The Rental Trap

These Americans could afford a mortgage. But they’re stuck in a cycle of renting.

‘Lack of credit access keeps people in a cycle of paying more in rent than they would pay each month for a mortgage on that same home,’ Zillow economist says

“Areas with higher levels of credit insecurity tend to have higher populations of color, especially Black households — a legacy of redlining practices that were outlawed decades ago,” Zillow says.

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The legacy of redlining lives on in modern-day America, shutting millions of families of color out of homeownership, according to a new report.

The report, by the real-estate brokerage Zillow Z, +1.49%, dug into how a lack of access to credit has pushed many people into renting for longer — when they could be paying the same amount or even less on a mortgage, and building equity in a home.

The company analyzed specific regions in the United States that are “credit insecure,” meaning individuals and households in the area face challenges in qualifying for credit. Zillow found that these areas are “directly linked” to areas with a higher share of Black residents, and also to areas where rent is more expensive than mortgage payments.

“Lack of credit access keeps people in a cycle of paying more in rent than they would pay each month for a mortgage on that same home,” Nicole Bachaud, a senior economist at Zillow, said in a statement.

“Communities of color, particularly Black families, see this play out, keeping a path to economic stability and wealth generation locked,” she added. “Policymakers should take action to reasonably improve access to credit for millions of families.”

Even with mortgage rates at 23-year highs, a monthly mortgage payment is cheaper for households in these areas than a rent payment, the report said. 

For the broader market, with rates over 7.5% in early November, the average principal and interest payment is over $2,500, according to the latest ICE Mortgage Monitor report. On the flip side, rents are trending downward: Year-over-year rent growth fell 1.2%, according to Apartment List’s November report. The median rent nationwide was $1,354. 

From the archives (July 2023): Redlining was outlawed 55 years ago, but it’s still hurting heart health today

A commonality connecting the regions where the imbalance was present is that they carry a legacy of redlining, a practice outlawed decades ago, the report noted. Redlining refers to a discriminatory practice in which communities of color were systematically denied access to financial products such as mortgages, insurance and so on, due to their race or ethnicity. 


Consider New Orleans, where 57% of the population living in credit-insecure areas is Black. The median renter would spend nearly 78% of their income on a typical rental, Zillow said, but the median household that owns its home would spend only around 29% of its income on a mortgage. 

“This means that residents in these areas, unable to secure the financing they need to buy a home, are stuck paying more for rent each month than they would expect to pay for a mortgage,” the report said.

“The legacy of redlining practices, though prohibited by law, continue to impact communities today, perpetuating racial disparities in homeownership and financial opportunities,” the authors added.

Aside from New Orleans, Hartford, Conn.; Pittsburgh; and Cincinnati also had populations that were spending a higher share of their income on rent, compared with the share of a typical homeowner’s income spent on a new mortgage.

More from the archives (March 2023): Bank accused of concentrating branches in white neighborhoods will settle discrimination allegations for $9 million: Justice Department