Small Mortgages Are in Short Supply in Cities With Low-Cost Housing

Research shows that homebuyers often struggle to obtain small mortgages—those for less than $150,000—even in metropolitan areas where low-cost homes are plentiful.

To better understand the financing challenges facing these homebuyers, The Pew Charitable Trusts commissioned Craig J. Richardson Consulting, LLC, and New America’s Future of Land and Housing program to study how residents in St. Louis, Philadelphia, and El Paso, Texas, navigate the homebuying process. For each city, the researchers analyzed mortgage and demographic data and interviewed homeowners and renters who used or tried to use a small mortgage. The two reports collected here capture the findings of their analyses.

The research confirmed that residents in all three cities face significant barriers to homeownership and often go to great lengths to purchase low-cost homes. It found that, especially in economically distressed neighborhoods, home prices are rising faster than incomes; prospective homeowners are being edged out by all-cash buyers; and there is an ongoing shift from owner-occupied to rental housing, all of which make homeownership less attainable for residents. Among those who did achieve homeownership, many reported buying dilapidated homes with cash, relying on informal help from friends and family, or even co-purchasing homes with family members.

This research highlights the urgent need for more small mortgages, especially in distressed neighborhoods in low-cost cities, to help expand homeownership opportunities for low- and moderate-income families and reduce the growing divide between renters and owners.

The Pew Charitable Trusts provided funding for this project, but Pew is not responsible for errors in this paper and does not necessarily endorse its findings or conclusions.