Mortgage Lending for LGBTQI+ People

Members of the LGBTQI+ community have long faced discrimination in different areas of social life, including housing. While society's attitudes towards LGBTQI+ issues have changed rapidly, the nation's anti-discrimination laws have lagged well behind. In 2019, 72% of people surveyed in the United States said homosexuality should be accepted (compared with just 49% as recently as 2007), according to research by Pew Research Center.

The federal government began to address that disparity in 2021, when it expanded the Fair Housing Act to prohibit "housing or housing-related" discrimination based on sexual orientation or gender identity.

LGBTQ+ Mortgage Lending Bias: The Historical Evidence

Multiple academic studies have shown that LGBTQI+ people have faced widespread bias in the housing and lending markets. A 2019 study by Hua Sun and Lei Gao of Iowa State University found that from 1990 to 2015, same-sex couples were 73% more likely to be turned down for a mortgage than similarly qualified different-sex couples. In addition, same-sex couples who were approved for mortgages paid about 0.02% to 0.2% more, on average, in interest and fees.

The researchers noted that the difference in approval rates had nothing to do with same-sex couples being any less creditworthy. In fact, they concluded, "We find that same-sex borrowers are less risky overall, as they exhibit similar default risk but lower prepayment risk."

Another 2019 study, by J. Shahar Dillbary and Griffin Edwards of the University of Alabama, looked at the effect of both race and sexual orientation on approval rates for more than five million Federal Housing Administration (FHA) mortgage applications. It found that same-sex male couples, regardless of race, were less likely to be approved for a mortgage than a White heterosexual couple, with Black male couples facing the highest rejection rate. Lesbian couples, however, fared better. They were either statistically indistinguishable from White, heterosexual couples in their approval rates or even more likely to be approved.

The obstacles that many LGBTQI+ people have faced in getting mortgages have made it more difficult for them to obtain affordable and stable housing. A 2020 study by the Williams Institute at the UCLA School of Law found that, while 70.1% of non-LGBT adults own their own homes, only 49.8% of LGBT adults own their homes. In other studies, the institute found that homeownership was "even lower among LGBT racial minorities and transgender people."

Federal Initiatives to Protect LGBTQ+ Rights

The Fair Housing Act—passed in 1968 and subsequently amended—protected Americans from discrimination based on race, color, national origin, religion, sex, family status, and disability. However, it didn't specifically mention sexual orientation or gender identity.

In June 2020, the U.S. Supreme Court ruled, in Bostock v. Clayton County, that Title VII of the Civil Rights Act, which prohibits discrimination in employment based on sex and other factors, also applies to sexual orientation and gender identity. In January 2021, President Biden issued an executive order to the heads of all federal agencies to review their anti-discrimination rules and amend them accordingly.

The following month, the U.S. Department of Housing and Urban Development (HUD) announced that it would now "administer and fully enforce the Fair Housing Act to prohibit discrimination because of sexual orientation and gender identity."

The Fair Housing Act prohibits a long list of discriminatory practices related to home sales, rental properties, and mortgage lending.

In terms of mortgage lending, those prohibitions make it illegal to:

• "Refuse to make a mortgage loan or provide other financial assistance for a dwelling"
• "Refuse to provide information regarding loans"
• "Impose different terms or conditions on a loan, such as different interest rates, points, or fees"
• "Discriminate in appraising a dwelling"
• "Condition the availability of a loan on a person's response to harassment"
• "Refuse to purchase a loan"

HUD notes that the Fair Housing Act applies to most housing in the United States. "In very limited circumstances," it adds, "the Act exempts owner-occupied buildings with no more than four units, single-family houses sold or rented by the owner without the use of an agent, and housing operated by religious organizations and private clubs that limit occupancy to members."

Much like the Fair Housing Act, the Equal Credit Opportunity Act (ECOA) of 1974 prohibited discrimination in lending based on race, color, religion, national origin, sex, marital status, age, or the receipt of public assistance, but omitted any reference to sexual orientation or gender identity. In March 2021, however, the Consumer Financial Protection Bureau (CFPB) announced that it would interpret the act's prohibition against discrimination based on sex to include sexual orientation and gender identity.

"In issuing this interpretive rule, we're making it clear that lenders cannot discriminate based on sexual orientation or gender identity," the CFPB's acting director, David Uejio, said in the announcement. "The CFPB will ensure that consumers are protected against such discrimination and provided equal opportunities in credit."

The ECOA applies to mortgage lending, in addition to credit cards, car loans, student loans, and small business loans.

While these changes were accomplished by executive order, a separate bill, known as the Equality Act, would codify them in federal law by prohibiting "discrimination based on sex, sexual orientation, and gender identity in areas including public accommodations and facilities, education, federal funding, employment, housing, credit, and the jury system." It passed the U.S. House in February 2021 but did not advance further. While some states have anti-LGBT discrimination laws, the purpose of the Equality Act is to legally protect individuals nationwide.

President Biden urged the passage of the Equality Act in his February 2023 State of the Union address. In June 2023, Rep. Mark Takano, Co-Chair of the Congressional Equality Caucus, reintroduced the Equality Act, saying "the LGBTQI+ community have been subject to discrimination, violence, and the denial of their full personhood under the law for far too long. I’m proud to reintroduce the Equality Act as a long-overdue guarantee to all members of our community that we, too, benefit from explicit civil rights protections and the full promise of American democracy."

LGBTQI+ Initiatives on the State and Local Level

According to the Movement Advancement Project (MAP), a nonprofit research organization, 23 states, the District of Columbia, and one U.S. territory have laws specifically prohibiting housing discrimination based on sexual orientation and gender identity.

Another seven states interpret their sex discrimination laws to include sexual orientation and/or gender identity, while one state prohibits discrimination based on sexual orientation only. That leaves 19 states and four U.S. territories with no such protections. All told, MAP estimates that about 29% of the LGBTQ population lives in parts of the country with no state or local laws protecting them against housing discrimination.

In addition to the states, at least 374 municipalities across the U.S. "fully and explicitly prohibit discrimination against LGBTQ people in employment, housing, and public accommodations," MAP reports.

In Texas, for example, which has no statewide anti-discrimination law, seven cities have ordinances prohibiting discrimination in private employment, housing, and public accommodations based on sexual orientation or gender identity. As a result, MAP estimates that 14% of the state’s population is covered by such laws. In some other states, that percentage is as low as 0%.

Where to Get Help if You Need It

A number of government agencies and nonprofit organizations field complaints and take action on behalf of LGBTQ+ people who believe that they have been discriminated against in violation of current laws. These include:

U.S. Department of Housing and Urban Development (HUD). HUD urges people who identify as LGBTQ+ to file a complaint if they believe that they've been discriminated against. "HUD will accept and investigate all legally sufficient complaints of sex discrimination, including discrimination because of actual or perceived gender identity or sexual orientation," the agency says.

Consumer Financial Protection Bureau (CFPB). The CFPB handles discrimination complaints against lenders and mortgage brokers based on the Equal Credit Opportunity Act.

American Civil Liberties Union (ACLU). The ACLU normally offers an online form specifically for submitting LGBTQ+ and HIV-related discrimination complaints. However, the ACLU says its form is temporarily offline and suggests emailing the organization with the relevant information.

Lambda Legal. This nonprofit civil rights organization for the LGBTQ+ community has an online help desk that provides information and resources regarding housing and other types of discrimination.

In addition to those national resources, your state or local housing agency may be of help, as well as a local legal aid society or a private attorney with expertise in discrimination matters.

The Bottom Line

Discrimination against the LGBTQ+ community in housing and mortgage lending is a longtime issue. Efforts by some states and municipalities—and recent initiatives on the federal level—are attempting to address the problem, although it is too soon to tell how effective they will be.