Expert Roundup: Overcoming LGBTQ+ Homeownership Challenges
A growing number of LGBTQ+ borrowers are emerging in the housing market. As more U.S. adults and young people identify as LGBTQ+, what is their attitude toward homeownership, and what specific challenges do they face?
We sat down with John Thorpe, president of the LGBTQ+ Real Estate Alliance, and Angie Wilen, Freddie Mac Single-Family Equitable Housing senior director, to learn more about the specific needs and experiences of LGBTQ+ borrowers.
Q&A with John Thorpe and Angie Wilen
What challenges do future LGBTQ+ homebuyers face?
The home buying process can be daunting for borrowers who feel overwhelmed by the many steps, let alone the tight market conditions we face today. LGBTQ+ people traditionally have even more hurdles to overcome.
Most reports indicate that anywhere from one-to-two in 10 face discrimination based on sexual orientation and gender identity. It is also important to keep in mind that these numbers are based solely on reported incidents, when actual instances of discrimination go unreported. While there is focus on discrimination being a major barrier, the fear of discrimination can be even more acute.
This fear includes the potential for homophobia or transphobia resulting in being denied a property, mistreatment by real estate professionals, what they might face in their next community and neighborhood, and possibly receiving higher mortgage interest rates or being denied a loan because of their LGBTQ+ status. This doesn't mean these things will happen in every instance, but they are very prominent concerns that LGBTQ+ people face.
What is the financial impact of discrimination?
Being bullied or discriminated against as early as high school and college age has implications on how LGBTQ+ people may do in school and their ability to get into college or a post-graduate job. This impacts earning potential, which in turn impacts purchasing power.
A recent LGBTQ+ Real Estate Alliance report on identifying how discrimination impacts LGBTQ+ homeownership highlights that:
- 13% of LGBTQ+ youth who face bullying in high school do not go to college, regardless of their potential.
- 65% of LGBTQ+ students actively face discrimination in college.
- Nearly 40% of LGBTQ+ Real Estate Alliance members believe bullying, discrimination and/or the fear of discrimination as an LGBTQ+ person in high school and/or college impacted their early earning potential.
- Discrimination in the workplace hinders the ability to do well in our careers; 47% of LGBTQ+ employees believe being "out" at work could damage their career.
All of these unfortunate occurrences can impede LGBTQ+ borrower readiness and our ability to generate income leading to the eventual down payment.
Why is education important for this key demographic?
Unfortunately, many LGBTQ+ people do not have family support when they come out. LGBTQ+ youth compose over 70% of all homeless youth in this country today. So many simply don't have a strong support system and therefore do not learn about the steps to financial stability - and, the sad reality is that our public education systems do not teach about mortgage or taxes. This knowledge is acquired through relationships.
The Alliance held a First Time Home Buyers Seminar on June 16th and the response has been incredible. The LGBTQ+ community has rarely been greeted with this type of awareness and support, which is why we also launched a consumer-facing site to allow buyers and sellers the opportunity to learn and engage with our LGBTQ+ real estate members.
Because of the challenges our community faces, it is natural that we want to work with real estate professionals who are LGBTQ+ or allies. Allies are critical and their support means so much to us. That is why more than 10% of our LGBTQ+ Real Estate Alliance members are allies. They engage with us, learn about the community and how they can help while working to eliminate unconscious bias that can occur.
What are the unique homebuying preferences of the LGBTQ+ community?
The LGBTQ+ homeownership rate is much less than the overall U.S. general population, which highlights the need for closing the homeownership gap for this demographic.
According to Freddie Mac’s LGBTQ+ Housing Experience study:
- Overall LGBTQ+ homeownership rate is 49% for participants age 22 to 72, which is much less than the overall U.S. general population homeownership rate of 65%.
- 72% of LGBTQ+ renters indicated a future interest in owning a home. Yet, only 16% of current renters interested in owning a home have the down payment funds available, and half of them question whether it is a good use of funds.
- 33% of LGBTQ+ renters indicated that they are saving and will have the funds within the next three years.
The LGBTQ+ community is also a highly migrant demographic and, as a majority, live in a different general locations compared to where they went to high school. Respondents cited the reasons for this as employment opportunities, wanting a change of environment, and the desire to live in a more LGBTQ+-friendly area.
A common assumption of the LGBTQ+ community is the preference for a city or urban area. Yet the survey indicates a fairly even split between LGBTQ+ respondents living in urban areas, the suburbs and smaller communities.
Another finding is that nearly all of the LGBTQ+ millennial respondents do not currently have children, but a majority either want children in the future or are not sure. This potential for having children can be a major indicator that there will be an increasing number of millennial LGBTQ+ homebuyers in the coming years.
How are current housing trends impacting the Black LGBTQ+ homebuying and homeownership experience?
The Black LGBTQ+ community is a highly educated population (99% having received a high school diploma or GED+ and 51% with 4-year degree) and they’re the children of homeowners (67% said parents/caregivers were homeowners), which are both all well above national trends for Black Americans, according to a recent survey by the Center for Black Equity supported by Freddie Mac.
However, the findings did not translate to an equitable housing experience for Black LGBTQ+ people today. For example:
- 31% have experienced homelessness.
- 33% are currently homeowners, which is lower than 65% of the general population, 42% of all Black Americans and 49% of LGBTQ+ Americans.
- 55% fear discrimination in homebuying.
- 11%-22% (depending on identity) experienced rental discrimination based on race.
- 16%-32% (depending on identity) experienced employment discrimination based on race.
Looking at both studies, Freddie Mac found that intersectionality across several minority identities plays a role in the experience of home. For example, Black American homeownership rates are low, and when carrying both a Black and LGBTQ identity, homeownership rates drop even further. This is why a push for equitable housing for LGBTQ+ and Black Americans is critical.
A Growing Borrower Segment
Nearly 5% of adults in the U.S. identify as a member of the LGBTQ+ community, according to the UCLA Williams Institute School of Law. This number continues to increase as landmark supreme court cases, such as Bostock v. Clayton, establish long-waited legal protections. Additionally, there is a significant spike in the number of young people who identify as LGBTQ+, as one in six Gen Z adults now identify as LGBTQ+, according to the Washington Post.
Since serving LGBTQ+ future borrowers is increasingly important, lenders and housing professionals can help address some of the challenges facing them through:
- Financial education and credit counseling to help borrowers be in a better position to qualify for mortgage.
- Down payment assistance programs to help borrowers address rising home prices and impediments to saving.
- Refinance support to help borrowers save money and better understand actions they can take when considering refinance.
As a growing number of LGBTQ+ borrowers emerge into the market, it is crucial that the housing industry helps equip them with the tools necessary to begin building equity in the housing market.