Immigrants will soon be the primary driver of new housing demand. That is not news—demographers have long predicted that the country is on track to see foreign-born households outstrip all other types of homebuyers by 2040, less than two decades from now. With more and more immigrant families moving outside of traditional “gateway regions” like Florida and California, and settling in places like North Carolina and Texas, understanding the immigrant homebuyer (and seller) is vital for anyone building a real estate business for the future.
In a new working paper titled “Immigrants’ Access to Homeownership in the United States,” researchers at Harvard’s Joint Center for Housing Studies (JCHS) attempt to parse out the pathways, pitfalls and aspirations of this diverse and critical population, dispelling myths while offering a new perspective on recent research.
“While immigrant households face barriers in becoming homeowners, immigrant communities have also developed innovative means to overcome these challenges,” write JCHS researchers Sharon Cornelissen and Livesey Pack.
They note that right now, immigrant buyers still rely on agents and brokers. But that could be changing, as they cite other recent research showing that many immigrant families are stereotyped or excluded by organized real estate. That is likely to either push these buyers toward people who they trust (often an agent who shares their linguistic or cultural background) or toward a different kind of home-search process altogether.
“The digitalization of the housing search, such as through the use of online platforms, may have mitigated this potential for neighborhood steering, information withholding and other types of discrimination, by decreasing buyers’ dependence on housing brokers,” they write.
But there are many opportunities for real estate professionals to instead serve and gain the trust of immigrant communities. Pack and Cornelissen point out that foreign-born families are even more likely to rely on recommendations from members of their community. And they additionally found homeownership rates are positively associated with the strength of these close-knit networks, where communities pool resources and knowledge.
“Birth networks can provide information, translation services and financial resources to support newly arrived immigrants. A long-established co-ethnic population, moreover, may mean better formal institutional support for homebuying, such as through co-ethnic real estate professionals, specialized financial institutions and a clustering of supportive non-profits,” they write.
Everything from intergenerational wealth to basic information on the mortgage-financing process flows through these informal networks, and the JCHS researchers say that immigrant families have long practiced the multi-generational housing structure that is steadily growing in popularity across the country.
Especially in the Northeast, small multi-family homes are often analogous to a starter home, with immigrant families sharing two-to-four-unit multifamily structures as they build wealth.
“By leveraging shared resources and living together, immigrants’ housing models offer innovative ways of cohabiting, aging in place near family, and building wealth despite financial constraints,” Pack and Cornelissen write.
Understanding these markets and preferences will be of huge importance for real estate professionals going forward, as this type of path to homeownership becomes more and more common.
Barriers and breakdowns
Immigrant families looking to buy (or sell) a home rely on a different set of skills and resources, and require a whole different set of supports to succeed. For instance, immigration status, including temporary authorization, DACA, work visas and asylum applications all affect what type of federal home-buying credits or financing an immigrant family can apply for.
“The insecurity experienced by immigrants with temporary legal status may prohibit them from becoming homeowners as 30-year mortgages conflict with the uncertain horizons of legal status renewals,” Pack and Cornelissen write. “Given the ways that legal status can accelerate or hinder economic mobility, immigration reform could effectively double as housing policy.”
In the short term, these families often are unsure of even the basic elements that go into buying (or selling) a home. That includes how to build history or boost credit scores. Most immigrant families have very little credit to begin with, and foreign-born communities often misunderstand and propagate misinformation around how to build or repair credit.
The entire financing process is much more difficult for immigrant families as well. A potential negative consequence of living in self-segregated communities, according to Pack and Cornelissen, is a lack of integration into and knowledge of the kind of financial process that can lead to homeownership, with many people in these neighborhoods or areas relying on “non-bank financial products.” Having a relationship with a bank or broker that shares language and ethnic characteristics can make a big difference.
“Research on a subprime lender in the early 2000s found that Hispanic borrowers living in areas with limited English fluency paid more for their mortgage if they used a non Hispanic white broker than if they used a Hispanic broker,” the researchers write.
But the researchers also note that immigrant families are often taken advantage of, including by people who share their backgrounds and language, and continue to face significant discrimination across the entire homeownership journey—during appraisals, the mortgage lending process and through racial steering. While Pack and Cornelissen found that disparities in mortgage denial rates between white people and people of color may be shrinking, many of these discriminatory environments persist.
“We recommend stronger monitoring and enforcement of the Fair Housing Act, including around the protected class of “national origin,” and related classes such as birthplace, ethnicity, ancestry, culture, and language,” they write. “Better data can help us understand and document where and to whom national origin discrimination happens.”
And data will remain key. Pack and Cornelissen emphasize that much of the research on immigrant homeownership and home-buying is dated, and that immigrant communities are rapidly evolving. Policy will also play a huge role in either smoothing or obstructing the path of homeownership for the next generation of foreign-born buyers, and potentially shaping whole markets as these buyers eventually transition to become sellers as well.
“For many immigrants legal status remains an obstacle to employment opportunities and to stable long-term housing, including homeownership,” the researchers say. “Prolonged waiting times for visa processing and green cards, moreover, can draw out periods of uncertainty for immigrants, a legal precarity that conflicts with the 30-year timelines and rootedness of mortgaged homes.”
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