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As Congress advances the biggest housing investments in decades and the Biden administration focuses more attention on housing issues, one policy matter should top the agenda: closing the racial homeownership gap. This persistent disparity not only limits the opportunity for individuals and families to build wealth; it also deprives our nation the opportunity for more robust economic growth.
For the better part of the twentieth century, a combination of private-industry practices and federal government policy denied mortgage credit to Black and immigrant buyers and neighborhoods, shutting those communities out of opportunities to build equity through homeownership and create intergenerational wealth.
The 2008 subprime mortgage meltdown—fueled, in part, by predatory loans targeted to Black and Hispanic borrowers—knocked homeownership rates for Black and Hispanic Americans down to levels not seen since the passage of the 1968 Fair Housing Act. Now, the COVID-19 pandemic has stalled homeownership for people of color even further.
Today, white homebuyers are more than twice as likely as Black homebuyers to rely on the sale of an existing home for a down-payment, while Black homebuyers are three times more likely to borrow from retirement accounts to raise the funds. Black Americans, on average, own homes that are valued less than comparable homes owned by whites, while they are assessed for taxes at a higher rate. All of these factors contribute to Black homebuyers being nearly three times more likely to be rejected for a mortgage.
The National Association of Realtors® is working to increase minority homeownership and right these historical wrongs, and to do so, we are advocating for a number of key initiatives:
The Preservation of Existing Homeownership through Aid for Mortgage Payments
A major component of Washington's response to the COVID-19 pandemic and a top NAR priority has been legislation to keep Americans in their homes. A core part of the Coronavirus Aid, Relief, and Economic Security (CARES) Act is the mandated pause on mortgage payments for up to 18 months for millions in need. This has helped Black borrowers, in particular, as this population has been disproportionately more likely to lose jobs due to the pandemic and twice as likely to fall behind on mortgage payments.
We believe this assistance should continue, even as the severity of the pandemic abates. The government should continue to support mortgage forbearance, where appropriate, and work with banks and servicers to find ways to extend the time for repayment. Realtors® nationwide help educate homebuyers on their repayment options.
Stimulating Housing Supply
NAR estimates the U.S. is 6.8 million units short in housing production. This is a result of more than a decade of underinvestment in new homes and critical infrastructure. This shortage has been exacerbated by Covid-19. Construction has stalled, and the rising cost of building supplies combined with supply-chain snags and labor shortages have only made the problem worse.
NAR is working with the Biden administration and Congress to make critical investments to address the housing-supply crisis. These steps include tax breaks to incentivize new construction in disinvested neighborhoods; investments in renovation and upgrades to existing affordable housing; construction of new affordable housing units; and making sure those who need help finding affordable housing have the resources to do so.
We're also supporting creative solutions to promote more development on the local level, including federal grants to localities who explore solutions to the affordability crisis, such as changes to zoning laws and the construction of new units.
Reimagining Credit Scores
Past discrimination means that people of color, on average, have lower incomes and less intergenerational wealth. Over decades, communities of color have been denied access to the same financial products that white communities have received, helping white borrowers, on average, build more robust credit profiles.
Most of today's credit-scoring systems don't recognize fulfillment of common financial obligations, like rent or utility bills. They should. Their omission means many creditworthy consumers are rendered "credit invisible" and left out of the housing market.
Our country is making great strides in defeating COVID-19, but the pandemic's long-term fallout will be devastating for minority homeownership if we do nothing to counteract it. The policy reforms discussed here represent proactive steps to reverse trends that will only worsen if matters are allowed to run their course. We must act now to mitigate past harms exacerbated by a pandemic and unlock the benefits of homeownership for more Americans.
Bryan Greene is Vice President of Policy Advocacy at the National Association of REALTORS®.
The views in this article are the writer's own.
