Want to close the Latino homeownership gap? Build more starter homes

By Laura Arce, senior vice president, Economic Initiatives

The number of qualified, willing Latino families ready to buy a home is growing faster than their ability to buy an affordable starter home. Starter homes have historically served as a step toward homeownership and building generational wealth. Expanding the supply of starter homes is one effective way to increase Latino homeownership and help more families achieve long-term economic stability.

As of late 2025, the Hispanic homeownership rate stood at 48.7%, compared with 75.1% for white households — a gap of more than 26 percentage points.  Recently, UnidosUS, the American Enterprise Institute’s (AEI) Housing Center and the Center for Responsible Lending (CRL) came together to address the biggest barrier to closing the Latino homeownership gap and offer a clear solution: Build more starter homes.

The Future of American Homeownership is Increasingly a Latino Story

Representing 1 in every 5 Americans, Hispanics are the youngest major racial or ethnic group in the country. The largest cohorts of Latino households are only now aging into prime household formation and homebuying years.

The demographic momentum is matched by economic progress: Rising incomes, growing educational attainment and a deeply held cultural commitment to owning a home have resulted in measurable market activity. According to the National Association of Hispanic Real Estate Professionals (NAHREP), in 2025, Hispanic households added 441,000 net new homeowners. Without Hispanic buyers, the United States would have posted a net loss of homeowners.

Yet, a significant homeownership gap persists. Critically, Hispanic household formation continues to outpace Hispanic homeownership growth, meaning the number of qualified, willing Latino families is growing faster than their ability to buy. This mismatch points to the central conclusion: Increasing Hispanic homeownership is no longer a question of demand — it is a question of supply.

The Elusive Starter Home

The starter home has historically served as the on-ramp to homeownership: a modest home at a price point within reach of a first-time buyer of moderate income, generally less than four times a household’s income. But the share of starter homes has declined sharply in recent years. According to AEI Housing Center analysis, starter homes made up approximately 42% of new single-family construction in 2012; by 2025, that share had dropped to 23%.

The causes are structural, not cyclical: Minimum lot sizes, restrictive zoning, costly aesthetic requirements and lengthy permitting processes push builders away from building starter units and toward larger, more expensive homes. As builders themselves acknowledge, the problem is not unwillingness to build starter homes, but the inability to build them profitably under current land use and regulatory regimes. The result is a market that is producing far too few of the very homes first-time buyers desire and can afford.

Starter Home Scarcity Hits the Hispanic Market Disproportionately

Starter home scarcity is a challenge for all first-time buyers, but its burden falls heaviest on the Latino market precisely because the typical Hispanic homebuyer is the archetypal starter home buyer. On average, Hispanic buyers are disproportionately younger and first-time purchasers with less wealth to draw on for down payments. The Julian Bond Institute’s 2050 survey found that among Hispanic respondents who said they wanted to buy a home, 40% claim to not have enough savings for a down payment and 36% report not having enough income for monthly payments.

Family structure is also an important consideration: Hispanic households are larger on average and more likely to be multigenerational, which means the smallest and cheapest units are not always workable. In fact, many first-time Latino homebuyers see a starter home not as a stepping stone, but as a legacy home. The real need, therefore, is for modestly priced homes that are both affordable and can accommodate a growing family.

At What Price Should We Be Building Homes to Expand Latino Homeownership?

The policy implications are clear: The buyers are ready; the homes are not. AEI created an interactive tool to help localities with large Hispanic populations identify policies to increase starter home development.

For each market, AEI’s tool identifies the Latino home-price opportunity threshold — the price point below which additional homebuilding could have the greatest potential to expand Latino homeownership — and then assesses whether the market is building enough homes below that threshold. More importantly, AEI’s tool identifies the policy levers for building more starter homes.

Currently, the interactive tool analyzes 16 cities with large Hispanic populations in Arizona, California, Florida and Texas.

Ending de facto bans on starter homes, reducing the cost of building homes and reducing delays and regulatory uncertainty are not niche interventions. They are the precondition for the next generation of American homeownership.

The Starter Home Policy Roadmap

Hispanic families want more starter homes. The Julian Bond Institute’s 2050 Survey found strong aspirations for homeownership across race, ethnicity and age. Among the 86% of Latinos who reported a desire to become homeowners, only 34% of Hispanic Millennials and 16% of Hispanic Gen Z have achieved this goal. A recent survey by the AEI Housing Center on zoning and land use flexibility found that 66% of Latinos cite having more affordably priced starter homes in their community as extremely or very important. According to the UnidosUS poll of Latino voters, housing is a top concern and motivator for going to the polls. Hispanics are the second largest voting bloc and the fastest growing segment of our electorate. A strong starter home strategy will resonate with voters. For many Latinos, buying a home is synonymous with starting a family and the shortage of affordable starter homes is delaying or redirecting life decisions. The tool provides a roadmap for how states and localities can strategically define the types and number of starter homes needed to meet their communities’ needs.