A new study suggests the addition of a language variable on the loan application is a move in the right direction
While many factors contribute to the disparity in homeownership rates between Hispanic (46%) and black (41%) households versus non-Hispanic white (71%) households, researchers at the Urban Institute said they have found clear evidence that English proficiency has a significant impact on homeownership.
The researchers analyzed zip-code-level data from the Urban Institute and Sloan Foundation’s Administrative Data Research Facility and found that neighborhoods with low levels of limited English proficient (LEP) residents had considerably lower homeownership rates compared with those with higher levels of LEP residents.
The study revealed a 74% median homeownership rate for neighborhoods with the lowest concentration of LEP residents in 2016. In comparison, neighborhoods with the highest LEP concentration had only a 64% median rate, or a 10-percentage-point difference.
The Researchers said English proficiency continues to have a significant impact on homeownership rates despite controlling for income, age, and race, which are other factors that influence homeownership. In this case, neighborhoods with the highest concentrations of LEP residents have homeownership rates five percentage points lower than rates in neighborhoods with the median concentration of LEP residents.
The researchers said their findings suggest that the addition of a language variable on the loan application is a move in the right direction. The Federal Housing Finance Agency in October announced its decision to add a preferred language question to the redesigned Uniform Residential Loan Application.
The researchers recommended that further research be done to determine how the housing finance industry can better support the LEP population and which institutions are best able to do so.
