Breaking the ‘Black Tax’: Why Black homeowners pay higher fees and rates, and how a new real estate club is fighting back
OPINION: The Wealth Wednesday’s Real Estate Club started by Power 105.1’s Angela Yee, financial expert Stacey Tisdale, and real estate investor Sayam Ibrahim, is taking aim at the “Black Tax” – the higher rates and fees charged to people of color for real estate. Contributing writer Logan Gamble explains how “Black Tax” impacts us.
Imagine a young couple, eager to start a family, finally saving enough for a down payment.
They find their dream home, only to be hit with a higher interest rate than their white counterparts—simply because of the color of their skin.
This so-called “Black tax” isn’t a literal tax, but rather the cumulative effect of discriminatory practices that create significant financial disadvantages for Black and Hispanic individuals seeking to build wealth through real estate.
And, it snakes its way throughout the entire banking and homebuying process. These are some of the ways which the “Black Tax” manifests in the process:
Higher Mortgage Rates
Black and Hispanic borrowers often face higher interest rates than white borrowers with similar credit profiles. This isn’t simply a matter of individual creditworthiness.
Historical discrimination in lending, limited access to credit-building opportunities, and biases embedded within credit scoring models contribute to this disparity.
Even when controlling for income and debt-to-income ratio, studies have shown that Black borrowers are still more likely to be offered subprime loans with higher interest rates.
Over a 30-year mortgage, this seemingly small difference can translate to tens of thousands of dollars in extra interest paid, significantly hindering wealth accumulation.
Higher Fees
The upfront costs of buying a home—origination fees, appraisal fees, and closing costs—can also disproportionately impact borrowers of color.
Origination fees, charged by lenders for processing the loan, can be higher for Black and Hispanic borrowers.
While appraisal fees themselves might be similar, the potential for appraisal bias (discussed below) can indirectly lead to higher costs if multiple appraisals are needed to challenge a low valuation.
Closing costs, including title insurance and escrow fees, can also vary based on location and lending practices, further compounding the financial burden.
Higher Insurance Premiums
Homeowners in predominantly Black neighborhoods often face inflated homeowners insurance premiums.
This is a direct consequence of historical redlining, a discriminatory practice where lenders and insurers literally drew red lines around predominantly Black neighborhoods on maps, marking them as “high-risk” and denying them services or charging exorbitant rates.
While redlining is now illegal, its legacy persists in outdated risk assessment models that continue to associate predominantly Black neighborhoods with higher risk, even when data doesn’t support this perception.
Lower Appraisals
Perhaps one of the most insidious aspects of the “Black tax” is appraisal bias.
Studies have consistently shown that homes in predominantly Black neighborhoods are often appraised at lower values than comparable homes in white neighborhoods.
This undervaluation directly limits the amount of equity homeowners can build, making it harder to access home equity loans for things like education or starting a business, refinance for better rates, or sell their homes for a fair price.
This perpetuates the wealth gap and makes it more difficult for Black families to build generational wealth.
This isn’t just about statistics; it’s about real people, real families, and real dreams being deferred.
But while we continue to fight for systemic change, we believe in empowering ourselves now.
Building Wealth Together: The Power of Collective Action
The Wealth Wednesdays Real Estate Club is a community built on the belief that collective action can overcome systemic barriers. We’re not just a club; we’re a movement. Founded by Radio Hall of Famer, host of Way Up With Angela Yee, and co-host of the Wealth Wednesdays financial empowerment platform, along with award-winning financial journalist, Stacey Tisdale, and real estate educator/investor, Sayam Ibrahim, the club has a goal of empowering members to collectively acquire $100 million dollars in real estate by the end of 2025.
Through weekly meetings and courses, the club holds sessions about everything from navigating the homebuying process to identifying investment opportunities. However, the group’s largest goal is to connect members with a supportive community of like-minded individuals, sharing knowledge, resources, and encouragement.
The “Black tax” is a real obstacle, but it doesn’t have to define your financial future.
By joining forces and leveraging collective knowledge and resources, we can overcome these challenges and build the wealth we deserve.
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