Latinos Strengthen as Homebuyers but Significant Challenges Persist in Chicago

Guadalupe Brizuela, a single mother with two teenage children who lived in the Gage Park neighborhood in southwest Chicago for over two decades, finally decided to overcome the fear and doubts that had haunted her for a long time. She took the first steps to buy her own home in the suburb of Summit. She had contemplated the idea for many years, but a lack of knowledge about the process, economic instability, and fear of risking all her savings on a property kept her from making one of the biggest decisions of her life.

When the three-story building she lived in with her family went up for sale, Brizuela, a fast-food restaurant supervisor, knew she had to silence her doubts and explore the option of becoming a first-time homeowner.

“It was the best option for my family after renting an apartment for 26 years. I had saved over $120,000 for the costs of homeownership and used $3,000 of that for the initial deposit,” Brizuela told La Raza.

The amount she paid in rent for a two-bedroom apartment was almost the same as what she would contribute toward a mortgage. The difference was that paying a mortgage would allow her to invest in her home’s equity, a financial tactic that builds net worth and can provide additional funds through a home equity loan.

On the other hand, property taxes and home maintenance costs are factors that need careful consideration, especially if the property is in a community where home values remain relatively static or fall below the increasing costs associated with homeownership.

Like Brizuela, who came to Chicago from Mexico with her parents at the age of five, many Latinos must weigh their options when deciding on the right type of housing. Several factors influence an individual’s decision to become a homeowner, including affordability, proximity to employment, and schools. Perhaps most importantly, the ability to manage unexpected costs such as repairs or increases in taxes or property insurance plays a significant role.

A History of Homeownership in the United States

To understand the current mortgage landscape, it is essential to examine the real estate history of the United States and the laws that fostered unjust practices against certain ethnic groups. The American dream has long been associated with owning land or property. In the early days of the U.S. republic, some states granted voting rights—one of the most coveted privileges—only to landowners. This small subset of the population, Anglo-Saxon landowning men, wielded power that allowed them to accumulate wealth over several generations. At that time, property ownership symbolized socioeconomic status and provided access to shaping societal norms. Property ownership and sovereignty have long been intertwined, as owning a home remains one of the most effective ways to establish generational wealth.

The federal government began offering mortgage loans during the Great Depression of the 1930s to stimulate real estate purchases and support the economy. This global financial crisis spurred the development of programs to make housing and mortgages more affordable. Among these initiatives, the Federal Housing Administration (FHA) was established in 1934. This program remains active today, with the National Association of Hispanic Real Estate Professionals reporting in 2022 that 24% of Latinos used FHA loans to purchase their homes. FHA loans, backed by the federal government, have less stringent requirements, accept lower credit scores, and require minimal down payments. Additionally, this program keeps closing costs affordable, benefiting low-income Latino buyers or those with limited credit history.

However, this period also saw the emergence of discriminatory practices such as redlining, which systematically denied services like mortgages, insurance, and other financial tools to residents of certain races or ethnicities. Today, there is a clear correlation between redlining and the lack of cultural diversity in some communities. Redlining segregated ethnic groups across Chicago. A 2019 Brookings Institution study highlighted that while “residential segregation was explicitly aimed at targeting African Americans… Latino or Hispanic residents, low-income white residents, non-citizens, communists, and other populations considered ‘risky’ by the federal government were also included in residential segregation.” These “risky” areas identified by real estate agents and financial institutions tend to have higher concentrations of people of color, lower incomes, and reduced property values.

Where Latinos Live and Why

The future of the U.S. housing market and economy will increasingly depend on Latinos. According to a 2021 Urban Institute report, Latinos are projected to account for 70% of new U.S. homeowners between 2020 and 2040.

Southwest Chicago

In the early 20th century, the first wave of Latinos, primarily Mexicans, settled in Chicago. Their homes were located near jobs that provided the necessary income to establish roots in a new country. Industries at the time included railroads, steel production, meatpacking, and food processing, predominantly located in South Chicago, Near West Side (around Pilsen and Little Village), and New City (home to the Back of the Yards neighborhood). Latino migrants became a vital workforce, contributing to Chicago’s profile and becoming integral to its cultural and ethnic richness.

According to the Great Cities Institute2024 report titled Fuerza Mexicana: The Past, Present, and Power of Mexicans in Chicagoland, Mexican and Latino residents continue to live in Chicago’s southwest communities. However, many now reside in adjacent neighborhoods like South Lawndale, Brighton Park, and Gage Park. Additionally, Mexicans make up 50% of residents in Belmont Cragin and Hermosa on the city’s northwest side. Experts attribute demographic shifts in Pilsen and Little Village, as well as the displacement of Mexicans from these areas, to gentrification and rising housing costs. This assertion is reinforced by the analysis Who Lives in Pilsen: The Trajectory of Gentrification from 2000-2020 by John J. Betancur and Alexander Linares, which states, “Between 2010 and 2020, 258 new construction permits were issued… coinciding with accelerated displacement and population loss in Lower West Side.” While there were more new homes years later, fewer Latinos lived there. By 2020, Pilsen saw a 17% decline in its Latino population.

The construction of new properties in the Lower West Side community, which includes Pilsen, has led to a surge in property valuations and corresponding property taxes. According to the 2022 annual property tax report released by Cook County Treasurer Maria Pappas, property taxes in the Lower West Side/Pilsen community increased by as much as 44%. A 20-year analysis of property tax history published by Pappas’ office reported a 295% increase in the 25th Ward, which encompasses Pilsen.

The elevated cost of housing also drives up rental prices, creating challenges for low-income residents with deep roots in the community.

In Pilsen, for example, the percentage of available apartments renting for over $1,000 increased from 32% between 2005 and 2009 to 51% between 2016 and 2020, according to John J. Betancur and Alexander Linares’ analysis. An individual is considered rent-burdened when they allocate 30% of their income to housing costs. The same report estimates that between 2016 and 2020, 35% of renters and 34% of homeowners in Pilsen were burdened by housing costs.

Northwest Chicago

In the 1940s, after World War II, Puerto Ricans established roots in Humboldt Park, a neighborhood five miles northwest of downtown Chicago. Renting or purchasing affordable properties was an attainable dream for Puerto Ricans who, unlike Mexican immigrants and others, held U.S. citizenship. Almost 70 years later, an exodus of Puerto Ricans began, moving to nearby communities where housing costs remained relatively lower. According to the report Paseo Boricua: Claiming a Puerto Rican Space in Chicago by Nilda Flores-González, the Latino population in Hermosa, Avondale, and Belmont Cragin increased by 41.6%, 99.6%, and 198.1%, respectively. Flores-González attributes this growth partially to the displacement of Puerto Ricans from Humboldt Park.

To counter gentrification and the displacement of Latinos from Humboldt Park, a coalition of over 80 community organizations and business leaders formed the Humboldt Park Empowerment Partnership (HPEP). In 1996, the group announced the Humboldt Park Empowerment Zone Strategic Plan, which included an economic initiative to revitalize Division Street and solidify the community’s Latin identity with the nickname Paseo Boricua.

However, years later, the opening of the urban park known as the Bloomingdale Trail, nicknamed ‘The 606’, further stimulated the real estate market. The transformation of abandoned railways by the Bloomingdale Line into a park drew investor attention. Many replaced multi-unit buildings with single-family homes along the 2.7-mile stretch of the trail.

Additionally, the median sale price of a 2-4 unit property near The 606 increased from $97,000 in 2012 to $462,000 in 2018.

These types of multi-unit buildings are one of the most sustainable options for Latino homeowners and renters, offering lower rental rates and facilitating home purchases for low-income individuals. In fact, over 73% of rental units in 2-4 apartment buildings are occupied by Latino or African American individuals. Moreover, the majority of these property owners are people of color, according to a 2023 report by DePaul University’s Housing Studies Institute.

As the availability of such properties decreases due to conversion into new developments and single-family homes, there are drastic consequences. In Latino-majority communities, the affordability of housing deteriorates, property costs rise, and the displacement of low-income individuals increases.

Efforts to Curb Displacement

To regulate gentrification in Latino-populated communities, the Chicago City Council voted 44-3 in September 2024 to approve the Northwest Side Housing Preservation Ordinance, which targets communities like Hermosa, Logan Square, Avondale, West Town, and Humboldt Park. This ordinance builds on a pilot program called the 606-Pilsen Demolition Permit Surcharge Ordinance, which imposes fees on demolition permits for residential buildings near The 606 and in Pilsen.

Under the new ordinance, property owners must pay a surcharge of at least $20,000 per unit and up to $60,000 for demolishing buildings with up to four units. Additionally, tenants living in such buildings will have the opportunity to purchase the property before it becomes available on the general market. Funds collected will go to the Chicago Community Land Trust to support affordable housing needs in identified communities.

This initiative aims to slow the displacement of Latinos from these areas caused by the replacement of affordable housing.

Discriminatory Predatory Practices

Unfair practices in the real estate sector have fostered ethnic segregation and created barriers for Latinos seeking homeownership and intergenerational wealth growth. Discriminatory strategies such as redlining contributed to regional segregation, which persists nearly a century later and manifests in communities defined by concentrated poverty.

According to the study A Shared Future: Two Extremes of Residential Segregation: Chicago’s Separate Worlds & Policy Strategies for Integration by Novara and Khare, published in 2017, “Chicago grapples with a deeply rooted history of racial and economic separation.”

Today, the divide is not only between property owners and non-owners but also in the value of their properties. The Fuerza Mexicana report reveals that the average home value in predominantly Mexican neighborhoods like Southeast Side, Little Village, New City, and Gage Park ranks among the lowest in the city.

However, the report also notes that over the past two decades, the rate of Mexican homeownership increased from 41.2% in 2000 to 49.9% between 2018 and 2022. While more Mexicans are investing in homeownership, the value of their properties remains relatively below average. This reality keeps many Latinos in the same neighborhoods or limits their ability to purchase homes in more affluent areas or suburbs.

The passage of the Fair Housing Act in 1968 prohibited discrimination in the sale, rental, and financing of housing based on race, religion, national origin, or sex. This law aimed to eliminate barriers to homeownership rooted in racial prejudice. Later, the Home Mortgage Disclosure Act of 1975 required financial institutions to collect data on their mortgage lending activities to ensure loan availability regardless of race.

However, the 2007 subprime mortgage crisis, caused in part by inadequate regulation of the real estate industry, led to evictions, foreclosures, and widespread loan defaults. Families from low-income and middle-class backgrounds, often unable to meet the requirements of traditional mortgages due to insufficient income or credit history, were disproportionately affected. During the crisis, many lenders offered high-interest loans to individuals with limited financial solvency.

This crisis was a significant setback for many Latino families, who lost their homes and savings and faced financial penalties. According to a report by the Economic Policy Institute (EPI), a nonprofit organization researching the economic impact of policies, 47.3% of subprime mortgages in 2006 were issued to Latinos. These predatory practices had a profound impact on Latinos pursuing the American dream, as many were steered toward high-risk loans even though they qualified for conventional ones.

To prevent a recurrence of such crises, lenders and financial institutions now provide educational resources on the mortgage process for first-time homebuyers.

Another challenge is the bias in property appraisal, where home values are devalued based on the racial or ethnic identity of their owners or the community where the home is located. According to a Freddie Mac report cited by the National Credit Union Administration, “out of 12 million appraisals reviewed, homes in neighborhoods predominantly occupied by people of color and Latinos were valued lower than similar properties in predominantly white communities.”

In response, the Biden administration tasked the Federal Housing Finance Agency in 2022 with evaluating 47 million public appraisal reports. The findings revealed significant disparities in Chicago, where the median appraised value of homes in communities of color was over $411,000 lower than in predominantly white neighborhoods.

This governmental initiative aims to expose inequalities in the real estate process, measure disparities in access to loans and financial assistance, and work toward leveling the playing field for everyone.

—

The production and publication of this story by La Raza have been made possible in part thanks to a grant from The Chicago Community Trust through its Cross Community Impact / Collective Power grant program.