Improving Equity Through Housing: Expanding Black and Hispanic Home Ownership

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More than half a century since passing Fair Housing Act, the picture of home ownership in the United States is still significantly unequal… For Black Americans and Hispanics, the share of homeowners lags behind non-Hispanic whites by about 30% and 25%, respectively.

The reasons for these differences are easy to point out, but not resolved, as they are based on many generations of people. discrimination in everything from public policy and industry practices to education and income opportunities.

And it’s a constant cycle. Traditionally, home ownership has been the primary means of accumulating wealth for Americans, especially for black and Hispanic families. Lower ownership in minority communities means less ability to do things like college and medical expenses without incurring debt, fund retirement, provide emergency protection, and pass on wealth to the next generation.

Unfortunately, barriers to minority home ownership have only been exacerbated during the Covid-19 pandemic, given its disproportionate impact on minorities and massive increases in housing prices, especially entry-level homes.

This is why our industry must continue to operate so that as many people as possible access to affordable and sustainable home ownership – and help them stay in those homes when we face times as bad as the past 12 months. One of the very positive developments in the industry since the 2008 financial crisis is the wider recognition of the devastating impact of foreclosures, which disproportionately affect minorities; and a deeper commitment to supporting programs and solutions that help keep people in their homes.

It is very important that “affordability” and “sustainability” are key components of the home ownership equation. And since minority communities are often more vulnerable to economic instability, as we saw in 2008 and then again as the pandemic unfolds, it is especially important that we pay attention to these components from the outset.

The two main culprits are the supply of housing and the lack of wealth for generations.
Many doctoral dissertations have been written on the causes of inequality in home ownership, and rightly so, as the factors involved are multifaceted and numerous. But it doesn’t take an advanced scientist to understand that the two critical areas we should focus on are limited delivery of houses on the sale and lack of wealth of generations among minorities.

For more than a decade, there has been record high demand for homes, and during that time, prices have steadily increased. This has benefited many participants in the housing market, but has also made climbing the home ownership ladder harder than ever. Inventory shortages and rising house prices have been particularly acute in the lowest quartile of prices, reflected in its significant rate of price growth over the past decade, which is double that of the top quartile.

In short, there is an ongoing shortage of reasonably priced homes that continues to propel the affordability and dream of home ownership for millions of potential minority homeowners into the future. With demographic trends that will continue to fuel growing demand from potential first-time buyers, the path to expanding minority home ownership lies in addressing this supply problem.

But even if we had more entry-level homes, so many aspiring homeowners would still be faced with an obvious but fundamental problem: It’s hard to raise enough money for a down payment. As you might expect, this is the reason potential buyers most often cite as their main obstacle. This is partly because our industry needs to better educate home buyers about low down payment options, such as mortgage insurance, and to debunk the persistent myth that buyers have to invest more than they actually do.

For example, a 2019 survey by Ellie May found that nearly a third of potential buyers believe you need a down payment of 20 percent or more, while the National Association of Realtors found that the average down payment for new buyers is about in fact about 6 percent. However an initial fee can be a major obstacle, especially given the rapidly rising house prices, stagnant wages, high rental costs that make savings difficult, and other related factors. And the lesser wealth of minority generations means that they have fewer opportunities to use family support and, therefore, are less likely to get home ownership at an early age, which is highly correlated with future wealth.

Working on solutions
There are no simple or quick fixes for the persistently limited supply of housing and the lack of wealth for generations. In terms of housing supply, the most significant barriers to building more affordable housing are the availability and cost of land, as well as high (and growing) construction costs. In many parts of the country, rules that have been standard for a long time, such as zoning restrictions, costly permits and minimum land sizes, need to be reformed to expand usable land and reduce the time and cost of permitting, the Biden administration says. and local governments across the country began the study.
In addition, the curve for building materials and labor costs needs to be changed.

There are many ways to approach this problem, but some of the under-discussed ways to help reduce these costs include creating more productive housing and better incorporating innovative building approaches into the home construction process, such as 3D printing technology and panel and container construction. The way most homes are built today is literally outdated, and the cost curve tends to reflect that. Given the particular shortage of entry-level homes, in addition to increasing new home construction, policymakers need to stimulate the recovery and renovation of abandoned and distressed properties through tax incentives, grant programs and reduced red tape.

On the welfare side, it is even more challenging, but the industry needs to support several efforts, including:
– Down payment assistance programs, especially those that are structured to avoid excessive debt capital
– A pipeline that better helps tenants work on their home purchases
– A legal and regulatory framework that makes it easier and more sustainable for banks to lend at low prices and for builders to build cost-effective small houses.
– Optimizing refinancing opportunities so that current homeowners can take advantage of historically low interest rates.
– Borrower Tolerance and Assistance Programs that help keep people in their homes when they face financial hardship, as the loss of a home has a huge and potentially long-term negative impact on the ability to build future wealth.

These are just a few of the possible steps, and of course none of them alone will bring you a silver bullet. Overcoming this long-standing injustice will require a wide variety of approaches and focused, persistent efforts on the part of many different players. Let’s make this a priority for our industry as we begin to redefine the housing industry in the post-Covid era.



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