BY DESTINY MATEO
In New York City, the high demand for housing, coupled with financial requirements, has placed a spotlight on the critical role credit scores play in renting or purchasing property. Recent data underscores the significant hurdles faced by certain demographic groups, particularly minorities and low-income individuals, in securing housing due to credit score disparities.
According to statistics provided by the New York City Department of Housing Preservation and Development (HPD), nearly 30 percent of all applicants for rental and housing applications face rejection due to inadequate credit scores. In response to this, Mayor Eric Adams announced in October 2023 the elimination of unnecessary credit checks for low-income households buying with a city voucher.
Minorities are disproportionately affected in the competition for housing, advocates say. Studies conducted by housing advocacy groups such as the Urban Institute reveal disparities in credit scores among racial and ethnic groups. African American and Hispanic populations tend to face challenges in achieving higher credit scores, the Institute said, with averages notably lower than their white counterparts. On average, African Americans in NYC have a credit score of 660, while Hispanics average 670, compared to the citywide average of 690.
Ernesto Gonzalez, a 39 year old Latino, says, “ I don’t want to say score number but I have not been able to buy my own property. I work very hard but I came here from South America and started with 0 dollars.” Ernesto is one of the many Latinos in New York who struggle with a low credit score that prevents them from purchasing homes.
Low-income individuals also encounter barriers in accessing housing due to credit score limitations. According to the Community Service Society, an advocacy organization, individuals earning below the city’s median income often grapple with lower credit scores. Approximately 4 percent of low-income applicants experience housing denials due to creditworthiness concerns, hindering their ability to secure affordable housing options in a city notorious for its high cost of living.
In a city where the median home price hovers around $680,000 and the average monthly rent for a one-bedroom apartment exceeds $3,000, the significance of a high credit score cannot be overstated. Landlords and property management companies heavily rely on credit checks as a determinant of an applicant’s reliability in meeting rent or mortgage obligations.
These realities have sparked discussions among policymakers and housing advocates about how to address systemic issues contributing to credit score disparities. Efforts are underway to promote financial education programs aimed at improving credit literacy among underserved communities and advocating for alternative assessment criteria to evaluate housing eligibility beyond credit scores.
In response to the growing concerns, organizations such as the NYC Commission on Human Rights have initiated campaigns to combat discriminatory practices in housing and lending, striving to ensure fair access to housing regardless of demographic backgrounds. Mayor Adams’ elimination of credit score checks for city voucher holders on October 5, was one effort to combat the housing struggle in NYC.
Rafael Reyes, a loan officer at Compass, says, “I really try to highlight the different resources out there that can help. For example, I have a lot of videos on my social media targeting the Latino community and offering them help in order to buy their dream home.”
“So, when it comes to working with a loan officer, at least for me, one of the first things I tell my clients is how sensitive their spendings will be during the application,” Reyes pointed out. “The bank is watching and any action that makes them double take will affect their loan approval. Which is the first step to achieving that dream home.”