Homeownership Month is for Everyone

LGBTQ+ home buyers face special challenges

June is National Homeownership Month. As an organization dedicated to increasing homeownership nationwide, we’re proud to participate every year.

And speaking of pride, June is also LGBTQ Pride Month. For over 50 years in the United States, June has been a time to commemorate the Stonewall Uprising of 1968 and, as the Library of Congress states, “to recognize the impact that lesbian, gay, bisexual and transgender individuals have had on history locally, nationally, and internationally.”

For us as a nonprofit organization dedicated to promoting homeownership, it’s important to understand the special challenges different communities face when it comes to attaining homeownership.

According to a recent study by the National Association of Gay and Lesbian Real Estate Professionals, LGBT homeownership rates are 16% below the national average. Iowa State University reported that when it comes to obtaining mortgages, same-sex couples are 3 to 8 percent less likely to be approved, and pay slightly more in interest and fees.

Unfortunately, LGBTQ homebuyers face special challenges that need to be considered in addition to all the typical concerns like saving for a down payment, finding affordable homes in the right areas with good access to schools, low crime rates, and the like.

Discrimination

Fear of discrimination is a common concern for LGBTQ homebuyers. Thankfully discrimination is becoming less common over time, but the Iowa State University report linked above shows that discrimination in mortgage lending is real and still happens, even if it’s getting increasingly rare.

Besides lending, discrimination in the homebuying market is harder to measure and prove. There is no federal law protecting LGBTQ homebuyers from discrimination, but 21 states do have anti-discrimination laws on the books. Last year, HUD was directed to enforce the Fair Housing Act of 1968 to include sexual orientation and gender identity, but this was an executive order, not a permanent law.

In 2020, the Supreme Court ruled that the Civil Rights Act of 1964 applies to sexual orientation and gender identity, which led some states to expand their anti-discrimination protections.

HUD’s offers some more information about housing discrimination against LGBTQ persons here, and anyone who wishes to file a discrimination complaint can do so online here.

Some examples of prohibited discrimination on the basis of sexual orientation or gender identity:

  • Real estate agents refusing to represent you
  • Sellers saying their house is off the market to avoid selling to you
  • You are prevented from getting financing or it’s made more difficult for you than a traditional couple
  • Lenders don’t clearly disclose mortgage rates to you up front
  • An agent only shows you homes in an area known to have many LGBTQ residents

Financial Concerns

Like anyone, LGBTQ buyers express concern about home affordability, and saving up a down payment for a mortgage is no small task for any buyer.

For workers who face wage gaps, affording a home is that much tougher. It’s difficult to calculate what the true pay gap is, but the Human Rights Campaign estimates that LGBTQ+ workers’ median earnings are 90% of the typical US workers’ wages. That means as a baseline, LGBTQ+ homebuyers have 10% less to work with financially when saving for a home.

Housing Costs

Another financial concern is housing costs. When comparing home prices in areas where the LGBT community is legally protected, Zillow found that houses cost 63% more than in areas with no explicit legal protections for LGBT buyers.

It’s natural for LGBTQ+ home shoppers to want to live in an area where their legal rights are guaranteed, and they feel welcome and safe. But according to Zillow, those areas are more expensive to live in and those property values are higher. Going back to the Iowa State University study linked earlier, fees and interest rates are slightly higher for LGBTQ+ borrowers as well, widening that gap.

Homeownership is for everyone, and areas that promote equal access for all do a better job of building wealth for homeowners. Housing diversity builds great neighborhoods by supporting an array of viewpoints, cultures, and fostering social acceptance.

Challenges of Ownership

Once a homebuyer has achieved homeownership, new responsibilities and challenges await. For LGBTQ+ homeowners, it’s important to know when your joint ownership is fully protected by law.

Any married couple, regardless of gender, should have the same protections, but gay marriage has only been legally protected for less than a decade now. Some LGBTQ+ couples may have gotten together before the national laws changed, and their joint ownership may not be fully protected.

As we discussed in our Guide to Buying a Home Together Before Marriage, there are some special ways couples who are not married can legally co-own property:

  • Joint tenancy with “right of survivorship”
    Two or more people can jointly own property with this arrangement; if one partner dies, the rights go to the surviving partner. In the event of a split, however, things are more complicated. One partner can’t just sell to anyone; their share can only be sold to the other partner, or the couple has to sell the property jointly.
  • Tenancy in Common
    Any number of “Tenants in Common” may share the title to a property. It needn’t be equally divided, either. If one tenant dies, their share of the property goes to their heirs—so LGBTQ+ couples who are not legally married might see jointly held property going to their partners’ relatives if they don’t take the time to draft a formal will.
  • Marriage
    Being legally married provides the best legal protections for couples who own a home together. There are tax advantages, and property is better protected from creditors and from family members who may not approve of their relative’s same-sex relationship. LGBTQ+ couples who do not marry but choose to buy a home together will have some extra expenses and paperwork to deal with, but this extra expense is worth it to protect each person’s shared homeownership.

Homeownership for our Clients

For our clients on a Debt Management Plan, we have a great opportunity to work toward homeownership. The DMP payment our clients make every month stays the same, even as individual debts are paid off. When all debts are repaid, that DMP payment amount is available to be saved every month. This will help build up a down payment for a home much more quickly.

On top of building a down payment by saving what was going toward their DMP, our clients and graduates improve their debt-to-income ratios, which improves their credit and helps make their mortgage application more likely to be approved.

Homeownership for Everyone

Every aspiring homeowner has a lengthy journey to make, but the rewards are worth the effort. LGBTQ+ homebuyers have extra considerations on top of the challenges everyone faces.

A great way to make the homebuying and mortgage borrowing process easier is to start with pre-purchase coaching. A nonprofit counselor can help you avoid the top mistakes homebuyers make, and take the right steps to homeownership, in the right order.

Our top recommendation is to get first-time homebuyer education as early as possible in the home buying process. That will ensure you know what challenges you face ahead of time, so there will be fewer surprises and greater likelihood of success.

We’re happy to help anyone who wants to achieve homeownership, whether it’s during National Homeownership Month or any other time of year. We think being a homeowner is a point of pride for anyone looking to build wealth and ensure their financial freedom. It’s a happy coincidence that LGBTQ Pride Month coincides with this event, reminding us that there is always work to do to ensure everyone has the same chance to enjoy the benefits of owning a home.

Speak to our certified Financial Coaches to review all of your options and discuss best strategies for getting out of debt.Speak to our certified Financial Coaches to review all of your options and discuss best strategies for getting out of debt.

About The Author

Melinda Opperman is an exceptional educator who lives and breathes the creation and implementation of innovative ways to motivate and educate community members and students about financial literacy. Melinda joined credit.org in 2003 and has over two decades of experience in the industry.