LGBT Community Still Faces Hurdles to Homeownership
The American dream of owning a home, for many in the LGBT community, still appears to be just that — a dream.
With Pride Month underway in June, housing industry professionals and several research reports suggest that LGBT individuals have lower homeownership rates than non-LGBT adults, still experience discrimination in home-buying, including documented instances of lower mortgage approvals and higher interest rates than the non-LGBT population.
“Most times, it’s the same experience as non-LGBT couples, thankfully. But we can’t forget that any level of discrimination hurts people and the health of our housing market,” said Jeff Berger, a Coldwell Banker Realtor in Jupiter, Florida, and founder of the National Association of Gay & Lesbian Real Estate Professionals (NAGLREP), which has about 2,850 members among 42 local chapters.
NAGLREP’s fourth annual LGBT real estate report, released in April with partnership from Freddie Mac and RE/MAX, said the LGBT population is estimated at 4.5% of the total U.S. population, with buying power of $1 trillion. Yet homeownership rates are at 49% for the LGBT community, while the national average is 65%.
The biggest barriers to LGBT homeownership, according to the report, include waiting for the right time to buy, lacking funds for down payment and concerns of being welcomed in a new community. Another one listed was fear of discrimination during the buying process. According to Freddie Mac data from 2018, cited in the April report, 46% of all LGBT renters fear discrimination in their future home-buying process.
The actual number of discrimination instances are less, the Freddie Mac data said: While 13% of LGBT homeowners said they experienced discrimination when buying at some point throughout their lives, 4% of those who bought homes in the past five years reported discrimination.
NAGLREP’s Berger said his organization works closely with lenders and large institutions in housing, and on the whole, the underwriting community “does a great job for helping stabilize a housing market that is diverse.”
“Overall I think the finance community and the GSEs (government-sponsored enterprises) do a fantastic job,” he said. “I know that there is a minority of discrimination and that is what we work for; we raise awareness as a nonprofit.”
Housing market research
The Williams Institute at UCLA’s School of Law leads research on sexual orientation and gender identity law and public policy. Luis A. Vasquez, the institute’s Daniel H. Renberg law fellow and a co-author of a study on housing challenges in the LGBT community, said “the discrimination that same-sex couples appear to be facing in the housing market does appear to be system-wide.”
“It’s not necessarily that we’re talking about individual actors, but just that the system overall appears to disfavor LGBT people,” Vasquez said. “Even though they might report that a lot of the experiences are the same, when we look at the actual data, we find that the end results aren’t the same. These are things that maybe folks aren’t as well-equipped to be able to compare, especially when they’re just looking at their own specific experiences.”
One such study, the most recent data on mortgage applications in the LGBT community, comes from Iowa State University’s Ivy College of Business. The research published in April 2019 said lenders have been less likely to approve same-sex couples seeking home loans. Analyzing national mortgage data from 1990 to 2015, researchers found the approval rate for same-sex applicants was 3-8% lower than different-sex couples.
The study also said that same-sex couples who were approved for mortgages paid 0.02%-0.2% more, equivalent to a total of $8.6 million to as much as $86 million annually, in additional interest and fees, compared to non-LGBT borrowers.
Lenders can justify higher fees based on the level of default risk, but “that is not what we found,” co-author Hua Sun told HousingWire. “We didn’t find any evidence that same-sex couples are more risky.”
Sun said that because of the limited public data available, it is still premature to definitively conclude the existence of lending discrimination against sexual orientation, but the findings raise enough concerns to justify additional research by government agencies with direct access to borrower data.
There is some sentiment of improved homeownership rates since the end of the Iowa State study’s data set in 2015. That year, the Supreme Court legalized marriage equality. According to this April’s NAGLREP report, 57% of members believe more married LGBT couples are buying homes than prior to the ruling. This is up from 47% reported in the NAGLREP’s 2017 LGBT Real Estate Report.
“Now that their marriages are legally recognized, and then in addition to that, if we add on explicit legal protections in credit and lending for LGBT people, then I’d say that based on this existing research, it is likely that we would start seeing more and more LGBT people and probably, in particular, same-sex couples to start applying for mortgages and start buying,” Vasquez said.
However, instances of discrimination aren’t just happening during the home-buying process, according to an Urban Institute study published in June 2017 which found bias against LGBTQ renters.
The study paired individuals in a same-sex or a different-sex couple, who posed as renters looking for apartments in the Los Angeles and Dallas-Fort Worth metro areas. The gay and lesbian testers referenced a same-sex partner or spouse by a gender-specific name. Researchers found that housing providers treated lesbians and heterosexual women comparably, but showed bias toward gay men and transgender renters. The housing providers were less likely to schedule an appointment with gay men, less likely to tell gay men and transgender individuals about available units, and quoted gay men $272 more in average yearly costs than heterosexual men, the study said.
Although the data for this study was collected in 2016 and published three years ago, “I think that one of the things that I would just point to that could have implications for what the housing search looks like today for a couple, in spite of some of the strides that have been made, is that you’re still looking at this sort of patchwork of legal protections on a local and state level,” Claudia Aranda, a senior research associate at the Urban Institute and a co-author of the rental study, told HousingWire.
“The issue of how much something may vary depending on where you are, is something that I think is still very much at issue. But also, one of the things that we have not been able to say more about because of our limited sample sizes in some of the studies, is the issue of what some of these differences look like for testers of different ethnic and racial backgrounds.
“The issue for LGBTQ people who are people of color, about how they may be responded to by housing providers in any particular context, that’s something we just don’t have national data right now to be able to speak to, even within the places that we have done a lot of our testing work,” Aranda said.
The Fair Housing Act and Equal Credit Opportunity Act provide legal protection against discrimination in housing and lending based on race, color, age, national origin, religion, sex, disability, marital status or because an applicant receives income from a public assistance program. Sexual orientation and gender identity, however, are not explicitly named as federally protected. Some state and local levels do cover sexual orientation and gender identity in protective laws and ordinances, but there are still 25 states without explicit prohibitions, according to the Movement Advancement Project.
Based on 2019 estimates, that means about “8 million LGBT adults currently live in these states that don’t have explicit protections against sexual orientation and gender identity discrimination in credit and lending,” Vasquez, of the Williams Institute, said.
That’s where the Equality Act, which was passed in the U.S. House of Representatives in May 2019 and has been sitting stagnant in the Republican-led U.S. Senate, would come in. This bill will add sexual orientation and gender identity as protected classes and ban discrimination against the LGBT community in areas including housing, credit, employment, education, public spaces and services, federally funded programs and jury service.
“On a macro level, it would make housing more marketable and more desirable for the LGBT community to obtain the true American dream and feel that they are truly one with the law of our land,” said NAGLREP’s Berger.
The real estate community believes the proposed law would have a significant impact on housing. More than 80% of NAGLREP members believe LGBT homeownership rates would rise at least 1% within five years of the Equality Act passing, according to the association’s April report. Nearly half of the members expected homeownership would increase more than 5%.
In support of the bill, a group of almost 200 leading brands – including Ally Financial, Bank of America, Citigroup, Compass, Halstead Real Estate, Keller Williams Realty, Realogy, RE/MAX, Redfin, TD Bank, Wells Fargo and Zillow – have joined the Business Coalition for the Equality Act.
Wells Fargo also partners with SAGE, short for Services & Advocacy for GLBT Elders, to help fund LGBTQ-supportive housing as well as a financial health program. Older LGBTQ individuals face specific challenges in housing because they often lack the traditional family support system that heterosexual people have, and those challenges have been exacerbated by the COVID-19 pandemic, said John Lake, LGBTQ segment leader and a senior vice president for Wells Fargo Marketing.
“We have sped up work on this program because of the impact that COVID has had on the LGBTQ community, specifically the elderly LGBTQ community,” Lake said. “We’re hoping to launch the program with a couple of test markets in July, and then roll it out much more broadly through the end of the year.”
Housing industry involvement
Lake, who has led Wells Fargo’s LGBTQ segment for more than six years, said his team’s role is to deliver insights that help the bank better serve diverse communities. That means working with different lines of business on tailoring products and services to the LGBTQ community, serving as a subject matter expert to the Wells Fargo Foundation on philanthropic giving for community needs and ensuring the bank’s marketing approaches the group with authenticity.
“It’s really about taking a holistic look at how we’re interacting with the real estate industry, and how we’re preparing our own HMCs (home mortgage consultants) with the cultural competence to address the needs of this community, which are incredibly diverse,” Lake said. “That’s one of the insights that I have to keep bringing to the table. You don’t want to just check off a box that you put a same sex couple in an ad. You really need to go in deeper than that and understand that this community is incredibly diverse.”
During Pride Month this year, for example, Lake said the focus will be on more employee-focused events and education than the consumer-facing ones in past years.
“We’ve traditionally participated in more than 60 pride events around the country every year,” Lake said. “With COVID and with all of the cancellations of pride events, we’ve really had to figure out how we can still have a presence in the community, how we can still provide our team members the ability to feel connected, both with the LGBTQ communities, but also with each other. This is a very important time of year for our LGBTQ team members. So looking for ways to connect them throughout the month of June has been our focus this year.”
At RE/MAX, its diversity program focuses on education of its agents via training videos, partnerships with local chapters of NAGLREP, and inclusion and fair housing sessions at its annual convention, said Mike Reagan, a senior vice president who leads the diversity program internationally.
“The first thing we encourage agents and offices to share and get involved with is attend chapter events and really look around the room. These are your peers that are working to learn how to better serve the community,” Reagan said. “One thing about REMAX, for all of our 47 years, is we’re not the type of company to send a check and say we want to sponsor something, put a balloon on it.”
Further bolstering LGBT homeownership depends on more defined federal regulations, covered by the Equality Act, said lenders, real estate professionals and researchers alike.
One digital-first lender, Better.com, said 55% of the mortgages it made to LGBTQ married couples in the last year went to borrowers in the 25 states without legal protections. The company said that by digitizing home financing, it is helping to make the American dream a reality for communities that have faced discrimination during the home-buying process.
Housing industry professionals also said continued training is needed.
“If you’re a national lender, do you have visibility in the local community? Are you involved with groups like NAGLREP that escalate your presence and visualize and demonstrate your support in the community?” RE/MAX’s Reagan asked. “But you have to back that up with internal education, training that loan officers understand the guidelines that may be in place in their particular market. Do you present a welcoming trusted environment that same-sex couples will feel very welcome to go in and have that conversation? That’s a big step in that initial conversation.”