Minnesota has a long history of being in the top tier of states in quality of life measures — and homeownership is among them.
Indeed, 72.5 percent of the state's residents own their own homes — well above the national average of 65 percent.
But when it comes to making sure all people have a shot at the benefits of owning a home, the state has the worst track record of any state, according to a recent study by the Minnesota Home Ownership Center.
"In Minnesota we have the highest rate of homeownership among white households in the country, and the lowest rate of homeownership in households of color," said Julie Gugin, the center's executive director. "There's upwards of a 39 percent gap in the rates of homeownership."
Before the worst of the foreclosure crisis, that gap was below 33 percent.
That gulf is particularly evident in different areas of Minneapolis. In the 55419 zip code of largely white southwest Minneapolis, 78 percent of residents own their homes. But the 55411 zip code of north Minneapolis, which has a predominantly minority population, has a home ownership rate of just 44 percent.
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The disparity is even more glaring when housing values in the two areas are taken into consideration. In the southwestern corner of the city the median sale price is six percent higher than in 2006 — a $19,000 increase. But in north Minneapolis, the median price is 85 percent below what it was eight years ago — a $69,000 decrease.
Such measures are telling because despite the recent housing bust, purchasing a home typically is a good investment. Homeowners consistently do better in many quality of life measures from health to employment, Gugin said.
The center's study cites research showing that low-income and homebuyers of color paid slightly higher interest rates, on average, than higher-income and white buyers. But the Minnesota Homeownership Center's researchers found several other factors fueling the homeownership gap, including lack of a family history of homeownership among minority families and less familiarity with financial management practices.
University of Georgia researcher Kim Skobba, who contributed to the report, said the gap in homeownership rates is rooted in racial disparities in health, income and education.
"All the things that contribute to the likelihood of being a homeowner," she said, "when we compare white and households of color, there's a gap there, an effect of cumulative disparity."
One reason the disparity of home ownership is so stark in the state is that white Minnesotans are better off than whites nationwide. But Allison Liuzzi, a research scientist for the Minnesota Compass project at Wilder Research, said that's not the whole story.
"When we look at rates of homeownership among households headed by persons of color, we actually have lower homeownership rates in the Twin Cities than nationally," she said. "We have lower homeownership rates in Minnesota than nationally. So just focusing in on a story about households of color, we see that we're not doing well relative to other households of color nationally."
Liuzzi says racial disparities in homeownership can be found across the nation, but the gaps are much narrower in communities such as San Antonio, Texas and San Bernadino, Calif. — cities that have much larger non-white populations. She said it's unclear why those communities have lower disparities.
Still, Liuzzi said ignoring the problem is not an option because Minnesota's population continues to grow more diverse every year.
"If we don't address these gaps now, they're only going to widen in the future, and that affects all of us," she said.
Gugin, of the Minnesota Homeownership Center, said boosting the number of owner-occupied homes in areas hit hard by the foreclosure crisis is key to stabilizing those communities. She said raising homeownership rates in minority neighborhoods could help narrow the gaps in other quality of life measures.
In the wake of the foreclosure crisis, Gugin said, a major part of boosting homeownership rates is education — helping homebuyers avoid the subprime loan scams, adjustable rate mortgages and other pitfalls that sparked the crisis in the first place.
"There are numerous studies and numerous examples of how homeowners fare better in their long-term employment, in educational achievement in health, in community engagement," she said.