The path to homeownership in minority communities can be long and bumpy, but those creatively finding their way are to be respected all the same.

Most if not all of us have suffered through an episode of a reality TV show where a teenager’s very wealthy parents hand their son or daughter the keys to a brand new, $90,000 Range Rover on their 16th birthday. The lucky teenager runs out the mansion’s front door to find a sparkly, luxury SUV waiting for them in the circular driveway, giant red bow and all.

Economic trends generally suggest that someday, that same lucky teenager will be handed the keys to that mansion looming in the background or at the very least, will be the beneficiary of the equity grown over time in that property to seed the purchase of their own first home. While this example falls on the extreme side, it is not uncommon for homebuyers today to be gifted large down payments from parents and grandparents to assist them in buying their first home. This is not, however, the traditional path to homeownership for many minority communities in the US.

Barriers to closing the homeownership gap in minority communities

According to the National Association of Realtors, while homeownership overall in the US has increased to a little over 65% in the last few years, the rate by which Black Americans lag in homeownership compared to White Americans is approximately 29 percentage points. Although Asian and Hispanic Americans have experienced the biggest homeownership rate gains over the last decade, these households still lag some 10 to 20 percentage points behind White Americans. “More Americans Own Their Own Homes, but Black-White Homeownership Rate Gap is Biggest in a Decade, NAR Report Finds.” March 2, 2023.

According to the U.S. Department of Housing and Urban Development (HUD), there are multiple barriers to minority homeownership, many of which are systemic and long-standing. The most pervasive barriers continue to be:

• lack of capital for the down payment and closing costs;
• lack of access to credit and poor credit history;
• lack of understanding and information about the homebuying process, especially for families for whom English is a second language; and
• continued housing discrimination.

For many minority communities, creativity, cooperation, and pooling of resources has been key in helping to overcome these barriers. However, these efforts are often misunderstood or misinterpreted altogether in the context of disputes that arise related to various creative arrangements people make with one another to purchase real estate. All too often, attorneys involved in these cases overlook or misunderstand the barriers and the role they play in the formation of various agreements among people, leading to hostile disputes, misunderstandings and erroneous assumptions about the parties involved.

Recognizing and respecting creative ways property ownership is achieved

As a real estate mediator, I have had the privilege of witnessing the creative ways that people who are not afforded privilege and access still manage to purchase real estate. Sadly, I have also seen the ways in which these creative strategies have been used as weapons against them when an agreement to purchase or operate real estate is not properly or clearly documented. To respectfully resolve disputes related to property, it is important to recognize and respect the different paths people have taken.

Because lack of cash, credit and information are prevalent issues, many communities have had to band together and leverage numerous people to achieve property ownership. Common strategies include:

• Pooling the financial resources of family or community members to buy property and then leveraging equity to buy more.
• Leveraging the good credit of community or family members to buy properties for those who do not have established credit.
• Group purchases of commercial properties. Instead of running one business out of the property, the purchasers split the property up such that a number of complementary businesses serving a particular demographic can run out of one location, drawing a host of people to the location and reducing the risk of running one business that fails from the location.
• Leveraging sweat equity to enter into a partnership to buy real estate because potential buyers have no cash to contribute but have skills to further the endeavor.

These are all good ways to overcome barriers. However, problems arise in these contexts when the parties do not have the resources or understanding of the importance of having their agreements legally documented. Generally speaking, people trust other people in their own community and thus, partnerships to purchase property may be formed on a mere handshake. When disputes arise, parties to these agreements who are not on title face an uphill battle to prove their beneficial or constructive interests. Attorneys representing the titleholder often argue that the constructive or beneficial owner is no more than a tenant, lender or investor. When attorneys say, “…everyone knows that title governs ownership,” this assumes that everyone has the same resources and knowledge when title to property is taken, which is far from the fact of the matter.

How legal practitioners can support minority communities in their quest

As legal practitioners, we should approach cases where creative approaches to purchase property have been employed with curiosity and less so with suspicion. We should ask questions and understand the role that culture plays in forming agreements. We should seek to educate and encourage clients engaging in creative methods of purchasing property to document their transaction before a dispute arises.

We all need to be respectful of the fact that many communities do not have access or education to resources to purchase property in traditional ways. Viewing all clients and parties as the same, with the same cultural backgrounds, understandings, access and resources, is a mistake and at the very least, terribly presumptive. In the words of the blues musician Keb Mo’, “…there’s more than one way home.”

Deb Graceffa mediates civil and real estate disputes across a wide spectrum of parties and issues, all across the state of California. Prior to practicing law, she was a residential and commercial real estate broker.