Figure 1 Affordability Problems Surged During the Housing Boom

With the projected growth in minority households likely to be the greatest source of housing demand in the future, understanding the potential long-term effects of the housing downturn on minority house-holds is critical.

Minorities have been especially hard hit by the current downturn. One significant factor is that minorities are more likely to have low household incomes, and low-income households have fared poorly. Indeed, while one in five white households is low income, the rate for minority households is one in three. Low-income households are much more likely to face severe cost burdens. At last count in 2007, low-income households comprised over 13 million, or nearly three quarters, of the 17.9 million households paying more than half their incomes on housing. Additionally, low-income households accounted for half of the surge of over four million severely burdened households that occurred during the housing boom from 2001 to 2007 (Figure 1).

Even among low-income households, however, low-income minorities are more highly burdened than whites. While rates of severe burden for low-income whites rose from 39 to 43 percent from 2001 to 2007, minority rates increased from 50 to 54 percent. During this time, the number of severely burdened low-income white households grew by 857,000 (13 percent) but the number of severely burdened low-income minority households increased by fully 1.05 million (23 percent).

Working at low-wage or part-time jobs is seldom enough to put an end to these severe affordability problems. In fact, employed workers head up roughly half of all severely cost-burdened households..

But minorities have also been hit especially hard by unemployment during the current downturn, increasing their housing affordability pressures. Unfortunately, the 5.8 million job losses resulting from the recession so far have also been concentrated among minorities. Going into the recession, unemployment rates for minorities were already higher than for whites. Whereas whites entered the recession with an unemployment rate of 4.4 percent, rates were 8.9 percent for blacks and 6.2 percent for Hispanics.

Figure 2 Even Controlling for Income, Foreclosures Are Markedly Higher in Minority Neighborhoods

With higher shares of younger householders more likely to be entry-level employees with little job security, minorities have been more susceptible to job loss and have felt a disproportionate share of the economic downturn. Now in the grip of the recession, as of April 2009, unemployment rates had risen to 15 percent for blacks, 11.3 percent for Hispanics, and 8 percent for whites.