Small Loans, Big Barriers: How Small-Dollar Mortgages Impact the Racial Homeownership Gap in the United States

The vast majority of homebuyers—and 97 percent of first-time buyers—rely on a mortgage loan to afford homeownership. Yet, mortgages for small-dollar homes, valued at $150,000 or less, have dropped by nearly 70 percent between 2004 and 2021. This decline locks millions out of homeownership, particularly low- and moderate-income households, often in communities of color.

To better understand the consequences of this mortgage financing gap on the racial homeownership gap, the U.S. Department of Housing and Urban Development supported New America’s Future of Land and Housing program and Craig J. Richardson (CJR) Economic Consulting, LLC to conduct two complementary analyses: a quantitative analysis examining how declining small-dollar mortgage lending over two decades has impacted the Black homeownership rate relative to the white homeownership rate nationwide, and a solutions landscape for expanding small-dollar homeownership, organized around financing, housing quality, and supply barriers.

The report also includes case studies of organizations across the country tackling these challenges through innovative programs, financial products, and partnerships, showcasing how solutions can be put into action. We’ve highlighted a few below.

Editor’s note: The report above was previously submitted to the U.S. Department of Housing and Urban Development Office of Policy Development and Research. The views expressed in this report are solely those of the authors and do not necessarily reflect the views of the U.S. Government or New America, its staff, fellows, funders, or board of directors.