistical models predicting homeownership and concluded that discrimination in the housing 

market has not declined since 1970 (Gyourko and Linneman, 1997). 

On the other hand, as discussed in Chapter 2, other studies explain most of the Hispanic 

homeownership gap by controlling for socioeconomic characteristics other than ethnic status, thereby 

suggesting that discrimination plays a limited or insignificant role in explaining homeownership gaps 

(Watcher and Megbolugbe, 1992; Coulson, 1999; Flippen 2001a;). These studies find some variation 

across the different Hispanic subgroups (i.e., Cubans, Dominicans, Mexicans, Puerto Ricans, and 

others). Others argue that “ethnic clustering” has a positive effect for Hispanics by improving 

Hispanic households’ access to Spanish-speaking financial institutions, real estate agents, and dense 

networks of community contacts (Flippen, 2001b). The presence of Spanish speaking professionals 

and homeownership materials in Spanish mitigates the negative effects of poor English skills and 

literacy. However, Flippen cautions that such ethnic enclaves may reinforce social attachments to 

these neighborhoods, which may have inferior housing and services, and decrease the motivation for 

Chapter 3: Barriers to Hispanic Homeownership 

62 
integration and mobility. Thus, the effect of ethnic enclaves on the life chances of their residents is 

also questionable. 

Financial and Mortgage Market Barriers 

The push to connect Hispanics, especially immigrants, with mainstream financial resources is mounting. 

Financial institutions view Hispanics and the influx of immigrant Hispanics as a large, growing, and 

relatively untapped market (Schoenholtz and Stanton, 2001; Brookings Institution, 2004). Financial 

institutions are currently spending millions of dollars on marketing campaigns and products that target 

the immigrant population. Also, community development organizations view this population as a 

source for promoting neighborhood revitalization and stabilization. Linking Hispanics to mainstream 

financial resources can help community-based organizations to promote local economic development, 

support small businesses, restore distressed neighborhoods, and encourage homeownership. And even 

police departments across the country are attempting to fight crime by encouraging immigrants to open 

bank accounts. Police departments are partnering with local banks to encourage immigrants to put their 

money into bank accounts, thus reducing immigrants’ vulnerability to criminals who prey on 

unsuspecting immigrants (Brookings Institution, 2004). 

Despite this growing interest, connecting Hispanics to mainstream financial institutions has been 

challenging and is a significant barrier to Hispanic homeownership. In particular, obtaining mortgage 

financing is a critical, albeit difficult, stage in the home-buying process and is guided by the mortgage 

industry’s three “C”s: creditworthiness, capacity, and collateral.33 Collectively, these measures 

constitute a borrower’s overall credit and determine whether a borrower will qualify for a loan. 

Hispanic borrowers, however, face several barriers to performing well on these measures, and thus have 

problems qualifying for mortgages. These barriers, each of which is discussed in turn below, include: 

• Poor credit history; 

• Low wealth and income; 

• Lack of proper documentation; and 

• Racial and ethnic discrimination in mortgage lending. 

Poor Credit History 

Recent evidence suggests that many Hispanics have poor credit, which hinders their ability to become 

homeowners. In a recent study, Bostic et al., (2004) use data from the Survey of Consumer Finance 

(1989, 1995, 1998, and 2001 surveys) to assess the trends in credit quality across various segments of 

the U.S. population stratified by demographic characteristics, and also quantifies the extent to which 

credit quality constraints play an important role in a household’s decision to pursue homeownership 

opportunities. The researchers identify an individual as constrained by credit if their score is below 

Creditworthiness is a measure of what kind of credit the borrower has been extended in the past and 

whether or not that credit was paid in a timely fashion. Capacity is an income-to-debt measure that gauges 

a borrower’s ability to afford a loan. Collateral is a measure of the size of the borrower’s down-payment. 

Chapter 3: Barriers to Hispanic Homeownership 

63 

33 
34 

660 (or the 25th percentile of the score distribution).34 Overall, the study suggests that median scores 

across all individuals in the national sample increased from 721.3 in 1989 to 730.1 in 2001. The 

percentage of individuals who are credit-constrained also increased slightly, from 19.3 percent to 24.5 

percent during the study period. 

However, these marginal increases for the total national sample mask the results for Hispanics. The 

median score among Hispanics decreased from 695 in 1989 to 670 in 2001. The proportion of 

Hispanics who fell below the 660-threshold increased significantly from 25.4 to 48.5 during the same 

time period. Moreover, these results are especially dramatic for Hispanic renters. The predicted 

score decreased significantly for Hispanic renters from 685.2 to 623.7, and the proportion of creditconstrained Hispanics increased dramatically from 20.5 percent to 63.3 percent. These results varied 

among Hispanics renting in central cities, suburbs, and rural areas, but the trends are consistent. For 

example, the average scores among Hispanic renters living in central cities and rural areas dropped 

significantly from 681.3 and 689.3 in 1989 to 624.7 and 624.0 in 2001. For these same groups, the 

proportion of individuals who are considered uncreditworthy increased from 27.1 and 6.7 percent to 

63.1 and 62.2 percent. These findings are corroborated by the regression results and suggest that 

fewer Hispanics, especially renters, are viewed as creditworthy and many more are likely to be 

subject to more extensive reviews, which could potentially deter them from considering 

homeownership or completing the homebuying process. However, the study does not shed any light 

on the cause of these trends. Among the possibilities offered by the authors are that the increase in 

homeownership has creamed the highest credit quality renters among low-income and minority 

groups, deteriorating the average credit quality among remaining renters. The authors also speculate 

that changes in the characteristics of recent immigrants, who are more likely to be renters, may have 

contributed to the deterioration of credit quality among renters. 

These findings are echoed, albeit less pronounced, in an earlier study that estimates how much 

homeownership rates might increase for various subgroups of the population if all borrowing 

constraints were eliminated but households otherwise keep to their budget constraints (Rosenthal, 

2001). The study makes use of a set of survey questions from the 1998 Survey of Consumer Finances 

that enables the researcher to identify individual households that perceive themselves to have been 

subject to binding credit barriers of any type (mortgage, auto credit, consumer credit, etc.). Then, 

controlling for sample selection, the researcher estimates the demand for homeownership among 

families not subject to credit barriers and uses the results to predict the demand for homeownership 

for the entire sample. Comparing predicted to actual homeownership rates provides an estimate of 

the influence of credit barriers on homeownership. 

The researchers had access to a data set that included credit scores and a variety of household 

characteristics. Using these data, they developed a statistical model to predict a credit score using 

household characteristics that were available in the Survey of Consumer Finance (SCF), including detailed 

information on assets and liabilities, use of financial services, income, housing status (renter and 

homeowner), and demographic characteristics (age, years of education, martial status, number of 

dependents, and race and ethnicity). They then applied the estimated model to SCF survey in each of the 

four years. The SCF for these four years contains information for over 200,000 individuals and provides. 

The cutoff of scores below 660 to represent those who are credit constrained is based on the authors review 

of information on the use of credit scores by mortgage lenders as reported by Fair Issac Corporation at 

www.ficoguide.com. 

Chapter 3: Barriers to Hispanic Homeownership 

64 
For the full sample, the results indicate that the overall homeownership rate would be 4.03 percentage 

points higher in the absence of credit constraints. However, the impact of credit barriers on 

homeownership varied by subgroups in the sample. Among Hispanics, eliminating borrowing 

constraints is predicted to raise Hispanic homeownership by 6.72 percentage points, which is more 

than any other racial-ethnic subgroup in the study.

35 

Poor credit has consistently been identified in focus group research as a primary barrier to Hispanic 

homeownership (Congressional Hispanic Caucus Institute, 2004; Bendixen and Associates, 2004; 

Fannie Mae, 2003). These studies suggest that the confluence of numerous factors contribute to this 

barrier. One factor is a lack of experience with financial establishments and understanding of how to 

build and maintain a good credit rating, which was discussed above. Another is the fact that assessing 

credit history is reliant on a history with credit payments, which currently does not include utility or 

rent payments; and some Hispanics – especially immigrants, the unbanked and undocumented – pay 

for goods and services in cash, which does not contribute to a traditional credit assessment. 

Low Wealth and Income 

The mortgage approval process also relies heavily on a borrower’s wealth and annual income to 

demonstrate capacity and collateral. A study by the Pew Hispanic Center (2004) analyzes data from 

the Survey of Income and Program Participation and the Survey of Consumer Finances to describe 

the net worth of Hispanics between 1996 and 2002. The study demonstrates that Hispanic (and black) 

households are extremely vulnerable to economic downturns since their low net worth cannot protect 

them from short-term recessions or spells of unemployment. Overall, Hispanics have less than ten 

cents in wealth for every dollar owned by a non-Hispanic white household. 

Exhibit 3-6 presents the median net worth among Hispanic and non-Hispanic households by tenure 

from 1996 and 2002. The median net worth of all Hispanics increased by 14 percent from $6,961 in 

1996 to $7,932 in 2002. Net worth increased throughout the time period until the recession of 2001 

and rebounded thereafter to 1997 levels. However, as would be expected, Hispanic renters have 

dramatically less net worth than homeowners. Among Hispanic renters, median net wealth rose 32 

percent over the period, but was still only $762 in 2002. By comparison, during the same period the 

median net worth among non-Hispanics increased 16 percent, from $59,786 to $69,305, nearly nine 

times the net wealth of all Hispanics. Non-Hispanic renters also had significantly lower net worth 

than homeowners, although non-Hispanic renters had about twice the net worth of Hispanic renters in 

2002. 

Another indication of the degree to which Hispanics are wealth constrained is to consider the share of 

households with zero or negative net wealth. The Pew Hispanic Center study finds that as of 2002 

26.0 percent of Hispanics had no positive wealth compared to 13.1 percent of whites. 

Rosenthal (2001) also summarizes the influence of credit barriers on homeownership rates by income 

category, but not by income category and race/ethnicity. Among families in the upper half of the income 

distribution credit barriers have little or no discernible effect on homeownership rates. However, credit 

barriers depress homeownership rates by roughly 7 percentage points among individuals in 10th to the 50th 

income percentile, and 11 percentage points in the bottom income decile. 

Chapter 3: Barriers to Hispanic Homeownership 

65 

35 
Exhibit 3-6 

Median Net Worth ($) Among Hispanic and Non-Hispanic Households, 1996-2002 

Household 1996 1997 1998 1999 2001 2002 

Hispanic 

Renters or others 578 570 337 545 774 762 

Homeowners 56,767 53,614 49,485 57,928 57,376 62,839 

All Hispanics 6,961 7,801 7,167 10,495 6,213 7,932 

Non-Hispanic 

Renters or others 2,264 1,935 1,914 2,059 1,816 1,526 

Homeowners 111,141 115,222 117,070 123,175 126,261 129,778 

All non-Hispanics 59,786 61,171 62,179 67,692 68,248 69,305 

Sources: Pew Hispanic Center (2004) tabulations of SIPP data. 

There is some evidence that a lack of greater connection to financial institutions may limit wealth 

accumulation among Hispanics. Exhibit 3-7 presents asset ownership rates for Hispanic and nonHispanic households from 1996 to 2002. The most common assets among both Hispanic and nonHispanic households are a car and a house, although there are wide disparities in the proportion of 

households that own these assets. But perhaps the most striking disparity is reflected in the 

proportion of households with interest earning accounts at financial institutions (includes interestearning checking accounts, savings accounts, money market accounts, and certificates of deposit). In 

2002, 69 percent of non-Hispanic white households report owning an interest-earning account 

compared to 42 percent of Hispanics, which is nearly a 30 percentage-point gap. Ownership rates for 

non-interest bearing checking accounts are low for both Hispanic (30 percent) and non-Hispanic 

white (36 percent) households. 

Ownership rates for other financial assets are particularly low for Hispanic households. Less than 10 

percent of Hispanics own U.S. savings bonds, IRA or Keogh accounts, or stocks or mutual funds, and 

less than one-fifth own a 401k or Thrift account. Over 10 percent of Hispanics report owning no 

assets other than unsecured liabilities. These findings suggest that few Hispanic are saving for 

retirement, and many have debt but no positive asset position. By contrast, over one-third of nonHispanic white households own stocks or mutual funds, or 401k or Thrift accounts, and 30 percent 

have IRA or Keogh accounts. Very few non-Hispanic white households (less than 3 percent) report 

owning no assets other than unsecured liabilities. However, Hispanic households are slightly less 

likely to own unsecured debt (46 percent) than non-Hispanic white households (53 percent). 

Exhibit 3-7 

Asset Ownership Rates (%) Among Hispanic and Non-Hispanic Households, 1996-2002 

Chapter 3: Barriers to Hispanic Homeownership 

66 
1 

Exhibit 3-7 

Asset Ownership Rates (%) Among Hispanic and Non-Hispanic Households, 1996-2002

Asset 

Own home 

Rental property 

Other property 

Interest earning assets 

Other interest earning assets

Checking accounts 

U.S. saving bonds 

IRA & Keogh accounts 

401k & Thrift accounts 

Stocks & mutual funds 

Businesses

Vehicles

Other assets 

Unsecured liabilities 

Do not own assets 1 

1996 

44.2 

2.9 

3.4 

40.7 

0.5 

32.3 

5.3 

6.8 

13.4 

8.3 

7.8 

74.7 

2.1 

51.2 

14.9 

 Hispanics 

2002 %Change 

47.3 3.1 

2.2 -0.7 

2.3 -1.1 

42.4 1.7 

0.7 0.2 

29.9 -2.4 

4.3 -1.0 

7.1 0.3 

18.5 5.1 

9.4 1.1 

7.7 -0.1 

78.7 4.0 

1.2 -0.9 

45.5 -5.7 

10.5 -4.4 

Non-Hispanic White 

1996 2002 %Change 

71.0 74.3 3.3 

6.5 5.2 -1.3 

8.4 7.9 -0.5 

70.9 69.0 -1.9 

5.1 3.9 -1.2 

41.6 36.3 -5.3 

19.6 15.2 -4.4 

24.5 29.4 4.9 

27.8 34.5 6.7 

32.3 35.0 2.7 

12.7 13.1 0.4 

89.4 88.4 -1.0 

6.1 3.8 -2.3 

58.2 53.1 -5.1 

2.3 2.5 0.2 

Other than unsecured liabilities. 

Sources: Pew Hispanic Center (2004) tabulations of SIPP data. 

Exhibits 3-6 and 3-7 suggests that homeownership is an enormous part of a household’s asset 

portfolio. Indeed, according to the Pew Hispanic Center study, the average net worth among all 

Hispanics is $65,371 (in 2003 dollars) and 61 percent of their mean net worth is in the form of home 

equity. Interest earning assets represented less than 6 percent of their mean net worth, and checking 

accounts for under 1 percent. Rental property, 401k or Thrift accounts, and stocks or mutual funds 

each represented about 7 percent of the Hispanic mean net worth. By comparison, the mean net 

worth among non-Hispanic white households ($221,871) is less tied directly to home equity. About 

39 percent of the average net worth is associated with home equity, 22 percent is in the form of stocks 

and mutual funds, and about 7 percent each in interest-earning accounts, IRA and Keogh accounts, 

and 401k and Thrift accounts. 

The results from the Pew Hispanic Center are supported by other research that has been able to 

quantify net worth by ethnic groups. In an analysis of the Census Bureau’s Survey on Income and 

Program Participation data from 1996 to 2000, Paulson and Osili (2003) suggest that Hispanic 

immigrants are 4.1 and 3.8 percentage point less likely to own stock or have a savings account 

compared to native-born residents, all else equal. Stock market participation and the likelihood of 

having a savings account increased sharply with education. Being married has a strong positive 

Chapter 3: Barriers to Hispanic Homeownership 

67 
1 

impact on the likelihood of having a savings account, although the presence of children lowers this 

probability (0.6 percentage points for each additional child). These researchers attribute these 

differences to the “institutional quality” of their home country, which measures the extent to which 

the country protect private property and provides incentives for investment. Hispanic immigrants 

from countries with higher levels of institutional quality (e.g., Mexico) tend to have more net worth 

than immigrants from countries with lower levels of institutional quality (e.g., El Salvador). 

Exhibit 3-8 

Median Net Worth ($) and Homeownership Rates (%) of Hispanic and non-Hispanic 

Households by Monthly Income Quintile, 2002 

Income Quintile1 

First 

Second 

Third 

Fourth 

Fifth 

All households 

 Hispanics 

Median Net 

Worth 

Homeownership 

Rate 

1,218 26.8 

4,466 38.5 

9,629 52.6 

38,402 64.4 

79,401 72.9 

7,932 47.3 

Non-Hispanic 

Median Net 

Worth 

Homeownership 

Rate 

7,963 48.5 

40,194 62.3 

57,080 70.4 

90,361 80.2 

195,018 87.0 

69,305 70.0 

Monthly income quintiles were estimated from the 2001 SIPP panel and were as follows: less than or equal to $1,380; 

$1,380 to $2,552; $2,552 to $4,020; $4,020 to $6,434; and more than $6,434. 

Sources: Pew Hispanic Center (2004) tabulations of SIPP data. 

The low wealth accumulation among Hispanic households is explained in large part by the demographic 

characteristics discussed in Chapter 2. Many Hispanics are foreign born, are younger and less educated, 

and earn less than non-Hispanic households. All of these factors are correlated significantly with less 

wealth accumulation. Annual income, in particular, is a strong predictor of both wealth accumulation 

and homeownership. Exhibit 3-8 shows a steep increase in median net worth and homeownership rates 

as incomes increase for both Hispanic and non-Hispanic households. Among Hispanics, a sharp 

increase in median net worth occurs after the third quintile. Hispanics in the fourth income quintile 

have four times more wealth than Hispanics in the lower quintile. However, the sharp increase is not 

associated with an unusually large increase in homeownership rates. 

Low wealth among Hispanics also is affected by large remittance flows to relatives living in 

immigrant’s home country. Some consider the funds that immigrants send to Latin America and the 

Caribbean as more important to these region’s economic and social development than foreign direct 

investment, portfolio investment, foreign aid, or government and private borrowing.36 For example, 

remittances to Central America doubled from $1.8 billion in 1996 to $3.6 billion in 2001, compared 

According to the data collected from the Inter-American Development Bank, remittances account for 30 

percent, 15 percent, and 12 percent of the GDPs of Nicaragua, El Salvador, and Honduras, respectively. 

Chapter 3: Barriers to Hispanic Homeownership 

68 

36 
to an estimated $2.0 billion in foreign direct investment and $2.1 billion in official development 

assistance37 in 2001 (Inter-American Dialogue, 2004). 

While the exact scale of this flow is unclear, it is undoubtedly significant. According to one estimate, 

immigrants living in the U.S. sent $25 billion to relatives living in Latin America and Caribbean 

countries, and total remittances grew by 19 percent between 2002 and 2003 (Brookings Institution, 

October 2004). Others estimate that immigrants send more than $30 billion per year, which is over 

$2,500 per year for each Hispanic household in the U.S. (Pew Hispanic Center, 2004). If that amount 

were saved and invested in the U.S., the impact on Hispanic household wealth would be significant. 

Finally, the Inter-American Dialogue Task Force on Remittances (2004) estimate that immigrants 

sent $32 billion to these regions in 2002, which increased 40 percent from 2000. 

Because many Hispanics eschew relations with banks, Orozco (2004) finds that banks have captured 

a very small fraction of the remittance market. According to the study, the four largest banks in this 

field – Citibank, Wells Fargo, Harris Bank, and Bank of America – conduct less than 10,000 

remittances monthly, of which the overwhelming majority go to Mexico. However, in 2003 an 

estimated 40 million remittance transactions occurred between the U.S. and Mexico, suggesting that 

U.S. banks have captured only 3 percent of the remittance market. Thus, Orozco emphasizes the 

potential for banks to offer remittance services to immigrants living in the U.S. and reach out to 

immigrants without savings or checking accounts. 

Lack of Proper Documentation 

Undocumented immigrants seeking a home mortgage may be denied financing because they do not 

have Social Security Numbers or proper proof of employment.38 Since the 2000 Census, several 

credible estimates of the undocumented population have been made and are summarized in Exhibit 3-

9. The U.S. Immigration and Naturalization Service estimated in 2000 that 7 million persons resided 

illegally in the U.S. as undocumented immigrants (U.S. Immigration and Naturalization Service, 

2003). Others estimate a population in 2001 of approximately 7.8 million (Pew Hispanic Center, 

2001) and even as high as 9.3 million in 2002 (Passel et al., 2004). 

In terms of undocumented households (rather than population), Paral and Associates (2004) use data 

from the U.S. Citizenship and Immigration Service (formerly the INS) on the number of 

undocumented Hispanics and information on non-citizen, recent Hispanic immigrants captured by the 

2000 decennial census to estimate the number of undocumented Hispanic householders and their 

characteristics. The report assumes that the decennial census captures most undocumented Hispanic 

immigrants and that all those who reported they were not citizens and had immigrated since 1980 are 

representative of undocumented Hispanic immigrants.39 The researchers also produce estimates by 

37 The official development assistance excludes loans from the World Bank and the International Monetary 

Fund. 

38 As noted at the beginning of the chapter, an undocumented Hispanic is defined as a foreign born person 

who is not a U.S. citizen and does not have legal immigration status and therefore is not eligible to obtain a 

social security number. 

39 The authors argue that a comparison of the number of legal immigrants over time with the number of selfreported immigrants captured by the decennial census supports the contention that most undocumented 

Chapter 3: Barriers to Hispanic Homeownership 

69 
income and age categories and region. The study finds that in 2000 there were nearly 1.2 million 

undocumented Hispanic households in the U.S., of which the vast majority were Mexican but also 

included 2,500 from Cuba; 28,000 from the Dominican Republic; 153,000 from Central American; 

and 113,000 from South America. In comparison, the 2000 decennial census identified a total of 9.2 

million Hispanic households residing in the U.S. Paral estimates that most households (669,705) are 

in the 25 to 34 age category, followed by the 35 to 44 age category (419,633). Also, the majority of 

these (817,392) earn between $10,000 and $39,999 annually, although over 200,000 households earn 

between $50,000 and $74,999 yearly. 

In addition, the study estimates the geographic location of undocumented Hispanic households by 

distributing their number across regions and states of the U.S. based on the location of Hispanic noncitizen renter households who entered the U.S. during the 1990s. This methodology suggests that 

16.6 percent of undocumented Hispanic households are in the Northeast (mostly in New York and 

New Jersey), 9.9 percent are in the Midwest (especially in Illinois), 38.2 percent are in the South 

(predominantly in North Carolina, Georgia, Florida, and Texas), and 35.3 percent are in the West 

(particularly in Arizona and California). 

This sizable population is effectively shut out of the homebuying process because undocumented 

immigrants cannot obtain valid Social Security Numbers (SSN), which, in turn, prevents them from 

applying for loans from mainstream lenders and for federally funded homeownership assistance 

programs. Indeed, focus groups conducted by the Congressional Hispanic Caucus Institute (2004) 

finds that lack of documentation is a significant barrier to homeownership in 7 out of 11 cities: 

Atlanta, Chicago, Durham, Kansas City, Los Angeles, San Antonio, and New York city. In many of 

these cities, focus group participants admit using false SSNs, but also state that they are unable to 

establish credit histories using these numbers or successfully complete the mortgage application 

process because the underwriting computer “will likely spit it out” (p.16). 

Without valid SSNs, Hispanics also have difficulties documenting their wages and employment 

histories. Lenders expect documentation such as pay stubs to demonstrate sustained employment 

income, which is needed to satisfy the lender’s assessment of the borrower’s capacity. Also, because 

undocumented immigrants do not have valid SSNs and are thus unable to work in the formal 

economy, many of them work in seasonal positions and change work frequently. These Hispanics 

face additional challenges to documenting their income and employment histories since it is difficult 

to locate former employers. 

Racial and Ethnic Discrimination 

Racial or ethnic discrimination within the financial and mortgage market has been researched 

extensively, particularly among black households. Numerous studies during the 1990s focused on the 

incidence and severity of discrimination in mortgage lending, which are succinctly summarized by 

LaCour-Little (1999) and Turner and Skidmore (1999). These summaries suggest that race and 

individuals are largely reported in the census. More specifically, Paral and Associates note the estimated 

undercount of Hispanics in the 2000 census is 2.85 percent, including both natives and immigrants. 

However, Census Bureau analysis of the undercount suggests that the foreign born have a higher 

undercount rate (Robinson, 2001). 

Chapter 3: Barriers to Hispanic Homeownership 

70 
ethnicity has a significant effect on whether a household is rejected for a home loan, even after 

controlling for a variety of demographic and economic indicators. A few studies are particularly 

noteworthy. 

The HUD-sponsored Housing Discrimination Study 2000 (HDS 2000) conducted by Turner et al. 

(2002b) used paired tests to demonstrate that real estate agents treated non-Hispanic whites more 

favorably than Hispanics in terms of receiving information about home financing assistance. Similarly, 

Turner et al. (2002a) applied the paired-testing approach in both Chicago and Los Angeles to 

investigate whether minorities (blacks and Hispanics) receive the same treatment and information as 

whites during the pre-application phase of the mortgage application process. Testers posed as first-time 

homebuyers and visited mortgage lending institutions

40 requesting help in identifying a price range for 

housing, determining a loan amount for which he or she would qualify, and finding appropriate loan 

products. The paired-testers were assigned financial profiles that would allow them to purchase a 

median-priced house in their metropolitan area, but were also asset constrained and had minor problems 

with their credit histories. Like the HDS 2000 study, the paired testers were assigned identical financial 

and household characteristics, although the minority tester was always slightly better qualified than the 

white tester. 

The study focused on six key questions: 

1. Did testers receive the information they requested? 

2. How much were testers told they could afford? 

3. How many loan products were testers told about? 

4. How much “coaching” did testers receive? 

5. Did testers receive follow-up contact? 

6. Were testers encouraged to consider FHA? 

The tests revealed statistically significant patterns of unequal treatment that systematically favored 

whites. Exhibit 3-9 summarizes these findings. In terms of statistically significant findings, 

Hispanics in Chicago were quoted lower loan amounts and house prices, told about fewer products, 

and offered less coaching than their non-Hispanic white counterparts. For example, non-Hispanic 

whites were quoted higher loan amounts and house prices over 50 percent of the time, but Hispanics 

were favored less than 20 percent of the time. Whites were also told about more loan products 56 

percent of the time compared to 28 percent among Hispanics. Non-Hispanic white were also given 

more assistance on how they can improve their qualifications as borrowers 41 percent of the time, 

while Hispanics were favored only 15 percent of the time. 

The study use a representative sample of mortgage lending institutions in each metropolitan area that report 

under the Home Mortgage Disclosure Act. 

Chapter 3: Barriers to Hispanic Homeownership 

71 

40 
Exhibit 3-9 

Differential Treatment Among Non-Hispanic White Homeseekers and Hispanic Homeseekers, 

in the Pre-Application Phase of the Mortgage Application Process 

Overall Indicator 

Information provided 

House they could afford 

Maximum loan amount 

Maximum house price 

Number of products 

Received positive coaching 

Received follow-up 

FHA encouraged 

 Chicago 

% nonHispanic 

White favored 

% Hispanic 

Favored 

7.5 8.8 

51.9 19.2** 

51.0 13.7** 

55.6 27.8** 

40.5 15.2* 

7.6 13.9 

13.0 13.0 

Los Angeles 

% nonHispanic 

White Favored 

% Hispanic 

Favored 

12.7 1.3** 

42.9 32.7 

44.0 30.0 

51.9 34.6 

39.2 36.7 

6.3 13.9 

15.0 30.0 

* indicates significance at the 90% level or higher. 

** indicates significance at the 95% level or higher. 

Sources: Turner et al. (2002a), pp. 25 through 35. 

In Los Angeles, Hispanics were given less information about loan amount and house price, and 

informed about fewer products. However, Hispanics received more follow-up compared to their nonHispanic white counterparts. For example, non-Hispanic white testers were given more information 

13 percent of the time compared to 1.3 percent among Hispanics. In terms of the number of loan 

products discussed, the incidence of favoritism was statistically insignificant but the study found that 

differences in the number of products discussed were significant, with non-Hispanic whites told about 

an average of 2.92 products compared to only 2.33 products among Hispanics. Similarly, although 

the incidence of follow-up among the testers was not statistically significant, the average number of 

contacts among whites (0.19) was statistically lower than that of Hispanics (0.38). 

Thus, the paired-testing conducted in Chicago and Los Angeles suggest that Hispanics face 

significant risks of receiving less favorable treatment when visiting mortgage lending institutions than 

whites, although the differences were much larger in Chicago than Los Angeles. As a result, 

discriminatory treatment at the early stages of the mortgage application process potentially 

discourages some Hispanics from continuing their housing search, limits their search to lower cost 

homes than they could actually afford, and prevent them from choosing the most favorable loan 

products (Turner et al., 2002a, p. 40). 

Discrimination in mortgage lending was also the focus of an earlier study that supplemented Home 

Mortgage Disclosure Act data in Boston with specific information on the financial, employment, and 

property characteristics of that were relevant to a lending decision (Munnell et al., 1996). With the 

support of the Federal Reserve Bank of Boston and other federal supervisory agencies, the researchers 

worked with lending institutions to collect the additional information to supplement that publicly 

Chapter 3: Barriers to Hispanic Homeownership 

72 
reported under HMDA. The goal of the study was to assess the importance of race and ethnicity in 

the rate of loan denials among black and Hispanic applicants41 compared to whites. 

The results demonstrate that even after controlling for the usual mortgage underwriting criteria, 

minorities were more likely to be rejected for a mortgage than whites. The study did confirm that 

Minority applicants differ from white applicants in several important ways. Minority applicants have 

considerably less net wealth, liquid assets, and income than white applicants and they also have 

poorer credit histories. Black and Hispanic applicants also make lower down payments and have 

higher loan-to-value ratios than whites. These disadvantages in the loan application process 

accounted for a large portion of the difference in denial rates—but not all of the difference. The 

disparity between minority and white denials decreased from 18 percentage points to just over 8 

percentage points, or a relative rejection ratio of 1.8 to 1, after controlling for these economic and 

property characteristics. Put differently, minority applicants with identical economic and property 

characteristics as white applicants would experience a rejection rate of 28 percent compared to only 

20 percent for white applicants (Munnell et al., 1996, p. 26). 

The study also divided the sample into lenders with a high volume or low volume of loans made to 

minorities to determine if loan denial disparities among whites and blacks and Hispanics differed by 

the size of the lending institution. The study found that race was an important explanatory factor for 

both types of lenders. Thus, the study concludes that financial characteristics of applicants plays a 

significant role in explaining loan denial disparities between whites and minorities, but differential 

treatment based on race and ethnicity was evident in the mortgage market.42 

These quantitative studies have been supported by qualitative research. For example, Temkin et al. 

(1999)43 conduct an in-depth case study of a moderately-sized lending institution44 based on detailed 

interviews with staff and a review of their HMDA loan data. According to the case study, loan 

officers (a third of whom were Hispanic) and senior staff all spoke about the importance of fairness 

and the efforts to make sure that all qualified households were able to qualify for loan. However, the 

institution’s data showed that Hispanics were 2.5 times more likely to be denied a loan than whites, 

which was a considerably higher denial rate than the average rate within that Metropolitan Statistical 

Area (MSA), even after controlling for an applicant’s income and loan product. These researchers 

41 The study combines black and Hispanic applicants into a single minority category in the analysis. 

42 These findings should be interpreted with some caution. Critics have pointed to potential problems with 

omitted variables, data errors, assumptions in their predictive equation, and disentangling endogenous 

explanatory variables from minority status (for example, see Zandi, 1993; Liebowitz, 1993; Horne, 1994, 

and Day and Liebowitz, 1994). Nevertheless, a reanalysis conducted by Ross and Yinger (1999) suggest 

that the study’s findings have emerged intact in the face of most of this scrutiny and that the large 

differences in loan denial rates between minority and white applicants cannot be explained away by these 

issues (see Turner et al., 1999). 

43 In Turner, M. and Skidmore, F. (eds.) “Mortgage Lending Discrimination: A Review of Existing Evidence” 

Urban Institute June 1999 

44 The mortgage company was founded in 1991, has 31 employees, originates approximately 1,000 mortgages 

yearly (worth about $70 million), and nearly all mortgages are for home purchases. The lender operates in 

a large city and processes more minority applications, as a proportion of the company’s total volume, than 

the average for the metropolitan area. 

Chapter 3: Barriers to Hispanic Homeownership 

73 
could not quantitatively pinpoint a reason for the discrepancy between the reported fair treatment of 

all applicants by staff and the lender’s high denial disparities suggested by their HMDA data but 

offered three possible explanations: (1) the possibility that a higher rate of unqualified minority 

applicants applied at this institution; (2) HMDA-based data may be too imprecise to measure 

discrimination and may generate “false positives”; and (3) the lending institutions staff may have 

good intentions, but lack training, monitoring, or feedback mechanisms that ensure fair treatment. 

After reviewing the lender’s managerial practices and procedures, the researchers conclude that the 

lender fell short of implementing numerous fair lending practices that could have reduced the 

possibility of differential treatment of minority loan applications. Specifically, the lender failed to: 

• include the goal of fostering minority lending in the institution’s overall mission 

statement or similar document; 

• involve senior management in developing, implementing, and monitoring the minority 

lending goals; 

• reward (or at least not indirectly penalize) employees for fostering minority lending; 

• practice staff recruitment and promotion to foster minority lending through ethnic and 

racial diversity of staff; 

• provide training on fair lending practices and multicultural interactions; 

• conduct outreach to minorities; 

• self-monitor fair lending performance; and 

• designate an ombudsman or comparable employee to receive and review fair lending 

complaints (Temkin et al., 1999, pp. 150-152). 

Financial and Mortgage Market Barriers and the Homebuying Process 

As this section suggests, poor credit histories, low wealth and income, lack of proper documentation, 

and the potential for racial and ethnic discrimination in mortgage lending represent major barriers to 

Hispanic homeownership. Poor credit can depress homeownership rates by delaying access to 

homeownership opportunities through more extensive lender reviews or by permanently excluding 

credit-constrained families from owning. The former situation may prompt some Hispanics to feel 

frustrated with the mortgage application process and give up, and the later situation may further the 

perception among Hispanics that homeownership is an unaffordable opportunity. 

Hispanics are also dissuaded from pursuing homeownership or prevented from owning a home by the 

large proportion of households with extremely low (and even negative) net worth, which is associated 

with low or seasonal incomes and by large remittance flows to relatives living in Latin America or the 

Caribbean. Lender’s justifiably reject applicants that have very little (or no) capacity to repay the 

loan. The immigration status of some Hispanic further deters Hispanic from obtaining a mortgage 

because undocumented immigrants cannot obtain valid Social Security Numbers (SSN), which, in 

turn, prevents them from applying for loans from mainstream lenders and for federally funded 

homeownership assistance programs. 

Chapter 3: Barriers to Hispanic Homeownership 

74 
Lastly, racial and ethnic discrimination can limit the housing search and the likelihood that a Hispanic 

applicant will be approved for a mortgage loan. When lenders provide Hispanics with less 

information about loan amounts, house prices, loan products and offered less coaching than nonHispanic white counterparts, it would be expected that at least some Hispanics will choose to opt out 

of the homebuying process. 

Summary of Findings 

This chapter discussed three categories of barriers to homeownership that many Hispanics confront: 

barriers associated with information gaps about the homebuying process, barriers in the housing 

market, and barriers in the mortgage application process. 

Information gaps about the homebuying process, the importance of establishing a financial history, 

and the mortgage qualification process may dissuade many Hispanics from pursuing homeownership 

either because their misconceptions about the process lead them to believe that homeownership is 

unaffordable or too complicated, that banks are untrustworthy, or that they do not qualify for a 

mortgage due to their credit history. Information gaps also undermine Hispanics’ confidence in 

completing the homebuying process. 

Confidence in completing the homebuying process is further affected by affordability challenges 

faced by Hispanics in many markets and feelings of discrimination in the housing market. Housing 

affordability concerns and the perception of discrimination may chill interest in pursuing 

homeownership by putting it out of reach of many Hispanic households or by making housing search 

excessively difficult. These fears are exacerbated by poor credit histories, low wealth and income, 

lack of proper documentation, and the potential for racial and ethnic discrimination in mortgage 

application process. Hispanics with poor financial characteristics feel frustrated with the mortgage 

application process and give up or view homeownership as an unaffordable opportunity. Racial and 

ethnic discrimination in the mortgage application process can limit their search for housing search 

and even shut out Hispanics altogether. 

Although these barriers may seem formidable, communities across the country have developed local 

programs – some basic and others highly innovative – that have successfully moved Hispanic 

households into homeownership. In general, these programs mix education counseling, affordable 

housing strategies and enforcement of fair housing laws, and innovative loan products to provide 

greater homeownership opportunities to Hispanic households. The next chapter discusses these 

programs in more detail. 

Chapter 3: Barriers to Hispanic Homeownership 

75 
Chapter 3: Barriers to Hispanic Homeownership 

76 
Chapter 4 

Promoting Hispanic Homeownership 

The persistent gap in homeownership rates between Hispanics and non-Hispanic whites has motivated 

both national and local stakeholders to explore strategies for overcoming the barriers faced by 

Hispanics. At the national level, there are no Hispanic-specific homeownership programs. Programs 

targeted to individual minority groups would undoubtedly violate federal laws that prohibit 

discriminatory treatment of households by race or ethnicity (e.g., Fair Housing Act, the Equal Credit 

Opportunity Act, and the Federal Housing Enterprises Financial Safety and Soundness Act). However, 

there is considerable interest in policies and programs that would have the indirect effect of reducing 

gaps in the homeownership rates of minorities by helping to overcome barriers to homeownership. 

While Hispanics face many of the same barriers as blacks, including low income and wealth levels, 

including a lack of familiarity with the homebuying process and discriminatory treatment in housing 

and mortgage markets, the significant share of immigrants among Hispanics is an important 

difference from blacks. In addition to other barriers, recent immigrants to the U.S. will also face 

cultural and language barriers to homeownership. While federal programs may not have a specific 

Hispanic focus, there are many examples of efforts by advocacy groups, community development 

corporations, lenders, and other private and non-profit organizations that are aimed specifically at the 

barriers unique to Hispanic immigrants. Most of these efforts may be best characterized as marketing 

and outreach efforts that have the goal of ensuring that Hispanics benefit from the public and private 

resources that are available to promote homeownership. For example, a community-based 

organization serving a Hispanic neighborhood may develop a Spanish-language homeownership 

counseling program using HUD funding or obtain HOME funding to develop affordable homebuying 

options in the neighborhood. Lenders may design mortgage products that address the needs of lowincome immigrants and develop marketing and outreach efforts to promote these products within the 

Hispanic community. In short, national efforts to promote homeownership for low-income and 

immigrant populations generally are given a Hispanic focus by the local organizations that deliver 

these services. 

Our goals in this chapter are to describe the efforts that are designed to promote homeownership 

generally and to then provide examples of how public and private groups help to connect these efforts 

to the Hispanic community. There are two significant challenges in documenting current efforts to 

assist Hispanic homebuyers. First, because these efforts are largely undertaken by local 

organizations, there is no good overall source of information about these efforts. As a result, the 

information on Hispanic-specific efforts presented here are anecdotal examples of the type of efforts 

that exist but for which there is no information about the scale of such efforts nationally. Second, 

there are very few studies that evaluate the effectiveness of these strategies, and thus it is difficult to 

identify specific approaches – or combination of approaches – that will produce the largest positive 

affect on Hispanic homeownership rates. 

This chapter provides an overview of the types of strategies designed to increase homeownership 

opportunities for Hispanics in each of the three categories of barriers discussed in Chapter 3. Exhibit 

4-1 summarizes the relationship between the barriers, the strategies used to overcome the barriers, 

and the homebuying process. 

Chapter 4: Promoting Hispanic Homeownership 

77 
Dow

Paymen

Closing 

Assista

Reduce

Mortgage 

Interest Rates

Reduction in 

Discriminatory

Practices

Barrier:

Lack of

Information

Barrier:

Real Estate 

& Housing

Markets

2. Searching for

and Finding a 

Suitable Home

Development 

Cost

Subsidies

Regulatory

Relief

Reduction in 

Discriminatory

Practices

1. Deciding to

Pursue

Homeownership

3. Obtaining 

Mortgage

Finance

Strate

Strategy

Homebuyer 

Education and

Counseling

Financial 

Literacy

Programs & 

Outreach

Bi Lingual

Training and

Information

Strategy

Resolv

Immigr

Issu

Dow

Paymen

Closing 

Assista

Reduce

Mortgage 

Interest Rates

Reduction in 

Discriminatory

Practices

Barrier:

Real Estate 

& Housing

Markets

2. Searching for

and Finding a 

Suitable Home

Development 

Cost

Subsidies

Regulatory

Relief

Reduction in 

Discriminatory

Practices

1. Deciding to

Pursue

Homeownership

3. Obtaining 

Mortgage

Finance

Strate

Strategy

Homebuyer 

Education and

Counseling

Financial 

Literacy

Programs & 

Outreach

Bi Lingual

Training and

Information

Strategy

Resolv

Immigr

Issu

Exhibit 4-1: Strategies for Overcoming Homeownership Barriers Among Hispanics 

Chapter 4: Promoting Hispanic Homeownership 

78 

Homebuying 

Process 

-

Homebuying

Process

Barrier: 

Lack of 

Information 

-

Homebuying

Process

Barr

Dow

Paymen

Closing 

Assista

Reduce 

Mortgage 

Interest Rates 

Reduction in 

Discriminatory 

Practices 

Barrier: 

Real Estate 

& Housing 

Markets 

2. Searching for 

and Finding a 

Suitable Home 

Development 

Cost 

Subsidies 

Regulatory 

Relief 

Reduction in 

Discriminatory 

Practices 

1. Deciding to 

Pursue 

Homeownership 

3. Obtaining 

Mortgage 

Finance 

Strate

Strategy 

Homebuyer 

Education and 

Counseling 

Financial 

Literacy 

Programs & 

Outreach 

Bi Lingual 

Training and 

Information 

Strategy 

Resolv

Immigr

Issu

ier:

Lack of

Information

-
• Strategies to Overcome the Lack of Information include homebuyer education and 

counseling, financial literacy programs and outreach, and bi-lingual training programs. 

These initiatives are designed to help Hispanics learn about the homeownership process 

and understand that homeownership is an attainable opportunity. 

• Strategies to Overcome Real Estate and Housing Market Barriers include 

development cost subsidy programs, regulatory relief in building codes and land use 

zoning, and enforcement of fair housing laws and use of audit testing to reduce 

discriminatory housing practices. These approaches focus on housing market supply 

constraints and increase the range of housing options for low-income and low-wealth 

households generally, including Hispanics. 

• Strategies to Overcome Financial and Mortgage Market Barriers include down 

payment and closing cost assistance, income subsidies for mortgage payments, relaxed 

mortgage underwriting guidelines, reduction in mortgage interest rates, solutions to 

residency status issues, and enforcement of fair lending laws and use of audit testing to 

reduce discriminatory mortgage lending practices. While many of these strategies focus 

on credit issues and income and wealth constraints facing low-income households 

generally, they also include efforts targeted specifically at the challenges faced by 

immigrants. 

The first three sections of this chapter discuss each of the three strategies in turn. The next section 

summarizes studies of the effect of these strategies on homeownership rates. There are few studies 

that evaluate the effectiveness of these strategies for low-income or minority households generally, let 

alone for Hispanics specifically. Nonetheless, the research provides some insights into the magnitude 

of potential increases in homeownership rates from different policy approaches. It also suggests 

which groups of renters are most likely to make the transition to homeownership as a result of these 

efforts. The chapter closes with a summary. 

Strategies to Overcome the Lack of Information 

Exhibit 4-2 presents the most common strategies for overcoming the lack of information among 

homebuyers, the type of borrower constraint addressed by each strategy, and examples of existing 

efforts. The strategies include informational homebuying programs, financial literacy programs and 

outreach, and bi-lingual information approaches. These strategies are being developed and 

implemented by federal, state, and local governmental agencies and also by private entities and local 

community groups. While most of these strategies apply to all potential homeowners who lack 

information about the homebuying and mortgage qualification process, these strategies are central to 

many of the efforts designed specifically to assist Hispanics. The importance of these strategies for 

supporting Hispanics reflects the fact that the informational barriers described in Chapter 3 are 

particularly important among immigrant households. 

Chapter 4: Promoting Hispanic Homeownership 

79 
Exhibit 4-2 

Strategies to Overcome the Lack of Information 

Strategy 

Homeownership Education 

and Counseling 

Financial Literacy 

Programs & Outreach 

Bilingual Information 

Constraint 

Addressed 

Homebuying process 

Financial literacy 

Mortgage 

qualification process 

Homebuying process 

Financial literacy 

Mortgage 

qualification process 

Existing Efforts 

Description 

Estimated Annual 

Number of 

Homebuyers 

Assisted 

HUD Funding Up to 150,000 

State, local, private Unknown 

HUD Funding Up to 150,000 

U.S. Department of 

Treasury - ETA 98,000 

U.S. Department of 

Treasury – First 

Accounts 

35,000 

State Electronic 

Benefits Transfer Unknown 

Private sector Unknown 

Credit Unions Unknown 

Federal, state and 

local governments Unknown 

Private sector Unknown 

Source: Herbert et al., 2005. 

Homeownership Education and Counseling 

The purpose of homebuyer education and counseling programs is two-fold. First, these programs are 

designed to address the information gaps about the homebuying and mortgage approval process. 

Second, these programs prepare households for homeownership to reduce the risk of default by these 

(often risky) borrowers. Education and counseling programs may also provide financial literacy and 

management training, which is discussed further in the next section. 

Formal homeowner counseling began with the Housing and Urban Development Act of 1968 and 

evolved considerably over the next three decades. As McCarthy and Quercia (2000) describe, 

throughout the 1970s homeownership counseling focused primarily on assisting financially troubled 

homeowners rather than on preparing households to become homeowners. During the late 1980s and 

1990s, the programs shifted to emphasize pre-purchase counseling as a means of identifying and 

screening potential homebuyers in the low-income and minority populations, market sectors for 

which lenders had previously had little experience. 

Chapter 4: Promoting Hispanic Homeownership 

80 
Today, the nature of services provided by homeownership education and counseling programs varies 

greatly. On the one hand, a potential borrower may meet individually with a counselor to review the 

household’s specific circumstances and help guide the borrower toward homeownership. On the 

other hand, a homeownership education program may simply distribute informational pamphlets or 

workbooks that describe the homebuying process via the Internet. In between these extremes, there 

are hundreds of homebuying education and counseling programs that use several different service 

models and a wide variety of providers. Exhibit 4-3 briefly summarizes the nature of these programs, 

the service model, and the type of service provider. 

While education and counseling are generally lumped together, there is an important distinction in the 

nature of services provided. As explained by McCarthy and Quercia (2000), education refers to the 

provision of information that is general in nature and is not specific to the counselee. Education 

generally is provided in group settings and covers the process of searching for a home, negotiating a 

home purchase, the financial and other obligations of homeownership, and determining eligibility for 

mortgage finance. Counseling, on the other hand, encompasses more intensive one-on-one meetings 

with clients to go over the specific needs and circumstances of the client to determine what steps are 

needed to prepare for homeownership. This distinction is reflected in Exhibit 4-3. 

Exhibit 4-3 

Characteristics of Homeownership Education and Counseling Programs 

Homeownership Education Homeownership Counseling 

• Provide general information about • A counselor reviews household 

the homebuying process, including specific circumstances to resolve 

finding and purchasing a home. barriers to, and plan for, 

homeownership. 

Nature of 

Service 

• May act as a marketing and selection 

strategy for lenders who wish to 

attract creditworthy applicants. 

• Inform participants about financial 

assistance opportunities and flexible 

loan products. 

• Helps sub-prime candidates repair 

problems with credit and work history 

to become eligible for prime loans. 

• Connects clients to financial 

assistance opportunities, for example 

favorable mortgage terms through 

affiliated lenders; may help negotiate 

with lender if client has difficulty with 

mortgage payment. 

Service Model 

• Classroom-based or distance 

learning (telephone and workbooks 

used) over a few weeks or months. 

• Face-to-face in single session or 

multiple session over weeks or 

months 

Service 

Provider 

• May be provided by government 

agencies, non-profits, lenders, 

realtors, and mortgage insurance 

companies. 

• Provided primarily by non-profits. 

Chapter 4: Promoting Hispanic Homeownership 

81 
Given the unknown number of organizations involved in providing homebuyer education and 

counseling services, it is difficult to estimate how many households receive assistance each year. 

Collins (2002) estimates that between 120,000 and 150,000 households are served each year by a 

HUD-related homebuying education and counseling program. Each year HUD provides financial 

support for housing counseling agencies pursuant to Section 106(a)(2) of the Housing and Urban 

Development Act of 1968. In 2005 HUD provided $41 million in funding, which was distributed 

among several hundred HUD-approved counseling agencies as well as several dozen national 

intermediary organizations (such as NeighborWorks America, ACORN, National Foundation for 

Consumer Credit, and Catholic Charities USA) and state housing finance agencies who, in turn, pass 

funding on to their affiliates. Altogether, HUD’s efforts supported more than 1,200 counseling 

agencies throughout the country. 

However, as noted above, there are many other significant homebuyer education and counseling 

programs that are not HUD-related. For example at the national level, Habitat for Humanity 

International is committed to providing homeowner education to each of the 27,800 new households 

(20,800 of these will be minorities) that will buy a Habitat home in the U.S. by 2005. In addition, 

education and counseling curriculums have been developed by the Mortgage Bankers Association of 

America, National Association of Home Builders, National Association of Hispanic Real Estate 

Professionals, National Association of Real Estate Brokers, and many other national groups. There 

are also a wide variety of local efforts that can be fairly substantial. As an example, the Enterprise 

Foundation and its partners in the Housing Development Project in Denver have provided 

homeownership counseling to 1,000 low- and moderate-income households. Thus the actual number 

of households receiving some form of counseling may be several times the number funded by HUD. 

National Council of La Raza (NCLR): Home to Own Program 

NCLR, Fannie Mae, First Interstate Bank and a coalition of Latino community-based 

organizations in Arizona embarked upon a pilot HEC program between 1993 and 1995. The 

program included down-payment assistance, flexible underwriting criteria, and the 

availability of mortgage financing. Pre-purchase housing counseling was mandatory and the 

program targeted the area’s very low-income population. Nearly half of the participants 

had incomes below 50 percent of the Area Median Income (AMI). 

Ninety percent of participants in the pilot program felt the counseling was “very 

worthwhile” and many participants “found the counseling to be much more important than 

down-payment assistance.” Home to Own participants from the pilot have been thriving 

homeowners with a very low delinquency and foreclosure rate of 1 percent, compared to the 

industry average of 4 percent and the national average for FHA mortgages of 12 percent. 

Subsequent to the Arizona pilot program, NCLR launched the NCLR Homeownership 

Network (NHN) to work with other partners across Southwestern states. The NHN has 

assisted more than 5,000 low-income Hispanic households become homeowners and maintain 

low delinquency rates. NHN provides classes and counseling in Spanish and assists CBOs to 

create and sustain housing counseling services. 

Chapter 4: Promoting Hispanic Homeownership 

82 
Education and counseling efforts that are Hispanic-focused share many of the same objectives as 

HEC programs for all household types: determining a household’s readiness for homeownership; 

accumulating wealth through budgeting and saving; understanding credit issues; searching for a home 

and the role of the real estate agent; understanding the mortgage process and the different types of 

financing options; knowing how to close on a home; and understanding the responsibilities of 

homeownership (Schoenholtz and Stanton, 2001, p. 37). These objectives are common to established 

curriculums that have been implemented nationally for many years and created by key 

organizations—e.g., Neighborhood Reinvestment Corporation, the American Homeowner Education 

and Counseling Institute, and HUD. However, Hispanic-focused education and counseling programs 

differ from standard approaches in a few important ways. First, these approaches must be 

translated—linguistically and culturally. Because Hispanics in the U.S. are diverse and come from 

many different countries (see Chapter 1), local education and counseling programs reflect this 

diversity by tailoring established curriculums to meet the needs of a locality’s particular Hispanic 

community. Second, as Chapter 3 suggests, immigrant populations have unique barriers to 

homeownership that must be addressed within HEC curriculums. In particular, developing trust in 

the U.S. banking system is often a focus of HEC curriculums that target immigrants. 

Financial Literacy Programs & Outreach 

For some low-income households, and particularly immigrants, a precursor to being ready to buy a 

home is to develop greater financial literacy and to become more integrated into mainstream financial 

markets. Financial literacy is needed to manage household finances, which helps the household meet 

the criteria used by mortgage lenders to evaluate credit risk, including the amounts of outstanding 

debt, patterns of paying bills on times, and levels of savings. Establishing accounts with banks and 

creditors are important parts of this process because these activities help to document savings and 

demonstrate a household’s ability to manage credit. 

As suggested above, HUD funding under Section 106 is used by counseling agencies, national 

intermediary organizations and their local affiliates, and state housing finance agencies to develop 

financial literacy curriculums into their broader education and counseling programs. As Schoenholtz 

and Stanton (2001) describe, the overall goals of financial literacy programs are to develop informed 

consumers, facilitate their ability to achieve their financial goals, and help them become long-term 

homeowners. To achieve these goals, financial literacy programs: 

• Help families to become more familiar with the institutional barriers and potential pitfalls 

in the American financial system; 

• Teach financial management and planning skills to make the most of a household’s 

income, savings, and assets; and 

• Explain the mechanisms of the U.S. credit system, specifically the reasons why 

households should use banks, take out home mortgages, and invest savings 

Many financial literacy programs focus on basic skills, such as planning, budgeting, spending, and 

saving. These programs are often targeted to unbanked populations, especially Hispanic immigrants, 

Chapter 4: Promoting Hispanic Homeownership 

83 
and try to build participates’ level of trust and comfort in the banking system. These efforts 

emphasize the advantages of using a bank (e.g., the safety of using a bank compared to having one’s 

savings at home or carrying it on one’s person and the ability to earn interest on savings) and teach 

participants how to use an automated teller machine (ATM), write a check, make deposits into 

checking and savings accounts, establish a credit history, and save for retirement. As stated above, 

Collins (2002) estimates that between 120,000 and 150,000 households are served each year by a 

HUD-related homebuying education and counseling program, many of which have a financial literacy 

component. 

First National Bank and Trust Company: Banking and Immigrant Education in the 

Workplace 

The small town of Rogers, Arkansas experienced a sharp rise in its Hispanic population in the 

1990s. The increase was largely due to young, male Mexican immigrants employed in the local 

poultry factories and residing in Rodgers temporarily before moving onto other jobs. First 

National, the largest and oldest bank in Rogers was already offering mortgage products that 

served the community’s moderate-income population and decided to reach out to the 

working-class Mexican population. To target this clientele the bank established a partnership 

with the poultry employers, developed a financial seminar series in Spanish in 1994, and 

began offering seminars on-site at the factories. The partnership fulfilled the needs of 

each group of stakeholders: the bank wanted to be the first to connect to the growing 

Hispanic population and simultaneously meet their CRA requirements; the poultry industry 

sought to stabilize its workforce; and the immigrant community wanted steady employment 

and quality, affordable housing. 

The program took significant effort for the First National to execute. First National hired 

experts on Mexican culture to supplement the bank’s existing customer training. In addition, 

bilingual bank staff and seminar instructors who spoke Spanish and understood the 

employees’ cultural and educational backgrounds were hired. First National also adjusted its 

mortgage loan processing approach and provided 90 percent of the new customers with FHA 

or similar loans. 

During the first five years of the program, over 500 immigrant families purchased homes 

through First National. Prior to the first seminar, only 8 percent of the poultry processor’s 

employees were First National customers; two years later 60 percent were customers. The 

programs also stabilized the workforce – the turnover rate at one of the largest companies 

dropped from 200 percent annually in 1992 to 15 to 20 percent in 1999. Company 

management credits the stabilization to the bank and the homeownership program. 

Source: Schoenholtz and Stanton (2003). 

In addition to these efforts to provide financial literacy training, there are also a variety of efforts to 

bring previously unbanked households into the financial mainstream. The prospects for increasing 

access to financial institutions and services among low-income and minority households grew rapidly 

Chapter 4: Promoting Hispanic Homeownership 

84 
during the 1990s due to increased attention to this issue as well as both an expanding national 

economy and several technological innovations. Government policy focused on expanding access to 

financial services initially among recipients of federal benefits and later on to low-income households 

more generally (Barr, 2004). Financial institutions and community development financial groups 

similarly developed approaches and new products during the 1990s that were designed to reach the 

unbanked, generally, and Hispanics immigrant households more specifically. 

In addition to HUD’s efforts, two initiatives by the U.S. Department of Treasury emerged during the 

1990s and are designed to link unbanked households with the U.S. financial system. The Debt 

Collection Improvement Act of 1996 authorized the U.S. Treasury to initiate the Electronic Funds 

Transfer (EFT) program in 1999. The EFT program has two primary goals. First, the program is 

designed to increase direct deposits of federal benefits and wages into bank accounts. Second, for 

unbanked recipients of federal benefits, the program creates a low-cost, electronically-based bank 

account or Electronic Transfer Account (ETA) to help bring them into the banking system.

45 

The Treasury also started a small pilot initiative, called First Accounts, designed to improve access 

among low-income households to financial services. In 2001, the federal government awarded about 

$8 million to fifteen projects nationally to bank 35,000 households. The program improves access to 

financial institutions by offsetting the costs incurred by these institutions in establishing low-cost, 

electronic bank accounts for low-income households and in expanded access to ATMs, the Internet, 

and other points of access within low-income neighborhoods. The grants also support financial 

education of low-income households and support research on the financial needs of low-income 

households and the development of financial products designed to address these needs (Barr, 2004). 

At the state level, the 1996 Welfare Reform law required states to shift from paying welfare benefits 

under the Temporary Assistance for Needy Families (TANF) program by check to making these 

payments electronically. Leyser (2001) reports that state electronic benefit transfer programs have 

expanded to cover welfare benefits, food stamps, state cash benefits, and a host of other state 

programs. However, Barr (2004) notes that many states have implemented their EBT programs in 

ways that minimizes broad access. Most states do not create bank accounts for each individual but 

rather create pooled accounts that are accessed with a recipient’s debit card. 

There are also numerous private sector initiatives occurring throughout the country that target lowincome households, particularly Hispanics. A recent report by the National Council of La Raza 

provides an overview of the importance of financial education in Hispanic communities and provides 

a number of examples of these efforts (NCLR, 2004). ShoreBank is working with local groups to 

offer free tax preparation services for low-income filers in their branch offices, and offer filers an 

These accounts carry a maximum fee of $3 per month, do not have minimum balances, and can be used to 

deposit income from Social Security and other types of benefits. The Treasury provides banks and other 

institutions participating in the program with a one-time payment of $12.60 per account to cover the fees 

associated with opening a new account. Thus, the program “banks” households that were previously 

detached from the U.S. financial system and promotes regular interactions with the system. As of May 

2004, almost 500 banks, thrifts, and credit unions are offering ETAs in over 18,000 locations nationwide. 

An estimated 98,000 accounts have been opened. However, Barr (2004) questions the long-term viability 

of these accounts due to the research and product development costs associated with a financial institutions’ 

participation in the program. 

Chapter 4: Promoting Hispanic Homeownership 

85 

45 
opportunity to open a bank account to save their refund. Citibank, Wells Fargo, Bank of America and 

other financial institutions are focusing on the billions of dollars in remittance payments sent from the 

U.S. to Latin America or the Caribbean annually. These institutions are developing ATM-based 

remittance products that significantly reduce the cost of sending remittances abroad and have the 

potential to attract immigrants to the American banking system. Lastly, credit unions are also 

increasingly active in improving access among Hispanics to financial services. In Washington DC, 

the District Government Employees Federal Credit Union, the Organization of American States Staff 

Federal Credit Union and IDB-IIC Federal Credit Union (a credit union affiliated with the InterAmerican Development Bank) are planning to open a credit union that would meet the needs of 

Hispanics. The joint venture would promote financial integration among Hispanics in multiple ways: 

set fees and policies reasonable to low-income households; accept foreign identification cards (e.g., 

Mexico’s Matricula Consular program) to allow illegal immigrants an opportunity to open a savings 

account; and look to regular rent or remittance payments as proof of creditworthiness. 

These initiatives are often promoted through outreach campaigns to inform Hispanics about these new 

opportunities and encourage them to participate. For example, federal agencies use mass media 

outlets, including television, radio, and print advertisements in English and Spanish (as well as other 

languages) to inform people of these opportunities. National campaigns to promote awareness are 

supported by the efforts of local ethnic- or community-based organizations to educate their audience 

about the homebuying process. Many community-based outreach efforts emphasize face-to-face 

interactions between program staff and potential homebuyers, and some programs send staff to local 

churches or places of work to offer their services and distribute basic information. Other programs 

organize homeownership fairs, print newsletters, or develop partnerships with local unions or 

educational institutions. 

Bilingual Training and Information 

Both education and counseling programs and financial literacy programs introduce households to 

complex financial concepts and practices that often require instructors to be bilingual and familiar 

with a participant’s educational and cultural background. As Schoenholtz and Stanton (2001) 

suggest, bilingual instruction that is culturally sensitive is important because it allows instructors to 

talk about these new concepts in ways that participants can understand and within a context with 

which participants can identify. The assumption is that bilingual and bicultural programs are more 

likely to have a lasting impact on participants and engender trust in mainstream financial institutions, 

when compared to English-only programs. 

Today, bilingual training and outreach is commonplace. HUD’s website is available in Spanish and 

industry professionals are trained and equipped to assist Hispanic homebuyers. For example, Freddie 

Mac, Fannie Mae, and the Federal Reserve provide step-by-step credit and home purchase 

information on-line in Spanish. The National Association of Hispanic Real Estate Professionals 

(NAHREP) has developed a professional certification curriculum to help real estate professionals 

serve Hispanic consumers effectively. NAHREP also hosts special local and national events, such as 

the annual Hispanic Marketing Conference to educate industry professionals about the strategies and 

tools needed to attract and serve Hispanic customers. Banks, realtors and other private companies 

reach out to the Hispanic community through Spanish language advertisements and websites that 

contain financing and housing market information. Several non-profits use television and radio to 

Chapter 4: Promoting Hispanic Homeownership 

86 
inform Hispanics about the process of homebuying and local opportunities. Television programs like 

Estrenando Casa in Houston are increasingly popular. The 30-minute shows address homebuying 

topics with local experts and follow a family as they buy their first home. 

Indeed, the ability to reach Hispanics and provide general information on homeownership 

opportunities has increased considerably as the number of Spanish-language media outlets has 

expanded nationally. Since 1990, circulation of Spanish-language dailies has tripled, newspaper 

advertising revenues have grown more than sevenfold and the number of Spanish language websites 

has increased exponentially (Downey, 2003). 

Strategies to Overcome Real Estate and Housing Market Barriers 

Exhibit 4-4 categorizes the most common strategies to overcoming real estate and housing market 

barriers, and also presents the type of borrower constraint addressed and examples of existing efforts. 

The three general strategies include development cost subsidies, providing regulatory relief, and 

reducing discriminatory practices. Development cost subsidies and regulatory relief attempt to make 

homeownership a more affordable option, while reduction in discriminatory practices will increase 

homeownership opportunities. These strategies tend to be highly decentralized, involving a wide 

range of organizations. Their impact on increasing homeownership among low-income households 

(including Hispanics) is typically unknown. Throughout this section we provide examples of efforts 

by local organizations to use these strategies to assist Hispanics. 

Exhibit 4-4 

Strategies to Overcome Real Estate and Housing Market Barriers 

Strategy 

Development Cost 

Subsidies 

Regulatory Relief 

Reduction in 

Discriminatory 

Practices 

Constraint 

Addressed 

Affordability of 

housing 

Affordability of 

housing 

Discrimination in 

Housing 

Existing Efforts 

Description 

Estimated Annual 

Number of 

Homebuyers Assisted 

HOME 7,000 

CDBG Unknown 

Habitat for Humanity 5,400 

State and local efforts Unknown 

HUD’s regulatory barriers 

clearinghouse 

Unknown 

Trade association efforts Unknown 

National Home 

Construction and Safety 

Standards 

300,000 

Enforcement of Fair 

Housing laws Unknown 

Paired Testing Unknown 

Source: Herbert et al., 2005. 

Chapter 4: Promoting Hispanic Homeownership 

87 
Development Cost Subsidies 

The goals of development cost subsidies are two-fold. First, the primary goal is to increase the supply 

of owner-occupied units at prices affordable to low-income households. The development cost subsidy 

is applied either to lower the purchase price below the unit’s market value or to close the gap between 

the cost of developing an affordable unit and the market value. How the subsidy is used depends on the 

housing market. The subsidy is used to lower the purchase price in high cost housing markets and used 

to close the gap between market value and development costs in depressed housing markets. Second, 

development cost subsidies often have important community revitalization goals as well. 

As summarized by Herbert et al. (2005), there are few sources of federal funding to subsidize the 

development of housing for homeownership. The HOME program is the primary source of funding 

for this purpose. Authorized under Title II of the Cranston-Gonzalez National Affordable Housing 

Act, the HOME program provides formula grants to States and localities to meet the needs in their 

areas for affordable housing, including efforts to build or rehabilitate affordable housing for 

homeownership.46 A total of 62,364 new construction units (or approximately 5,000 units annually) 

and 30,811 rehabilitation units (or about 2,000 units) have been developed using HOME funds 

between the inception of the HOME program in 1992 and October 2004. In addition, Community 

Development Block Grant (CDBG) funds are also used to subsidize the development of housing for 

homeownership. The effect of CDBG spending on developing homeownership opportunities is 

difficult to estimate because HUD reports on the use of CDBG funding do not separately identify 

funds spent for constructing or rehabilitating housing for homebuyers. 

In addition, there are numerous efforts by state and local governments to subsidize the development 

of housing units for homeownership. Many of these efforts are part of broader, inner-city 

redevelopment plans and some use unrestricted income from state housing finance agencies and the 

sale of tax foreclosed land and structures to help support these efforts. 

Federal, state, and local efforts are buttressed by private efforts to support the development of new 

housing units for homeownership. For example, Habitat for Humanity is one of the largest and most 

prominent developers of affordable housing globally. Habitat for Humanity is a nonprofit, 

ecumenical Christian housing ministry that relies on volunteered labor and charitable contributions to 

build or rehabilitate homes for low-income owners. Homebuyers invest considerable time to help 

build their homes and contribute a modest down payment in exchange for a home that is priced well 

below its market value using a no-interest rate mortgage. The organization operates in all fifty states 

and produced about 5,400 units in the U.S. in 2002. 

Habitat for Humanity is one of many sweat equity programs or mutual self-help programs that focus 

on the production of affordable housing. These programs require eligible households to build houses 

for each family in the program, and most programs include formal homeownership education before 

or during the construction process. Participating families are typically required to build most of the 

house themselves and the balance is completed by professional contractors, although a few programs 

require participants to build the entire house. Professional instruction is provided throughout the 

The HOME program also allows communities to use funds to develop affordable rental housing or provide 

direct rental assistance to low-income people. 

Chapter 4: Promoting Hispanic Homeownership 

88 

46 
program to ensure housing quality. Mutual self-help programs have been particularly successful in 

colonia communities, defined as the area within 150 miles of the U.S.-Mexico border excluding 

Metropolitan Statistical Areas with populations exceeding one million. For example, Proyecto 

Azteca in San Juan, Texas has helped 80 colonias families build their own homes since 1991. The 

houses are financed with federal HOME Investment Partnerships funds. The program uses the funds 

to offer no-interest mortgages for qualifying colonia residents with incomes as low as $4,500 and up 

to $13,500. Similarly, the Lower Valley Housing Corporation, a nonprofit corporation in El Paso 

County, Texas has helped low-income colonia families build over 360 new homes since 1990 through 

a mutual self-help program. These efforts have received considerable federal support from HUD 

(e.g., Colonias Gateway Initiative), the U.S. Department of Agriculture (Rural Housing Service), and 

the Environmental Protection Agency (Border 2012 program), which provide funding for housing 

development for low-income colonia families as well as for infrastructure improvements. 

Self-Help Enterprises (SHE) 

Formed in 1965, Self-Help Enterprises (SHE) has over 35 years of experience promoting 

homeownership among the 320,000 seasonal and migrant farm workers that live its multicounty rural service area in the San Joaquin Valley. SHE participants are below 80% AMI 

and must attend four training sessions, elect project leadership, and hold group meetings 

throughout the home construction process. 

A 1998 study showed that SHE’s work had significantly contributed to the development of 

reliable homeowners and strong communities. Eighty-five percent of participants have lived 

in their homes 7 or more years, 79 percent for 10 or more years, and 68 percent for 20 or 

more years. Since 1976 only 3 percent have defaulted on their mortgage loans. As an 

integral part of the construction team, the homeowners learn more about the workings and 

maintenance of a home than most new homeowners. 

SHE staff speak Spanish and work closely with the households during all stages of the 

homebuilding and purchasing process. Typically, mortgage loans are secured from the 

USDA's Rural Economic and Community Development Services (RECDS) and the USDA also 

fund some of SHE’s technical assistance services. Since 1965, SHE has helped over 5,000 

households build homes in over 70 subdivisions. They currently aid an average of 150 

households per year. 

Reduction of Regulatory Barriers 

Excessive building codes and land use zoning ordinances can contribute to higher home prices since 

these regulations raise the cost of housing development (Glaeser, Schuetz, and Ward, 2006). These 

regulations are controlled mostly by local governments, and to a lesser extent state governments, and 

thus the federal role in reducing these barriers is limited. However, HUD has played an important 

role in informing communities of these regulatory barriers and how to address them. HUD’s 

Regulatory Barriers Clearinghouse has gathered and disseminated information on regulatory barriers 

to affordable housing development since the early 1990s. HUD’s efforts have been supplemented by 

Chapter 4: Promoting Hispanic Homeownership 

89 
trade associations, particularly the National Association of Homebuilders (NAHB), that have also 

worked to identify regulatory barriers and ways to reduce them. 

One approach to reducing regulatory barriers is provided by the growing number of manufactured 

homes (formerly referred to as mobile homes) built under the HUD’s Federal Manufactured Home 

Construction and Safety Standards. HUD’s standards are less onerous than local building codes47 and 

are associated with lower development costs, compared to site-built homes (NAHB Research Center, 

1998). Overtime, these standards have helped to improve the size and quality of these units and, as a 

result, manufactured homes have increasingly become an option for many homebuyers. Collins 

(2002) finds that manufactured homes were purchased by 14 percent of all first-time homebuyers 

between 1997 and 1999. Also, 21 percent of homebuyers with incomes below 80 percent of area 

median income bought manufactured units. During the 1990s, the annual number of manufactured 

home placements was roughly 300,000, but declined to approximately 200,000 in 2001 and then to 

125,000 in 2004. 

Reduction of Discriminatory Treatment 

Government and community advocacy groups have typically pursued two approaches to reducing 

discrimination in the housing market. First, by enforcing extant laws and regulations prohibiting 

discriminatory treatment – particularly the Fair Housing Act – government agencies are stopping 

instances of discrimination and, in turn, discouraging future discriminatory treatment by 

demonstrating that violators will be identified and punished. Although Schill and Friedman (1999) 

note that a small number of cases have reached a settlement or judgment for the plaintiff, these efforts 

have the potential for broad impact by sending a clear message to others in the housing market. Also, 

as both Schill and Friedman (1999) and Yinger (1999) have noted, most government enforcement 

efforts have focused on discrimination in rental markets rather than the housing sales market. 

Second, as discussed in Chapter 3, the use of paired-testing to identify cases of discriminatory 

treatment appears to be increasing. Paired testing is used to examine both the specific practices of an 

institution and the prevalence of discriminatory treatment generally in a market area. HUD has 

undertaken three paired-testing examinations of racial discrimination nationwide in the sales and 

rental markets (see Chapter 3 and Turner et al., 2002b for a description of these efforts). 

Strategies to Overcome Financial and Mortgage Market Barriers 

Exhibit 4-5 groups the most common strategies to overcoming financial and mortgage market 

barriers, lists the types of borrower constraints addressed, and provides examples of existing efforts. 

As presented by Herbert et al. (2005), the six general strategies include down payment and closing 

cost assistance, income subsidies for mortgage payment, relaxed mortgage underwriting guidelines, 

reduction in discriminatory practices, reducing mortgage interest rates, and resolving residency status. 

Most of these strategies are designed to address low wealth and income constraints and many are 

government-based. Strategies for resolving residency status attempt to address the documentation 

issues discussed in Chapter 3 that are particular to immigrants. Along with efforts to overcome 

Manufactured homes must have a permanent chassis in order to qualify for regulation by HUD’s standards. 

Chapter 4: Promoting Hispanic Homeownership 

90 

47 
information barriers, efforts to develop mortgage products and outreach efforts to meet the unique 

needs of Hispanics are among the most common approaches for supporting Hispanic homeownership. 

Exhibit 4-5 

Strategies to Overcome Financial and Mortgage Market Barriers 

Strategy 

Down payment & 

closing cost 

assistance 

Income subsidy for 

mortgage payment 

Relaxed mortgage 

underwriting 

Reduction in 

discriminatory 

practices 

Reduce mortgage 

interest rates 

Resolving 

immigration issues 

Existing Efforts 

Constraint 

Addressed Description 

Estimated Annual 

Number of 

Homebuyers Assisted 

HOME 16,000 

CGBG 6,000 

NeighborWorks America 7,000 

FHLB’s AHP 17,000 

IDAs 840 

State and local efforts Unknown 

Low wealth and 

income 

Private efforts Up to 200,000 

RHS section 502 15,000 

Housing Choice Vouchers 750 Low wealth and 

income Mortgage credit certificates 5,000 

FHA, VA, and RHS mortgage 

Poor credit insurance 1,100,000 

GSE housing goals Unknown 

Low wealth and Community Reinvestment Act Unknown 

income Subprime lending 300,000 

Enforcement of Fair Lending 

Laws Unknown 

Public reporting requirements Unknown 

Discrimination in 

Mortgage 

Markets 

Paired testing Unknown 

Mortgage Revenue Bonds 125,000 

Low wealth and 

income GSEs favored status 579,000 first-time 

buyers 

Flexible underwriting 

guidelines Lack of proper Unknown 

documentation Local efforts Unknown 

Source: Herbert et al., 2005. 

Down Payment and Closing Cost Assistance 

Down payment or closing assistance grants or low-cost loans are among the most common approaches 

to promoting homeownership. These grants or loans help to overcome a borrower’s lack of wealth, and 

may also address a borrower’s income constraints by lowering the size of the mortgage needed to 

finance the purchase. The HOME and CDBG programs are two, large block-grant programs funded by 

HUD that provide funds to state and local governments who allocate this money to meet their housing 

and community development needs. Homeowners aided through the HOME program must have 

incomes below the area median income. A total of 211,491 homeowners (an average of about 16,000 

Chapter 4: Promoting Hispanic Homeownership 

91 
households annually) were assisted in acquiring a home from 1992 to 2004. Herbert et al. (2005) 

estimate that approximately 6,000 households annually were assisted by the CDBG program. Other 

newer initiatives include the American Dream Down Payment Initiative (see Exhibit 4-6). In its first 

three years (2003-2005), total funding for this program was $211 million. As of December 2005, half 

of these funds had been expended in assisting 13,850 new first-time homebuyers with an average 

subsidy of $7,400. 

In addition to the HOME and CDBG programs, the federal government supports the efforts of the 

NeighborWorks America (formerly the Neighborhood Reinvestment Corporation) and the Federal 

Home Loan Banks (FHLB) to provide grants or loans to promote homeownership. NeighborWorks 

America receives funding from the federal government to support the activities of its local affiliates 

who, in turn, partner with local lenders, realtors, foundations and others to increase homeownership 

opportunities among low-income households. Grants or second mortgages with below market interest 

rates are used to close the gap between the cost of available housing and the amount affordable to the 

household. NeighborWorks America also uses loans to attract additional funding from banks who earn 

credit toward low- and moderate-income lending goals under the Community Revitalization Act. 

Approximately 10,000 homebuyers were assisted by NeighborWorks America in 2000. 

The Federal Home Loan Bank’s (FHLB) Affordable Housing Program (AHP) is another important 

effort to address the wealth constraints of low-income borrowers. Funds from the AHP are used to 

provide both low-cost loans and grants to assist homebuyers with income below 80 percent of area 

median income. Herbert et al. (2005) note that in 2001 the AHP provided an average subsidy of 

about $5,000 to nearly 17,000 homeowners. 

Individual Development Accounts (IDAs) are another innovative approach to promoting 

homeownership among low-income households and may be particularly useful to helping Hispanic 

immigrants. These efforts provide financial management training to develop better savings habits 

among low-income households and encourage savings by matching participant savings with public or 

private funds. Withdrawals from IDAs are often restricted to investments that will have a longer-term 

payoff (e.g. buying a home, pursuing post-secondary education and training, and starting a small 

business), but may address short-term needs, (e.g., purchasing of a car or computer for work-related 

purposes) (Boshara, 2005). IDAs were initially developed by foundation-funded, community-based 

organizations, and later promoted by the federal government as part of welfare reform efforts. In 

1998, federal support was expanded with the establishment of the American Dream demonstration 

program in 13 sites to investigate the effectiveness and feasibility of IDAs. 

Today, there are at least 300 IDA programs in nearly every state, supporting about 15,000 active 

accountholders (CFED, 2003). While homeownership is a common use of these funds, it is not the 

only use. Based on research by Sherraden (2002) and (Schreiner and Sherraden, 2002), we can 

assume that approximately 28 percent of the 15,000 active participants used IDA funds for home 

purchase, and an estimated 20 percent of these participants eventually drop out of the program. As a 

result, we estimate that there may be 840 home purchasers using IDAs each year. 

In addition to these efforts, there are some other down payment assistance programs funded by state 

and local governments, non-profits and private sector firms that are independent of federal assistance. 

For example, state housing finance agencies use funds from the issuance of bonds with a slightly 

Chapter 4: Promoting Hispanic Homeownership 

92 
above market interest rates to provide down payment assistance. There has also been growing use of 

privately funded down payment assistance efforts, such as the Nehemiah Foundation in Sacramento. 

Under the Nehemiah model, the home seller provides a cash contribution to a non-profit organization, 

which in turn provides a grant in this amount to the homebuyer as down payment assistance. Other 

organizations have copied this approach and a national organization representing these groups 

estimates that there may be as many as 200,000 homebuyers assisted per year (Barta and Kim, 2002). 

Income Subsidies 

The Section 502 Direct Loan Program of the Department of Agriculture’s Rural Housing Service is 

the largest income subsidy program. Eligible households must have income that is below 80 percent 

of the area median; households must be without adequate housing, but be able to afford the mortgage 

payments; and households must be unable to obtain credit elsewhere despite having reasonable credit 

histories. The program uses loan limits from FHA’s Section 203(b) program. As of December 2004 

the interest rate on these loans was 5.875 percent,48 but the effective interest rate is brought down by 

the Section 502 payment assistance that is tied to the household’s income level. Herbert et al. (2005) 

note that with the payment subsidy, the effective interest rates may be as low as 1 percent. In recent 

years the program has averaged about 14,000 loans a year. 

The expansion of the Housing Choice Voucher program (formerly known as the Section 8 program) 

is another example of a federally sponsored income subsidy for homeownership. The Housing 

Choice Voucher homeownership program allows households with housing vouchers to apply the 

subsidy payment toward a mortgage. Several different financing approaches have been developed, 

but in most cases the income subsidy is insufficient to make homeownership feasible financially and 

thus other grants or loans are usually required (Turnham et al., 2002). Since the use of vouchers to 

support homeownership was first introduced in pilot form in 1999 there have been a total of 4,549 

homebuyers assisted through this effort. 

At the state level, the Mortgage Credit Certificate (MCC) program grants state housing agencies the 

option of converting their authority to issue mortgage revenue bonds into mortgage credit certificates. 

Under this program a first-time homebuyer acquires a conventional mortgage from a lender and then 

obtains a mortgage credit certificate from the state housing agency. The certificate provides the buyer 

with a nonrefundable income tax credit worth between 10 and 50 percent of the borrower’s annual 

mortgage interest payment (up to $2,000 annually). The tax credit lowers the buyer’s federal income 

tax withholding and thus acts as an income supplement. While innovative, the MCC program has not 

been heavily used. Collins (2002) reports that only 12 states participated in the program in 1999, 

issuing a total of 5,200 MCCs. 

Relaxed Mortgage Underwriting 

Conventional mortgages have income, wealth, and credit underwriting requirements to qualify for a 

mortgage, which frequently frustrate low-income households (including Hispanics) seeking 

homeownership opportunities. Relaxation of mortgage underwriting guidelines is an increasingly 

common approach by mortgage lenders to reduce these constraints, and can be coupled with down 

Applies to a 30-year fixed loan, 6.241 APR, 0 Discount Points, and 3 percent down payment. 

Chapter 4: Promoting Hispanic Homeownership 

93 

48 
payment assistance and other financial supports to promote homeownership among Hispanics (see 

Exhibit 4-5). Part of the motivation for the relaxation in mortgage underwriting has been HUD’s 

regulatory oversight of the government-sponsored enterprises (GSEs), Fannie Mae and Freddie Mac. 

HUD establishes housing goals for GSEs to expand the provision of mortgage credit to low-income 

and minority borrowers and communities. Burnett et al. (2006) provide a review of mortgage 

underwriting guidelines used by the GSEs (as well as FHA and a major subprime lender) to examine 

the extent to which these guidelines facilitate or impede the ability of Hispanics to qualify for a 

mortgage. The report finds that the GSEs have developed several products that are more flexible than 

conventional mortgage products. For example, Hispanic households are expected to benefit from the 

following flexibilities: 

• Do not require two years of employment history for mortgage approval; 

• Ignore frequent job changes as long as the borrower can document that his or her income 

is stable (for example, with paystubs, an employer-completed form, or W-2 forms); 

• Allow rent paid by family members to be included in the borrower’s income; 

• Allow a borrower to be approved for a mortgage without a formal credit history with 

credit reporting agencies; 

• Allow the use of non-traditional credit reports or a credit history compiled by the lender, 

as long as it includes a minimum number of credit references; 

• Provide some flexibility to borrowers with low credit scores; and 

• Do not require U.S. citizenship for mortgage approval. 

But while lending by the GSEs to low-income households has increased over the last decade in 

response to HUD’s housing goals, federal loan guarantee programs offered by the Federal Housing 

Administration (FHA), the Veterans Administration (VA), and the Rural Housing Service (RHS) 

have long been an important source of flexible mortgage products for low-income households.49 

According to Herbert et al. (2005), on average, FHA insured 792,000 mortgages a year between 2000 

and 2003, including 633,000 mortgages on average for first-time homebuyers. However, FHA’s 

market share has gone down since then. Over the 2002-2003 period, the VA guaranteed an average 

of 328,000 mortgages, while the RHS guaranteed 29,000. 

Portfolio lending by depository institutions is another source of flexible mortgage products for lowincome households. In order to meet regulatory requirements of the Community Revitalization Act 

(CRA), depository institutions have a strong incentive to develop mortgage products that meet the 

needs of low-income households in their service areas. There have been several studies examining 

the impact of CRA regulations on lending to low- and moderate-income borrowers, but most of these 

studies have focused on the share of lending to these groups rather than on overall volumes of lending 

(see, for example, Belsky et al, 2001, and Apgar et al, 2002). 

While private mortgage insurers have traditionally served lower risk households, during the 1990s these 

firms began to offer more aggressive products that would serve lower income and higher risk borrowers. 

However, because these mortgages are eligible to be purchased by the GSEs, these loans will fall within 

estimates of the GSE loan volumes. 

Chapter 4: Promoting Hispanic Homeownership 

94 

49 
The De Oro Group, U.S. Bank Home Mortgage, and Freddie Mac: Generating $1 Billion 

in New Mortgages to Boost Hispanic Homeownership Opportunities 

In July 2003, the De Oro Group—one of the largest Hispanic-owned mortgage companies in 

Southern California—U.S. Bank Home Mortgage, and Freddie Mac announced a new 

partnership that leverages the key strengths of each partner to promote homeownership 

opportunities among minorities. The partnership builds on De Oro’s understanding of the 

Hispanic community, the support of numerous members of the National Association of 

Hispanic Real Estate Professionals (NAHREP), the financial and organizational capacity of 

U.S. Bank Home Mortgage, and Freddie Mac’s affordable lending products and secondary 

market expertise to generate over $1 billion in mortgages to Hispanic families in two years. 

De Oro’s group of Spanish speaking mortgage professionals are working with NAHREP 

members to expand the availablility of affordable mortgage products in Hispanic 

communities. U.S. Bank Home Mortgage serve as the aggregator for De Oro’s standard 

mortgages and sell all De Oro-originated first lien conforming mortgages to Freddie Mac. 

Freddie Mac purchases the mortgages, which provides a steady supply of mortgage funds for 

additional homebuyers. Freddie Mac is also developing a flexible mortgage product that 

offers special down payment and closing costs options. 

Source: Freddie Mac Press Release, July 2003. 

The growth in subprime mortgage lending is another approach to addressing the constraints imposed 

by conventional underwriting. Subprime loans provide borrowers with mortgage funding even if the 

borrower has impaired credit, income levels that are low compared to their housing costs or total debt 

levels, or seek loan amounts that exceed the value of their home. However, borrowers face higher 

interest rates and fees to compensate lenders for the higher risks of these loans. Although most 

subprime loans are used to refinance existing mortgages, the use of subprime loans for home purchase 

has increased considerably, particularly among minority homebuyers. HUD tabulations of HMDA 

data for 2004 indicate that nearly 900,000 loans were made for home purchase by subprime lenders. 

The share of subprime loans among Hispanic homebuyers is particularly high and has been 

increasing. Data provided by HUD that considers conventional loans less than the GSE conforming 

loan limit indicate that HUD-identified subprime lenders accounted for 18 percent of Hispanic home 

purchase loans in 2002, 25 percent in 2003, and 33 percent in 2004. 

While the advent of subprime lending has expanded borrowing opportunities for those who would 

have difficulty meeting conventional underwriting standards, there have also been concerns that some 

share of subprime borrowers could have qualified for a prime mortgage at a lower cost. In particular, 

the heavy concentration of subprime lending in minority neighborhoods has raised concerns that 

minorities, in particular, are falling prey to aggressive marketing of some subprime lenders 

(Scheessele, 2002; ACORN, 2002; and Bradford, 2004). Recent studies that have examined subprime 

lending shares at the neighborhood level have generally concluded that these are higher in black and 

Hispanic neighborhoods even after controlling for neighborhood credit scores as well as income and 

Chapter 4: Promoting Hispanic Homeownership 

95 
other pertinent characteristics (Calem, Gillen and Wachter, 2004; and NCRC, 2003). However, the 

findings regarding the share Hispanics in the neighborhood are less consistent than they are for 

blacks. For example, in NCRC’s study of 10 market areas the neighborhood share black is 

statistically significant in 6 of 10 purchase loan models and 9 of 10 refinance loan models, while the 

Hispanic share is only significant in 1 purchase model and 5 refinance models. Thus, there is not as 

much evidence that subprime lenders are over represented in Hispanic neighborhoods as there is that 

they are overrepresented in black neighborhoods. 

Reduction of Discriminatory Treatment 

Like the approaches to reducing discrimination in the housing market, government and community 

advocacy groups have pursued three approaches to reducing discrimination in the mortgage market. 

First, government agencies are enforcing laws and regulations – especially the Equal Credit 

Opportunity Act and the Federal Housing Enterprises Financial Safety and Soundness Act – 

prohibiting discriminatory treatment in the mortgage market. Enforcement of these existing laws stop 

specific instances of discrimination and can inhibit future instances of discriminatory treatment. 

A second approach to combat discriminatory treatment in housing finance is the federal requirement 

that lenders report information on their lending activity (LaCour-Little, 1999) pursuant to both the 

Home Mortgage Disclosure Act (HMDA) and the Community Reinvestment Act (CRA). Public 

reporting permits regulators and the general public to scrutinize lenders actions and disclose 

important information about their lending practices. The CRA allows regulators to deny mergers on 

the basis of poor performance on CRA-defined measures, which gives community groups a powerful 

tool to encourage banks to lend to low-income and minority borrowers. 

Lastly, paired-testing has also been used to identify cases of discriminatory treatment in mortgage 

markets. See Chapter 3 and Turner et al. (2002a) for a description of these efforts. 

Reduced Mortgage Interest Rates 

Lowering borrowing costs by reducing mortgage interest rates is another approach to addressing 

limits on homeownership imposed by a lack of income and wealth. The most common source of 

below-market interest rate mortgages are provided by state housing agencies with funding provided 

by mortgage revenue bonds (MRB). States can issue MRBs with interest payments that are exempt 

from federal taxation to support private activities, such as home purchases. These bonds allow for 

lower interest rates when compared to other investments because investors do not pay federal tax on 

the income from these bonds. According to Collins (2002), MRB financing can reduce mortgage 

rates by as much as 2 percentage points, and the National Council of State Housing Agencies 

(NCSHA) estimates that the typical homebuyer saves $100 a month from these lower interest rates.50 

Herbert et al. (2005) reports that 125,000 homebuyers are assisted through this program annually. 

Resolving Immigration Issues 

Helping immigrants on a temporary U.S. Visa or undocumented immigrants resolve their immigration 

status is challenging for several reasons. First, these issues generate considerable confusion and fear 

See “Housing Bonds Program Fact Sheet” at http://www.ncsha.org/section.cfm/3/34/36. 

Chapter 4: Promoting Hispanic Homeownership 

96 

50 
among immigrants, which leads many immigrants to remain wary about seeking help with their 

immigration status. Fear of deception, imprisonment, or deportation are exacerbated by stories 

circulated among immigrant communities about a neighbor or relative who was a victim of predatory 

lending practices or was deported because of a minor criminal offense committed many years ago. 

Second, outreach efforts to immigrant Hispanics can be hampered by employment seasonality and the 

resulting residential instability. Migrant workers move regularly, which limits the ability of 

organizations to both identify the immigrant community and work with them for as long as it takes to 

resolve their issues. Lastly, lending institutions are hesitant to develop flexible mortgage products 

that do not require a social security number (SSN) because of the potential high risk for the 

institution. For example, industry representatives in Chicago noted that their institutions will not 

make mortgage loans to undocumented immigrants because the “secondary market will not purchase 

these loans” (Congressional Hispanic Caucus Institute, 2004). 

As the above discussion suggests, there are several education, counseling, and financial literacy 

programs that are designed to overcome peoples’ fears and confusion with the homebuying process. 

But there are currently only a handful of pilot programs nationally that are attempting to resolve the 

documentation requirements in the mortgage application process. Mortgage lending institutions have 

developed more flexible products that accept alternative forms of income and credit history (see 

Relaxed Mortgage Underwriting section above), and both standard and affordable lending products 

have never required U.S. citizenship for mortgage approval. 

WHEDA and MGIC Offer Undocumented Immigrants a Chance to Own a Home 

Announced in April 2004, the Wisconsin Housing and Economic Development Authority 

(WHEDA) has partnered with MGIC Corp., a large Milwaukee mortgage insurer, and four 

Wisconsin banks to help lenders provide more mortgages to undocumented immigrants. The 

pilot program uses nontraditional measures of credit, such as rent receipts and utility 

payments, and does not require borrowers to have SSNs. Instead, borrowers with an ITIN 

can qualify for a loan. All the loans will be structured as WHEDA loans and sold by the 

agency to the secondary market. WHEDA is the first governmental agency in the country to 

promote the use of the secondary market for ITIN loans. 

Nonetheless, legal residence in the U.S. is required for mortgage approval by these lenders. 

According to industry representatives, mortgage institutions can “do good outreach” to the Hispanic 

immigrant community, but they still “run up against the fact that people don’t have valid Social 

Security Numbers” (Congressional Hispanic Caucus Institute, 2004). These representatives call for 

both more flexible underwriting guidelines that accept alternatives to SSN (e.g., for Individual Tax 

Identification Numbers or ITINs51) and for the creation of a secondary market for ITIN loans. 

The ITINs is a tax processing number issued by the Internal Revenue Service (IRS) to individuals, 

regardless of their immigration status, who require a tax payer identification number but do not qualify for 

a SSN. An ITIN is only intended for tax purposes and does not qualify recipients for Social Security 

Benefits or change their immigration or work status. The use of ITINs in lieu of SSN for the mortgage 

application process is complicated by the fact that the IRS does not validate the identity of the recipient or 

Chapter 4: Promoting Hispanic Homeownership 

97 

51 
The Potential Impact of Various Approaches for Increasing 

Hispanic Homeownership 

Overall, there is relatively little research that has evaluated the effectiveness of various strategies for 

increasing homeownership among low-income or minority households generally, let alone among 

Hispanics specifically. In particular, there has been almost no research in recent years that has 

examined the effectiveness of efforts to address informational barriers or to overcome obstacles in 

real estate and housing markets. By far the largest body of research has been studies that have 

examined the potential for increasing homeownership opportunities by expanding access to mortgage 

financing. However, not all of these studies provide separate estimates for Hispanics. In order to 

have some understanding of what is known about the potential effectiveness of various approaches 

for increasing Hispanic homeownership, the following section summarizes the existing literature 

related to each of the three broad strategies for expanding homeownership opportunities. 

The Effectiveness of Information Strategies 

One of the most common efforts to promote low-income homeownership over the last decade has 

been the provision of homeownership education and counseling (HEC). As described earlier, HEC 

programs have two goals: to increase the number of households who become homeowners and to 

lower the probability of default among these households. While there has been a fair amount of 

emphasis on the use of HEC as a means of promoting homeownership, there has been very little 

research that has evaluated the effectiveness of counseling in achieving these goals. Since the 1970s, 

when a few studies were conducted that were methodologically weak and inconclusive, no new 

research has examined the question of whether counseling is effective in increasing the likelihood that 

a minority or low-income households will become homeowners. In their review of the literature on 

HEC programs, McCarthy and Quercia (2000) describe the dearth of research on counseling 

effectiveness in this regard and conclude that “there is little tangible evidence that HEC works to 

expand or stabilize homeownership.” On the other hand, there have been a few recent studies that 

have examined the effectiveness of HEC in lowering default probabilities, but none that report results 

separately for Hispanics. 

Hirad and Zorn (2002) and Hartarska et al. (2002) both examine the relationship between HEC and 

mortgage default, and conclude that HEC programs reduce mortgage default rates. Hirad and Zorn 

(2002) find lower 90-day delinquency rates that are statistically significant among borrowers who 

receive HEC. They find that individual counseling is found to have the largest impact, lowering the 

probability of serious delinquency by 34 percent. Classroom and home study counseling are also 

found to lower the probability of delinquency by 26 and 21 percent, respectively. Telephone 

counseling is found to have no statistically significant impact. There were no statistically significant 

differences in delinquency based on the type of organization delivering services. Hartarska et al. 

(2002) estimate a hazard model to examine the relationship between the receipt of counseling services 

and the probability of foreclosure, and find that the program is associated with lower default risk as 

counseled borrowers had one-half the hazard rate of non-counseled borrowers. 

the authenticity of any identity documents, and thus financial institutions and mortgage lenders are hesitant 

to use ITINs. However, ITINs provide compliance with federal tax laws. 

Chapter 4: Promoting Hispanic Homeownership 

98 
However, both of these studies should be interpreted cautiously because it is unclear whether the 

effectiveness of HEC is due to selection bias rather than benefits from the services provided. That is, 

it is possible that HEC is effective not because the services provided are addressing information gaps 

among potential borrowers, but rather because the counseling process is a better way of identifying 

low-risk borrowers than standard underwriting criteria alone. Hirad and Zorn’s attempted to control 

for this selection bias, but had limited success, and Hartarska et al. make no attempt to control for this 

selection bias. 

A study by Staten et al. (2002) is notable in this regard by including more rigorous controls for 

selection bias in examining the impact of credit counseling on borrower behavior. While Staten et al. 

examine consumer credit counseling rather than homeownership counseling, their findings 

nonetheless lend support to the argument that even after controlling for selection bias, counseling can 

have an impact on the counselees’ subsequent credit management. This study creates a pseudocontrol group from credit bureau data by identifying households with similar credit profiles to those 

that received services, but are located in areas not served by the counseling agencies and so could not 

have been aided by these groups. These researchers find that counseling did improve clients’ credit 

profile over a three-year period in comparison to the control group. The impacts were greater on 

those borrowers who started with the weakest credit measures. Improvements were evident in such 

measures as fewer accounts open, lower debt levels, fewer delinquencies, and greater improvements 

in credit scores. 

The Effectiveness of Real Estate and Housing Market Strategies 

To date, we are not aware of any studies that examine the impact of strategies designed to overcome 

barriers in the real estate and housing markets on homeownership rates. In particular, the effect of 

developments cost subsidies, regulatory relief, and a reduction in discriminatory practices on 

Hispanic homeownership rates is unclear. 

One related study by Galster et al. (1999) demonstrates the potential for expanding homeownership 

opportunities through the combined removal of discriminatory, information, and supply-related barriers 

may not be large. This research relies on the assumption that white, suburban households face few, if 

any, barriers to homeownership due to a lack of information about homebuying, discrimination, or a 

lack of housing that is suitable and attractive for ownership. The researchers first estimate a statistical 

model that predicts the likelihood that white, suburban households would make the transition from 

renting to owning. This model is then applied to low-income and minority renters to see how many 

more of these households would be predicted to own if they had the same likelihood of becoming an 

owner as their white, suburban counterparts. Galster et al. estimate that there would have been 522,000 

additional homeowners in 1992 if all renters (including Hispanics) moved to homeownership at the 

same rate as white, suburban renters. This increase corresponds to a 0.6 percentage point increase in the 

overall homeownership rate. The gains are higher for lower-income households as they estimate a 

potential for increasing homeownership by 0.7 percentage points among households with income at or 

below 60 percent of area median income by and by 0.8 percentage points for those with incomes 

between 60 and 100 percent of area median income, compared to 0.2 percentage points for those with 

incomes above the area median. Thus, the authors estimate that overcoming these barriers would lower 

homeownership gaps by income, but only by about a half a percentage point. 

Chapter 4: Promoting Hispanic Homeownership 

99 
The Effectiveness of Financial and Mortgage Market Strategies 

Exhibit 4-7 draws from Herbert et al. (2005) to summarize the findings from the most comprehensive 

studies that estimate the potential for increasing homeownership by relaxing the income, wealth, and 

credit constraints imposed by mortgage underwriting criteria. The studies examine the impacts 

associated with many of the strategies discussed above, including reducing or eliminating down 

payment requirements, reducing mortgage interest rates, relaxing underwriting standards, removing 

credit barriers, and eliminating discrimination. However, only the Listokin et al. (2002) and 

Rosenthal (2002) studies provide results separately for Hispanics. 

As shown in Exhibit 4-7, there are two different methodological approaches used in the studies: 

synthetic underwriting and constrained tenure choice models.52 The synthetic underwriting approach 

estimates the potential for increasing homeownership among renter households by applying various 

underwriting criteria to the specific financial circumstances of individual households to identify how 

changes in underwriting criteria affect the number of households that could qualify for a mortgage. 

The approach compares the house value that a household could afford assuming various mortgage 

underwriting guidelines, subsidy programs, or efforts to lower housing or transaction costs to a target 

house value for each household – which is an estimate of an appropriate housing alternative for each 

household. If the household is able to meet the “synthetic” mortgage underwriting guidelines for the 

target house value under assumed market conditions, then they are deemed able to afford 

homeownership. Homeownership is considered out of reach for households that are unable to meet 

these guidelines. This methodological approach allows researchers to evaluate the potential impact of 

specific policies aimed at reducing financial constraints on the number of renter households who 

could afford to purchase a specific home. 

Listokin et al., (2002) provide the most thorough analysis of the potential for different mortgage 

products to lower homeownership constraints. They use SIPP data from 1993-1995 to provide 

estimates of renters’ income, assets, and debts to evaluate their financial circumstances and also 

incorporate estimates of taxes, insurance, closing costs and fees to mimic the underwriting process. A 

regression model of house values is used to provide an estimate of the most appropriate target house 

price for these renters. Listokin et al. apply underwriting criteria for 15 specific mortgage products,53 

including several more flexible options developed during the 1990s. As a result, the researchers are 

able to examine the impact of a wide range of policy options, for example, policies that reduce 

transaction costs and lower interest rates, down payment requirements, mortgage insurance costs, 

housing prices, supplement borrower income or supplement borrower wealth. The results are 

disaggregated by household race and ethnicity and income. 

The results suggest that the potential impact on homeownership rates by race-ethnicity across the 

range of affordable products evaluated by Listokin et al. is not large. Compared to the current GSE 

standard underwriting guidelines, the potential gain in homeownership rates from these products is 

52 See Herbert et al. (20054) for a detailed description of these approaches. 

53 The products include a range of affordable products introduced by the government-sponsored enterprises 

(GSEs), Fannie Mae and Freddie Mac, as well as products offered by lenders to be held in their own 

portfolios. 

Chapter 4: Promoting Hispanic Homeownership 

100 
generally only between 0.5 to 0.9 percentage points for whites, 0.3 to 0.5 percentage points for 

blacks, 0.3 to 0.6 percentage points for Hispanics, and 0.4 to 1.0 for Other minorities. In fact, since 

the potential gain in white homeownership rates are larger in absolute terms than for blacks and 

Hispanics, these affordable lending products by themselves would not be expected to lead to a 

reduction in homeownership gaps between minorities and whites. 

Exhibit 4-7 

Summary of Research Estimating the Potential for Increasing Homeownership by Increasing 

Access to Mortgage Finance 

Magnitude of Potential Increase In 

Constraints Study Ownership Rate 

(Percentage Points) 

Synthetic Underwriting 

0.8 to 3.3 for whites 

Downpayment Assistance Listokin et al. (2002) 0.1 to 5.2 for blacks 

0.1 to 7.0 for Hispanics 

0.3 to 0.8 for whites 

Reduced Mortgage Interest Rate Listokin et al. (2002) 0.0 to 0.1 for blacks 

0.1 to 0.2 for Hispanics 

0.2 to 0.9 for whites 

0.2 to 0.6 for blacks 

Relaxed Mortgage Underwriting Listokin et al. (2002) 

0.3 to 0.6 for Hispanics 

0.0 for <80% AMI 

0.1 to 0.4 for 80-120% AMI 

0.6 to 2.0 for >120% AMI 

Constrained Tenure Choice Model 

Downpayment Assistance Quercia et al. (2002) 

Reduced Mortgage Interest Rate Quercia et al. (2002) 

Relaxed Mortgage Underwriting Quercia et al. (2002) 

Credit Barriers Generally, Including 

Combined Impact of Income, Rosenthal (2002) 

Wealth, and Credit History 

7.7 for All Households 

9.3 for black Households 

8.5 for Low- and Mod-Incomes 

0.4 for All Households 

0.1 for blacks 

1.2 for Low- and Mod-Incomes 

3.2 to 3.4 for All Households 

4.4 to 4.6 for black Households 

4.1 to 5.4 for Low- and Mod-Incomes 

4.1 for white Households 

1.3 for black Households 

6.7 for Hispanic Households 

6.4 for Other Minorities 

11.1 for Bottom Income Decile 

7.1 for 10th-25th Income Percentile 

6.7 for 25th-50th Income Percentile 

3.0 for 50th-75th Income Percentile 

Sources: Herbert et al. (2005) 

Chapter 4: Promoting Hispanic Homeownership 

101 
In addition, Listokin et al. conclude that specific policies would have little potential impact on 

homeownership rates, particularly among minorities. Surprisingly, reducing mortgage interest rates 

to 0 percent would not increase homeownership rates by much (0.2 percent among Hispanics). This 

reflects the fact that renters who are financially constrained are much more likely to lack sufficient 

wealth to purchase a home rather than to not have sufficient income. By far the most effective policy 

option is to provide borrowers with one-time cash grants, similar to the American Dream Down 

Payment program. The study suggests that grants of $5,000 have the potential to increase 

homeownership rates among whites and blacks by 0.9 percent, 1.0 percent for Hispanics and 1.6 

percent for Other Minorities. This impact is much larger than any of the other types of policy options 

considered. Increasing the size of the grant to $10,000 would result in larger impacts: 5.2 percent for 

blacks, 7.0 percent for Hispanics, 5.3 percent for other minorities, and 3.3 percent for whites. As 

these findings suggest, this policy would have a large potential impact on narrowing the gap between 

non-Hispanic whites and minorities. The reason cash grants are more effective than other policy 

options is that these grants helps to remedy all financial constraints. 

A significant drawback of the synthetic underwriting approach is that it comes to a simple “yes or no” 

answer regarding whether homeownership is feasible given a household’s current financial 

circumstances. But Listokin et al. also find that a number of the households that were deemed by 

their analysis to be unable to afford to buy a home were actually observed in the SIPP data to have 

purchased a home by the end of the period of observation. Household financial circumstances are not 

static, so that through efforts to increase earnings and savings and an ability to tap families and 

friends, many renters are able to succeed in becoming owners. The constrained tenure choice 

approach accounts for this dynamic nature of household circumstances by estimating a statistical 

model of the probability that an individual household will become an owner. These models thus 

allow for the fact that even households with little income or wealth have some probability of buying a 

home. As a result, these studies generally find that efforts to reduce barriers have a larger potential 

impact on homeownership rates. 

These studies also incorporate household characteristics that are known to be associated with the 

demand for homeownership (described in chapter 2), such as marital status, age, and the presence of 

children in the family, to measure a households’ preference for homeownership and not just the 

financial ability to qualify for a home mortgage. However, a limitation of this approach for policy 

makers is that they generally cannot isolate the potential of specific policies on homeownership rates. 

For instance, these policies may indicate that a reduction in barriers to obtaining mortgage financing 

could increase homeownership rates by several percentage points, but these models cannot isolate 

which approach to reducing borrowing constraints is likely to be most effective. 

Quercia et al. (2002) provide the most comprehensive analysis applying a constrained tenure choice 

approach to data from the 1995 American Housing Survey. While they do not report results 

separately for Hispanics, the results are nonetheless instructive about the approaches that are most 

likely to increase homeownership rates among low-income households. In general, Quercia et al. find 

that downpayment assistance has the greatest potential for increasing homeownership rates among 

low-income households, with the elimination of a downpayment requirement resulting in an increase 

in homeownership of 8.5 percentage points. Less dramatic reductions in the income and 

Chapter 4: Promoting Hispanic Homeownership 

102 
downpayment constraints are found to increase homeownership rates among these households by 

between 4.1 and 5.4 percentage points. The smallest impact is from reductions in interest rates of 2 

percentage points, which results in only a 1.2 percentage point increase in the homeownership rate for 

low-income households. 

Rosenthal (2002) focuses specifically on the importance of credit constraints in reducing 

homeownership rates and does report separately on Hispanic households.54 Rosenthal uses the 1998 

Survey of Consumer Finances to identify credit constrained households, non-credit constrained owners, 

and non-credit constrained renters. Credit constrained households are identified using survey questions 

that identify whether at any time in the past five years the household had a loan request denied, had a 

loan request only partially granted, or considered applying for credit but then chose not to because of an 

expectation of being rejected. By identifying credit-constrained households, Rosenthal can then 

estimate a tenure choice equation that is based solely on non-credit constrained households. The 

explanatory variables include household demographic characteristics (including age, marital status, 

race-ethnicity, gender, and size of the household), measures of income potential (including education 

level, current, past, and expected income, measures of income stability, and health status), access to 

inheritances and gifts, and credit history (bankruptcies and recent missed loan payments). 

Overall, Rosenthal estimates that the U.S. homeownership rate would be 4.0 percentage points higher 

in the absence of credit constraints. Across racial groups, the biggest potential gains are estimated for 

Hispanic and Other race households with increases in their homeownership rates of 6.7 and 6.4 

percentage points, respectively. White homeownership rates would also rise by 4.1 percentage points 

while the black rate would only rise 1.3 percentage points. Thus, given the relative changes in 

homeownership for different racial and ethnic groups, Rosenthal finds that a removal of credit 

barriers would narrow homeownership gaps for Hispanics and Other races, but widen gaps for blacks. 

The study also finds the largest influence of borrowing constraints on those with lower incomes. 

Summary of Findings 

This chapter reviewed the various strategies for overcoming the main barriers to homeownership 

faced by Hispanic households. Approaches to overcoming barriers that are associated with a lack of 

information include informational homebuying programs, financial literacy programs and outreach, 

and bi-lingual information approaches. Strategies for overcoming real estate and housing market 

barriers include development cost subsidies, providing regulatory relief, and reducing discriminatory 

practices. Finally, there are numerous strategies for overcoming financial and mortgage market 

barriers, including down payment and closing cost assistance, income subsidies for mortgage 

payment, relaxed mortgage underwriting guidelines, reduction in discriminatory practices, reducing 

mortgage interest rates, and resolving residency status. 

Gabriel and Rosenthal (2005) employ the same methodology to data from the Survey of Consumer Finance 

covering the period from 1983 to 2001. However, by focusing on a single year Rosenthal (2002) is able to 

include more explanatory variables and so provides a better estimate of homeownership gaps controlling 

for all available and relevant factors. 

Chapter 4: Promoting Hispanic Homeownership 

103 

54 
Taken as a whole, the policies discussed in this chapter highlight several important challenges to both 

developing and evaluating strategies that target Hispanic households. First, policies that would help 

Hispanics are designed to help low-income households and, to a lesser extent, immigrant households 

generally. These policies are given a Hispanic focus by marketing and outreach efforts by local 

groups that serve Hispanic communities. However, because most of these initiatives are designed to 

help all low- and moderate-income households, including many low-income white households, the 

overall impact on narrowing the homeownership gap between Hispanics and non-Hispanics may only 

be slight. 

Second, it is difficult to catalogue the myriad programs and services available to help Hispanics 

specifically – as well as all households generally – become homeowners. A broad range of 

government, non-profit, and private sectors organizations have been involved in efforts to assist 

Hispanics, but only anecdotal information about these efforts is available through articles in popular 

and industry publications. Nonetheless, since the early 1990s, the importance of, and attention to, 

Hispanics in the housing market is growing, with a steady stream of published articles reporting on 

efforts by Hispanic advocacy groups, lenders, and other interested groups to address key barriers to 

Hispanic homeownership. These efforts can be divided into two broad categories: efforts to 

overcome informational barriers through homeownership and financial literacy education and 

counseling; and efforts to develop mortgage products that serve households that have difficulty 

meeting traditional underwriting standards regarding debt to income ratios, down payment and 

closing cost requirements, credit history standards, and documentation of income and savings. 

Efforts to overcome informational barriers can be tailored to aide Hispanic households by developing 

bi-lingual and bi-cultural curriculums, focusing on Hispanics’ lack of trust and comfort with the U.S. 

banking system, and by targeting neighborhoods and employers were Hispanics live and work. In 

addition, lenders can also target tailor their products to help Hispanics by allowing for alternative 

sources of income and credit documentation, and also by creating a secondary market for loans that 

use an ITINs in lieu of a SSN. 

Lastly, little is known about the effectiveness of various approaches to increasing homeownership, 

and even less is known about their effectiveness on Hispanics specifically. While the sharp rise in 

Hispanic homeownership since the early 1990s – a gain of more than 10 percentage points between 

1993 and 2005 according to Current Population Survey data – suggests that efforts to address barriers 

to Hispanic homeownership have been successful, very little is known about what approaches are 

most successful in different circumstances. For example, informational barriers seem very important, 

particularly for immigrants, but no research has attempted to estimate the potential of these efforts to 

increase Hispanic homeownership. One of the major challenges to rigorously estimating the impacts 

of these strategies on Hispanic homeownership is developing methodologies that can accurately sort 

through the many factors that contribute to a households propensity to become a homeowner. For all 

households, evidence (described in Chapter 2) suggests that the confluence of basic socioeconomic 

characteristics – such as age, income, wealth, and household type – and residential location can 

influence a household’s decision to become a homeowner. In addition to these factors, characteristics 

unique to some Hispanics – such as language proficiency, country of origin, and citizenship status – 

further complicate the ability of researchers to isolate the independent effects of a specific policy 

intervention. For example, if an education and counseling program does not significantly increase 

homeownership rates among Hispanics, is it because of the program’s curriculum or because 

Hispanic households have less desire to own because their expected length of stay in the U.S. is 

Chapter 4: Promoting Hispanic Homeownership 

104 
temporary? Some research has attempted to estimate the impact of mortgage underwriting constraints 

on the attainment of homeownership, and a few of these studies specifically control for ethnicity. 

These studies have found that among Hispanics, as with other low income groups, a lack of savings 

for down payment and other costs are much more important than low incomes or even poor credit. 

Nevertheless, large gaps in our understanding of effective policy interventions persist. Closing this 

gap is increasingly important, as the number of Hispanic households increases dramatically during the 

next few decades, and requires considerable more research to evaluate what types of barriers are most 

important for Hispanics and to evaluate what types of strategies are most effective. 

Chapter 4: Promoting Hispanic Homeownership 

105 
Chapter 4: Promoting Hispanic Homeownership 

106 
Chapter 5 

Conclusion 

This report provided a descriptive analysis of Hispanic homeownership rates and gaps in an effort to 

understand the major barriers that restrict homeownership opportunities for this group. The report 

used decennial census data to describe the size of the Hispanic homeownership gap and major trends 

since 1980. The descriptive analysis was supplemented by the literature on Hispanic homeownership 

in order to identify the main demographic and socioeconomic characteristics that are associated with 

the gap. The report also discussed the main barriers to Hispanic homeownership beyond the 

demographic and socioeconomic characteristics of Hispanic households to include problems 

accessing mortgage financing, discriminatory treatment in both the housing and mortgage markets, 

and a lack of understanding and comfort with the homebuying and mortgage process. The final 

chapter in the report discussed existing efforts to address these barriers and the limited extant research 

on the potential effectiveness of these approaches. 

Chapter 1 demonstrated that Hispanics are becoming an increasingly sizable proportion of the U.S. 

population, and the Hispanic community is very diverse. Hispanic households come from many 

different countries and differ across many demographic and socio-economic characteristics. Some 

Hispanics are born abroad or speak English poorly, while others are native-born citizens or speak 

English fluently. A portion of the Hispanic community are immigrant households, and some of these 

households have been in the U.S. for many years, while others have been in the U.S. for only a few 

years. In terms of residence, most Hispanic households are located in the South and West, 

particularly in California and Texas, and a few metropolitan areas in the Northeast also have very 

high concentrations of Hispanic households. 

These characteristics are important, not only because they highlight the enormous diversity among 

Hispanic households, but also because they are critical to understanding how Hispanic 

homeownership rates and gaps may change over time. Chapter 2 provided a series of cross 

tabulations using census data to explore the relationship between these characteristics and 

homeownership rates and gaps. The analysis, supported by a literature review, found that age, 

income, level of education, net worth, household type, nativity, country of origin, degree of social 

integration (citizenship status and years in the U.S.), and place of residence were important factors 

that explained the gap in homeownership rates among Hispanics and non-Hispanic whites. The data 

demonstrated that Hispanic homeownership rates increase and gaps decrease with age, income, and 

wealth, and educational status. Marriage was also a strong determinant of homeownership. 

Also, among the immigrant-related characteristics, country of origin, citizenship status, and years in 

the U.S. were found to be important determinants of Hispanic homeownership. Homeownership rates 

increased with citizenship and length of stay in the U.S., but arrival cohorts effects were evident. 

That is, the homeownership rates of more recent immigrant groups have not risen as much overtime 

as earlier immigrant cohorts. The analysis also indicated that the concentration of Hispanics in high 

cost housing markets could depress Hispanic homeownership rates in these areas. 

Chapter 5: Conclusion 

107 
The descriptive analysis was supported by the existing literature on homeownership, generally, and 

on the emerging literature on Hispanic homeownership, specifically. Research suggests that 

individual “endowment” factors (such as income, age, education, family type, gender, and 

characteristics of the housing market where Hispanics reside) explain between half and three quarters 

of the racial and ethnic gap in homeownership rates among Hispanics. Much of the remaining gap 

appears to be related to the large share of Hispanics who are immigrants, at least based on the 

findings of one study that includes the broadest set of variables to explain Hispanic-white 

homeownership gaps. 

The high share of Hispanics who are immigrants contributes to a number of key barriers to Hispanic 

homeownership, including information gaps about the homebuying process, barriers in the housing 

market and barriers in the mortgage application process. Chapter 3 described these barriers and how 

they impinge on the homebuying process. For example, information gaps about the homebuying 

process, the importance of establishing a financial history, and the mortgage qualification process can 

discourage some Hispanics from pursuing homeownership either because their misunderstandings about 

the process lead them to believe that homeownership is unaffordable or too complicated, that banks are 

not to be trusted, or that they do not qualify for a mortgage due to their credit history. Similarly, 

housing affordability concerns and the perception of discrimination in the housing market may chill 

interest in pursuing homeownership by putting it out of reach of many Hispanic households or by 

making housing search excessively difficult. These concerns are exacerbated by poor credit histories, 

low wealth and income, lack of proper documentation, and the potential for racial and ethnic 

discrimination in mortgage application process. These mortgage market barriers can lead to frustration 

with the mortgage application process and prompt some Hispanics to give up or view homeownership 

as an unaffordable opportunity. Furthermore, racial and ethnic discrimination in the mortgage 

application process can limit a household’s search for housing and even shut out Hispanics altogether. 

Although the confluence of all of these barriers may seem insurmountable, communities across the 

country have developed local programs that have successfully moved Hispanic households into 

homeownership. This success is evidenced by the more than 10 percentage point increase in Hispanic 

homeownership rates from 1993 to 2005. Chapter 4 discussed many of these programs, including: 

informational homebuying programs, financial literacy programs and outreach, bi-lingual information 

approaches, development cost subsidies, providing regulatory relief, reducing discriminatory practices 

in both the housing and mortgage markers, providing down payment and closing cost assistance, 

income subsidies for mortgage payment, relaxed mortgage underwriting guidelines, reducing mortgage 

interest rates, and resolving residency status concerns. These policies are often designed to help all lowincome households, but are marketed and tailored by local groups that serve Hispanic communities. For 

example, efforts to overcome informational barriers can be tailored to aide Hispanic households by 

developing bi-lingual and bi-cultural curriculums, focusing on Hispanics’ lack of trust and comfort with 

the U.S. banking system, and by targeting neighborhoods and employers were Hispanics live and work. 

Yet, as Chapter 4 also demonstrated, it is difficult to catalogue the myriad programs and services 

available to help Hispanics households because there is only anecdotal information about efforts to 

specifically aide these households. As a result, little is known about the effectiveness of various 

approaches to increasing homeownership, and even less is known about their effectiveness on 

Hispanics specifically. One of the major challenges to estimating the impacts of these strategies 

rigorously on Hispanic homeownership is developing methodologies that can accurately sort through 

Chapter 5: Conclusion 

108 
the many factors that contribute to a household’s propensity to become a homeowner. Current 

approaches successfully capture important factors that can be quantified relatively easily – e.g., 

income, age, gender, credit score, and down payment assistance – but less quantifiable factors—e.g., 

a household’s expected length of residency in the U.S. and sense of personal and financial attachment 

to the U.S. are more elusive. 

Taken as a whole, the chapters suggest that Hispanics face considerable barriers to homeownership in 

the U.S. and the ability of homeownership programs – formed at all levels of government and within 

private and community-based groups – to overcome these barriers remains unclear. In particular, our 

understanding of Hispanic homeownership rates and gaps suffers from two shortcomings. First, most 

of the existing literature on homeownership focuses on all U.S. households generally and on the gaps 

among whites and African-Americans. Some of the lessons learned from these studies are applicable 

to Hispanics, but as this report suggests, there are numerous challenges to accessing homeownership 

opportunities that are particular to Hispanics. Second, the literature on the impact of different policy 

approaches on increasing homeownership rates among Hispanics is severely lacking. Anecdotal 

evidence from various communities across the country provides an important starting point from 

which to craft more informed policies, but the long term success of homeownership programs that 

target Hispanics will rely on more rigorous empirical studies. 

Chapter 5: Conclusion 

109 
Chapter 5: Conclusion

110 
References 

Apgar, William C. Jr. 2002. The 25th Anniversary of the Community Reinvestment Act: Access to 

Capital in an Evolving Financial Services System. Cambridge, MA: Joint Center for Housing 

Studies, Harvard University. 

Association of Community Organizations for Reform Now (ACORN). 2004. Separate and Unequal: 

Predatory Lending in America 2004. Washington, DC: ACORN. 

Barr, Michael. 2004. Banking the Poor: Policies to Bring Low-Income Americans Into the Financial 

Mainstream. The Brookings Institution, Research Brief, September. 

Barta, Patrick and Queena Sook Kim. 2002. “Buyers Get Free Down Payments on Homes, Paid for 

by Builders,” Wall Street Journal: p. 1. December 10. 

Belsky, Eric S., Michael Schill, and Anthony Yezer. 2001. The Effect of the Community 

Reinvestment Act on Bank and Thrift Home Purchase Mortgage Lending. Cambridge, MA: Joint 

Center for Housing Studies, Harvard University, Working Paper CRA01-1. 

Bendixen and Associates. 2004. The Barriers to Banking and Building Credit History for Latin 

Americans: A focus Group Study of Un-Banked Hispanics in Mobile, Alabama and Las Vegas, 

Nevada, June. 

Boehm, Thomas P. and Alan Schlottmann. 2004. “Wealth Accumulation and Homeownership: 

Evidence for Low-Income Families?” Washington, DC: U.S. Department of Housing and Urban 

Development, Office of Policy Development and Research. 

Borjas, G. J. 2002. Homeownership in the Immigrant Population. Research Institute for Housing 

America, Institute Report 02-01. 

Bostic, Raphael W., Paul S. Calem, and Susan Wachter. 2004. Hitting the Wall: Credit as an 

Impediment to Homeownership. Joint Center for Housing Studies: Harvard University, Working 

Paper BABC 04-5. 

Bradford, Calvin. 2002. Risk or Race: Racial Disparities and the Subprime Refinance Market. 

Center for Community Change. 

Burnett, Kimberly, Alvaro Cortes, and Christopher E. Herbert. 2006. Review of Selected 

Underwriting Guidelines to Identify Potential Barriers to Hispanic Homeownership. 

Washington, DC: U.S. Department of Housing and Urban Development, Office of Policy 

Development and Research. 

Calem, Paul S., Kevin Gillen, Susan Wachter. 2004. “The Neighborhood Distribution of Subprime 

Mortgage Lending”, The Journal of Real Estate Finance and Economics 29(4):393-410. 

References 

111 
Calem, Paul S., Jonathan E. Hershaff, and Susan M. Wachter. 2004. “Neighborhood Patterns of 

Subprime Lending: Evidence from Disparate Cities,” Housing Policy Debate 15(3):603-622. 

Callis, Robert R. 2003. Moving to America—Moving to Homeownership: 1994-2002. U.S. Bureau 

of the Census, Current Housing Reports, H121/03-1. 

Capone, Charles. 2002. “Research Into Mortgage Default and Affordable Housing: A Primer” 

Center for Homeownership LISC. 

Collins, Michael. 2002. Pursuing the American Dream: Homeownership and the Role of Federal 

Housing Policy. Paper prepared for the Millennial Housing Commission. January 

Collins, Michael and Doug Dylla. 2001. Mind the Gap: Issues in Overcoming the Information, 

Income, Wealth, and Supply Gaps Facing Potential Buyers of Affordable Homes. LISC Center 

for Home Ownership, Home Ownership Summit 2000 Research Series. October. 

Congressional Hispanic Caucus Institute. 2004. Focus Group Findings: Cross-Site Report. Prepared 

by Mosaica: The Center for NonProfit Development and Pluralism. Washington, DC. 

Cortes, Alvaro et al. 2006. Summary of Recent Research Examining the Barriers to Hispanic 

Homeownership and Efforts to Address These Barriers. Washington, DC: U.S. Department of 

Housing and Urban Development, Office of Policy Development and Research. 

Coulson, N.E. 1999. Why Are Hispanic and Asian-American Homeownership Rates So Low?: 

Immigration and Other Factors. Journal of Urban Economics 45:209-227. 

Dietz, Robert and Donald Haurin. 2002. The Social and Private Micro-level Consequences of 

Homeownership. Journal of Urban Economics 54(3): 401-450. 

DiPetta, Ann, Hamer, Margeret and Smith, Catherine A. 2001. Winning Practices: Best Practices in 

the Work of Home-Ownership Promotion. Neighborhood Reinvestment Corporation 

Downey, Kevin. 2003. More Hispanic Ad $ than We Thought. Media Life Magazine, November 17 

Duca, John and Stuart Rosenthal. 1994b. “Do Mortgage Rates Vary Based on Household Default 

Characteristics? Evidence on Rate Sorting and Credit Rationing,” Journal of Real Estate Finance 

and Economics, 8(2): 99-113 

Englehardt, G and C, Meyers. 1998. Intergenerational Transfers, Borrowing Constraints, and Saving 

Behavior: Evidence from the Housing Market. Journal of Urban Economics, 44: 135-57. 

Fannie Mae. 2003. Understanding America’s Homeownership Gaps: 2003 Fannie Mae National 

Housing Survey. Washington, DC: Fannie Mae. 

Flippen, C. A. 2001a. “Racial and Ethnic Inequality in Homeownership and Housing Equity.” The 

Sociological Quarterly 42:121-149. 

References 

112 
Flippen, C. A. 2001b. Residential Segregation and Minority Home Ownership. Social Science 

Research 30: 337-362. 

Follain, James R., David C. Ling, and Gary A. McGill. 1993. The Preferential Income Tax 

Treatment of Owner-Occupied Housing: Who Really Benefits? Housing Policy Debate 4(1): 1-

24. 

Galster, George, Laudan Aron, Peter Tatian, and Keith Watson. 1999. “Encouraging Mortgage 

Lending in “Underserved’ Areas: The Potential for Expanding Home Ownership in the US.” 

Housing Studies 14(6): 777-801. 

Glaeser, Edward L., Jenny Schuetz, and Bryce Ward. 2006. Regulation and the Rise of Housing 

Prices in Greater Boston. Cambridge, MA: Rappaport Institute for Greater Boston. 

Gyourko, Joseph, Peter Linneman and Susan Wachter. 1999. Analyzing the Relationship Between 

Race, Wealth and Homeownership in America. Journal of Housing Economics 8: 63-89. 

Hartarska, Valentina, Claudio Gonzalez-Vega, and David Dobos. 2002. “Credit Counseling and the 

Incidence of Default on Housing Loans by Low-Income Households,” Working Paper, Rural 

Finance Program, The Ohio State University. 

Haurin, Donald, Robert Dietz, and Bruce Weinberg. 2002. The Impact of Neighborhood 

Homeownership Rates: A Review of the Theoretical and Empirical Literature. Journal of 

Housing Research 13(2): 119-151. 

Haurin, Donald R., Patric Hendershott, and Susan Wachter. 1996. Wealth Accumulation and 

Housing Choices of Young Households: An Exploratory Investigation. Journal of Housing 

Research 7: 33-57. 

Herbert, Christopher E. 1997. Limited Choices: The Effect of Residential Segregation on 

Homeownership Among blacks. Ph.D. dissertation, Harvard University. 

Herbert, Christopher E., Donald Haurin, Stuart S. Rosenthal, and Mark Duda. 2005. Homeownership 

Gaps Among Low-Income and Minority Borrowers and Neighborhoods. Washington, DC: U.S. 

Department of Housing and Urban Development, Office of Policy Development and Research. 

Herbert, Christopher E. and Eric S. Belsky. 2006. The Homeownership Experience of Low-Income 

and Minority Families: A Review and Synthesis of the Literature. Washington, DC: U.S. 

Department of Housing and Urban Development, Office of Policy Development and Research. 

Hirad, Abdighani and Zorn, Peter. 2002. “A Little Knowledge is a Good Thing: Empirical Evidence 

of the Effectiveness of Pre-Purchase Homeownership Counseling,” in Low-Income 

Homeownership: Examining the Unexamined Goal, eds. Eric Belsky and Nicolas Retsina, 

Brookings Institution Press, Washington D.C. 

References 

113 
Hizel, Erica, Kamasaki, Charles, and Schafer, Geraldine. 2002. Increasing Hispanic 

Homeownership: Strategies for Programs and Public Policy. National Council of La Raza, Issue 

Brief (June 2002) No. 7: 1-17 

Hoyt, William and Stuart Rosenthal. 1990. Capital Gains Taxation and the Demand for OwnerOccupied Housing. Review of Economics and Statistics, 72: 45-54. 

Inter-American Dialogue. 2004. All in the Family: Latin America’s Most Important International 

Financial Flow. Task Force on Remittances, January. 

Kain, John. 1992. The Spatial Mismatch Hypothesis: Three Decades Later. Housing Policy Debate 

3(2):371-460. 

Kain, John F. and John M. Quigley. 1975. Housing Markets and Racial Discrimination: A 

Microeconomic Analysis. Columbia University Press, New York. 

Kochhar, Rakesh. 2004. The Wealth of Hispanic Households: 1996-2002. The Pew Hispanic Center. 

Washington, DC. 

Krivo, Lauren J. 1995. Immigrant Characteristics and Hispanic-Anglo Housing Inequality. 

Demography 32:599-615. 

Krivo, Lauren J. 1986. Home Ownership Differences Between Hispanics and Anglos in the United 

States. Social Problems 13: 319-335. 

LaCour-Little, Michael. 1999. “Discrimination in Mortgage Lending: A Critical Review of the 

Literature,” Journal of Real Estate Literature 7:15-49. 

Leyser, Barbara. 2001. Selected Characteristics of State EBT Systems. National Consumer Law Center. 

Listokin, David, Elvin K. Wyly, Brian Schmitt, and Ioan Voicu. 2002. The Potential and Limitations 

of Mortgage Innovation in Fostering Homeownership in the United States. Washington, DC: 

Fannie Mae Foundation Research Report. 

Listokin, David, Elvin K.Wyly, Brian Schmitt, and Ioan Voicu. 2001. The Potential and Limitations 

of Mortgage Innovation. Housing Policy Debate, 12(3): 465-513. 

Masnick, George. 1997. Citizenship and Homeownership among Foreign Born Residents in the US. 

Cambridge, MA: Harvard University, Joint Center for Housing Studies Research Note N97-1. 

August. 

Masnick, G. 1998. Understanding the Minority Contribution to U.S. Owner Household Growth. 

Cambridge, MA: Harvard University, Joint Center for Housing Studies Working Paper W98-9. 

References 

114 
Masnick, G. S. and Z. X. Di. 2002. Projections of Us Households by Race/Hispanic Origin, Age, 

Family Type, and Tenure to 2020: A Sensitivity Analysis. Urban Institute and U.S. Department 

of Housing and Urban Development Issue Paper: Demographic Trends Important for Housing; 

McArdle, N. 1995. Homeownership Attainment of New Jersey Immigrants. Working Paper W95-2, 

Cambridge, MA: Harvard Joint Center for Housing Studies. 

McCarthy, George and Quercia, Roberto. 2000. Bridging the Gap Between Supply and Demand: 

The Evolution of the Homeownership, Education and Counseling Industry. The Research 

Institute for Housing America (No. 00-01). 

Mitchell, Maxine V. and Warren, S. Paige. 1998. Making Homeownership a Reality: Survey of 

Habitat for Humanity International (HFHI), Inc. Homeowners and Affiliates. Chicago, IL: 

Applied Real Estate Analysis (AREA), Inc. 

Munnell, Alicia H., Geoffrey M.B. Tootell, Lynn E. Browne, and James McEneaney. 1996. Mortgage 

Lending in Boston: Interpreting HMDA Data. American Economic Review, 86(1), 25-53. 

Myers, Dowel and Seong Woo Lee. 1996. Immigration Cohorts and Residential Overcrowding in 

Southern California. Demography 33: 51-56. 

Myers, Dowel and Seong Woo Lee. 1998. Immigrant Trajectories into Homeownership: A Temporal 

Analysis of Residential Assimilation. International Migration Review 32: 593-625. 

Myers, Dowel, Isaac Megbolugbe, and Seong Woo Lee. 1998. Cohort Estimation of 

Homeownership Attainment among Native-Born and Immigrant Populations. Journal of Housing 

Research (9)2: 237-269. 

National Association of Homebuilders Research Center, Inc. 1998. Factory and Site-Built Housing: 

A Comparison for the 21st Century. Washington, DC: U.S. Department of Housing and Urban 

Development. 

National Community Reinvestment Coalition. 2003. The Broken Credit System: Discrimination and 

Unequal Access to Affordable Loans by Race and Age. Washington, DC: National Community 

Reinvestment Coalition. 

National Council of La Raza. 2004. Financial Education in Latino Communities: An Analysis of 

Programs, Products, and Results/Effects. Washington, DC. 

Painter, Gary, Stuart Gabriel, and Dowell Myers. 2001. Race, Immigrant Status, and the Housing 

Tenure Choice. Journal of Urban Economics 49: 150-167. 

Paral, Robert. 2004. The Potential for New Homeownership Among Undocumented Latino 

Immigrants. Prepared for the National Association of Hispanic Real Estate Professionals. 

References 

115 
Pollakowski, Henry O., Michael A. Stegman, and William M. Rohe. 1991. Rates of Return on 

Housing of Low- and Moderate-Income Owners. AREUEA Journal 19(3): 417-25. 

Quercia, Roberto G., George W. McCarthy, and Susan M. Wachter. 2002. The Impacts of Affordable 

Lending Efforts on Homeownership Rates. Unpublished manuscript, October 10, 2002. 

Quercia, Roberto G. and Susan M. Wachter. 1996. Homeownership Counseling Performance: How 

Can it Be Measured? Housing Policy Debate 7(1):175-200. 

Ratner, Mitchell. 1996. Many Routes to Homeownership: A Four-Site Ethnographic Study of 

Minority and Immigrant Experiences. Housing Policy Debate 7(1): 103-145. 

Real Estate Center at Texas A&M University. Home Buying Among Ethnic Groups. May 2004. 

ReedHaldyMcIntosh. 2003. Insights into the Minority Homebuying Experience: The Mortgage 

Application Process. Research Institute for Housing America. Washington, DC. 

Richie, Martha. 2001. The Implications of Changing U.S. Demographics for Housing Choice and 

Location in Cities. Discussion paper for the Brookings Institution Center on Urban and 

Metropolitan Policy. 

Robinson, J. Gregory. 2001. ESCAP II: Demographic Analysis Results. Washington, DC: U.S. 

Department of Commerce, Executive Steering Committee for A.C.E. Policy II, U.S. Census 

Bureau, October 13, 2001. 

Rosenbaum, Emily. 1996. “Racial/Ethnic Differences in Home Ownership and Housing Quality, 

1991.” Social Problems 43(4):403–26. 

Rosenthal, Stuart. 2002. “Eliminating Credit Barriers to Increase Homeownership: How Far Can We 

Go?” in Low-Income Homeownership: Examining the Unexamined Goal, eds. Eric Belsky and 

Nicolas Retsina, Brookings Institution Press, Washington D.C. 

Rossi, Peter H. and Eleanor Weber. 1996. The Social Benefits of Homeownership: Empirical 

Evidence from National Surveys. Housing Policy Debate 7(1): 1-35. 

Rohe, William M. and Leslie S. Stewart. 1996. Homeownership and Neighborhood Stability. 

Housing Policy Debate 7(1): 37-81. 

Savage, H. 1999. Who Could Afford to Buy a House in 1995. United States Census Bureau Report, 

August. 

Schachter, Jason P. 2004. “Geographic Mobility: 2002 to 2003,” Current Population Reports (P20-

549). Washington, DC: U.S. Department of Commerce, Economics and Statistics 

Administration, U.S. Census Bureau, March 2004. 

References 

116 
Scheessele, Randall M. 2002. Black and White Disparities in Subprime Mortgage Refinance 

Lending. Housing Finance Working Paper Series, HF-014, U.S. Department of Housing and 

Urban Development, April 2002. 

Schill, Michael H. and Samantha Friedman. 1999. The Fair Housing Amendments Act of 1988: The 

First Decade. Cityscape: A Journal of Policy Development and Research, 4 (3): 57-78 

Schmidt, Raymond. 2004. Significant Returns on Milwaukee’s Employer Assisted Homeownership 

Investments. Private Sector Partnerships: Investing in Housing and Neighborhood Revitalization. 

National Housing Conference, Housing Policy Review (3)2: 14-17. 

Schreiner, Mark and Michael Sherraden. 2002. Drop-out from Individual Development Accounts: 

Prediction and Prevention. St. Louis, MO: Washington University, Center for Social 

Development, Working Paper 02-2. 

Schoenholtz, Andrew and Kristin Stanton. 2003. Reaching Emerging and Underserved Home 

Ownership Markets. Georgetown University and the LISC. Washington, DC. 

Schoenholtz, Andrew and Kristin Stanton. 2001. Reaching the Immigrant Market: Creating 

Homeownership Opportunities for New Americans. Georgetown University and Fannie Mae 

Foundation. 

Sherraden, Michael. 2002. Individual Development Accounts (IDAs): Summary of Research. St. 

Louis, MO: Washington University, Center for Social Development. 

Simmons, Patrick A. 2001. Changes in Minority Homeownership During the 1990s. Washington, 

DC: Fannie Mae Foundation, Census Note 07. 

Staten, Michael E., Gregory Elliehausen, and E. Christopher Lundquist. 2002. “The Impact of Credit 

Counseling on Subsequent Borrower Credit Usage and Payment Behavior.” Georgetown 

University, Credit Research Center, Monograph #36. 

Turner, Margery Austin, Fred Freiberg, Erin Godfrey, Carla Herbig, Diane Levy, and Robin Smith. 

2002a. All Other Things Being Equal: A Paired Testing Study of Mortgage Lending Institutions. 

Washington, DC: U.S. Department of Housing and Urban Development. 

Turner, Margery Austin, Stephen Ross, George Galster, and John Yinger. 2002b. Discrimination in 

Metropolitan Housing Markets: National Results from Phase I HDS 2000. Washington, DC: 

U.S. Department of Housing and Urban Development. 

Turnham, Jennifer, Gretchen Locke, Michelle Wood, and Michael Baker. 2002. Voucher 

Homeownership Program Assessment: Final Report. Abt Associates, Inc. Prepared for the U.S. 

Department of Housing and Urban Development, September. 

U.S. Department of the Treasury and the U.S. Department of Housing and Urban Development. 

2000. Curbing Predatory Home Lending: A Joint Report. Washington DC. 

References 

117 
U.S. Department of Housing and Urban Development. 2002. Barriers to Minority Homeownership. 

Washington, DC: U.S. Department of Housing and Urban Development. 

U.S. Immigration and Naturalization Service. 2003. Estimates of the Unauthorized Immigrant 

Population Residing in the United States: 1990 to 2000. Located at 

http://uscis.gov/graphics/shared/aboutus/statistics/Illegals.html 

Yinger, John. 1998. Housing Discrimination Is Still Worth Worrying About. Housing Policy 

Debate, 9(4), 893-927. 

References 

118 
Appendix A 

Lower and Upper Boundaries of Each Income Decile, 1980-2000

Decile 

1980 

Lower Upper 

1990 

Lower Upper 

2000 

Lower Upper 

1 

2 

3 

4 

5 

6 

7 

8 

9 

10 

$0 

$4,006 

$7,026 

$10,036 

$13,321 

$16,811 

$20,256 

$24,406 

$29,721 

$38,511 

$4,005 

$7,025 

$10,035 

$13,320 

$16,810 

$20,255 

$24,405 

$29,720 

$38,510 

$75,000 

$0 

$6,849 

$12,025 

$17,868 

$23,401 

$29,428 

$36,001 

$43,932 

$54,437 

$72,401 

$6,848 

$12,024 

$17,867 

$23,400 

$29,427 

$36,000 

$43,932 

$54,436 

$72,400 

$925,956 

$0 

$10,001 

$18,001 

$25,601 

$33,401 

$41,901 

$51,401 

$63,201 

$80,001 

$110,501 

$10,000 

$18,000 

$25,600 

$33,400 

$41,900 

$51,400 

$63,200 

$80,000 

$110,500 

$999,998 

Sources: U.S. Census Bureau’s Integrated Public Use Microdata Series (IPUMS) using the 1980 1% metro sample, the 

1990 1% metro sample, and the 2000 IPUMS 1% sample. 

Appendix A 

119