Despite assistance, LGBTQ first-time homebuyers lag behind
New reports continue to find that first-time LGBTQ homebuyers lag behind their straight counterparts when it comes to buying their first home. Some real estate experts fear that gap might persist due to the impact of anti-LGBTQ legislation and queer people moving to safer, but more expensive states.
However, data from the report and other organizations suggest the gap is more nuanced due to factors, such as where discrimination appears, inequities, geographical settings, and behaviors.
According to the LGBTQ+ Real Estate Alliance’s latest report, “The LGBTQ+ Journey to Homeownership,” published May 10, more than 90% of The Alliance’s straight respondents purchased their first home by 33 years of age compared to only 75.9% of LGBTQ+ people.
LGBTQ home buyers’ top three reasons to buy were committed relationships, children, and good schools.
Gallup reported the number same-sex marriages are up 70% since 2015.
The report found that “formalized” relationships, engagements, and marriages are a major driver of LGBTQ+ homeownership, according to the report. Lesbians (58.4%) were more likely than gay men (34.3%) to report a committed relationship (domestic partnered, engagement, or marriage) as one of the top three reasons for the purchase of their first home. Straight first-time home buyers (53.8%) cited “long-term financial investment” as the trigger for buying their first home and a committed relationship (domestic partnered, engagement, or marriage) as a second trigger.
A growing family triggered LGBTQ home buyers’ second home purchase; for straight families it was the third home buying trigger. UCLA’s Williams Institute reports that 29.0% of LGBTQ people have children and that 21.9% of married same-sex couples are raising kids.
“We are only eight years into the legalization of [nationwide] same-sex marriage and are now beginning to see signs that more LGBTQ+ people are becoming parents,” said The Alliance founder and CEO Ryan Weyandt said in a written statement. “This is leading to an emphasis on their children’s well-being and education when choosing where to live.”
“LGBTQ+ people are people. We value so much of the same things as everyone else,” Erin Morrison, The Alliance’s 2023 national president, said in a written statement to Gay City News on May 15. “We want access to good jobs, affordability, to be near our friends and family, have loving relationships, and live in welcoming communities. We deserve respect, dignity, and the unhindered ability to be us.”
Getting a piece of the American pie
Data released by Realtor.com in April suggests LGBTQ and Black, brown, indigenous, and people of color’s (BIPOC) financial status and choices might be a factor if not compounding the situation for first-time LGBTQ and BIPOC homebuyers. According to the April 5 news release, the data found that LGBTQ and BIPOC homebuyers are more likely to put smaller down payments on a home, with nearly two-thirds (65%) putting down 20% or less of a home’s purchase price when buying compared to about half (53%) of white, non-LGBTQ buyers. LGBTQ and BIPOC buyers were also nearly 9% more likely to pay over a home’s asking price to get their offer accepted – 86% paid over asking compared to 79% of white and non-LGBTQ+ individuals.
Realtor.com’s data revealed that LGBTQ and BIPOC homebuyers are paying more due to the actions they are taking. They are compounding their housing price by having smaller down payments on top of bidding above the asking home price which increases their mortgage payment equaling putting more of their income toward their housing than other home buyers and they are not taking advantage of programs set up to help with down payments for first homes and other assistance.
The organization’s data also showed that 5.37 million Americans qualify for down payment assistance, according to the Urban Institute, but the National Association of Realtors shows potential homebuyers aren’t tapping into the resource. Only 3-4% of recent homebuyers have taken advantage of these programs when buying a home.
President Joe Biden’s administration is working on making buying a home more accessible and affordable for people, especially those in disadvantaged communities. In February, the Department of Housing and Urban Development (HUD), through the Federal Housing Administration (FHA), announced a 30 basis point reduction to the annual mortgage insurance premiums (annual MIP) charged to homebuyers who obtain an FHA-insured mortgage in February 22 news release from the Biden administration. The premium will be reduced from 0.85% to 0.55% for most homebuyers seeking an FHA-insured mortgage, which could mean an estimated savings of $678 million for American families in aggregate by the end of 2023 alone. The reduction will benefit an estimated 850,000 borrowers over the coming year, saving these families an average of $800 annually.
The FHA also revised its underwriting policies to allow lenders to use renters’ positive rental history in evaluating applicants’ creditworthiness for an FHA-insured mortgage, making it easier for first-time homebuyers to qualify. HUD changed the way student loan debt is evaluated under FHA mortgage underwriting so more borrowers with student loan debt are eligible for FHA-insured mortgages.
The rules could help some LGBTQ home buyers, especially those who are leaving states that are passing harsh anti-LGBTQ laws.
“With the rising costs of homeownership taking a greater toll on budgets, resources like down payment assistance can help reduce the overall financial burden of buying a home and make it more accessible to a wider range of individuals,” Laura Eddy, Realtor.com’s vice president of Research and Insights, said in a written statement.
Discrimination and anti-LGBTQ laws vs. acceptance
Discrimination plays a role in LGBTQ people’s home-buying process, but it’s showing up in unexpected places. The Alliance report found that agents, in many cases, are not the discriminatory factor. The report found that 19.8% of members cite agents as the leading culprit, down from 20.7% a year ago. Members believe the legal forms needing signatures that do not adequately represent the life experiences of potential homebuyers are now the most discriminatory, with 20.3% of members citing them. Discriminatory sellers followed at 20.1%.
The Alliance’s findings somewhat echo Realtor.com’s data, especially for low-income homebuyers, that found LGBTQ and BIPOC homebuyers face challenges during the mortgage process and are 1.7 times more likely to have been denied mortgages two or more times.
Some real estate professionals reported they are already seeing the destabilizing effects of anti-LGBTQ legislation across the United States and in Congress on consumer confidence and homeowner behavior.
“Sadly, the current climate makes safety the top concern for LGBTQ+ homebuyers right now. Until we can provide that for our community, I fear our gap may remain,” Morrison said.
Morrison, a realtor in Texas, added that The Alliance is watching developments as families flee states proposing and passing anti-LGBTQ legislation into law.
“What is concerning is that the states that offer the most protections for our community are also the most expensive, whereas the more affordable states are the states people are fleeing,” Morrison added. “Our concern is that this will impact LGBTQ+ home buying, as many do not have the income or resources to purchase in the more expensive markets.”
At the same time, some real estate professionals in The Alliance report are optimistic that marriage equality, more same-sex families, greater acceptance of LGBTQ people, and Gen Z will continue to close the homeownership gap between LGBTQ and straight first-time buyers.
“As we continue to see more and more acceptance of the LGBTQ+ community across the country, I believe these numbers will increase,” Morrison, a 44-year-old pansexual woman, said.
Morrison, a founding member of The Alliance, noted more than 70% of the US population is in support of same-sex marriage.
“I would venture to bet that an end to discrimination in housing, whether through state legislation or via the Equality Act (H.R. 5), would cause these figures to jump dramatically,” she added.
The Equality Act would prohibit discrimination based on sex, sexual orientation, and gender identity in public accommodations and facilities, education, federal funding, employment, housing, credit, and the jury system.
The LGBTQ+ Real Estate Alliance is a professional organization for queer and ally real estate and housing industry professionals. The $1.2 million Minnesota-based organization, launched in June 2020, supports more than 3,000 members to enhance their professional lives and provide consumers with resources to assist in buying, selling, and enjoying their home, according to the organization’s website.
The third report, “The LGBTQ+ Journey to Homeownership,” from the organization examining LGBTQ homebuyers’ journey used 30 different sources, including responses from nearly 400 members in its annual member survey.
Realtor.com is an open real estate marketplace empowering real estate professionals and home buyers and sellers by helping to make the right connections and providing expert insights and guidance. Realtor.com conducted a proprietary online quantitative survey in January 2023 among 7,514 consumers who visited the website or real estate app within the last 12 months, who were primary or shared decision-makers of living situations, and who had no critical industry affiliations.
Reduction of FHA Annual Mortgage Insurance Premium Rates mortgage letter.
Realtor.com’s fair housing tool provided by Down Payment Resource inputs information about more than 2,000 programs to help match buyers with assistance programs to meet their individual home buying needs at consumers’ fingertips.
Realtor.com also donated to and raised funds for Homeownership Council of America’s Equity Down Payment Assistance Fund. The fund helps make owning a home more accessible for BIPOC and low- to moderate-income homebuyers.