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As the country grapples with an affordable housing crisis, the problem is even greater of closing the gap in homeownership rates among black Americans. The Biden administration and advocacy groups across the country are offering a variety of solutions, which we’ll cover, for a deep-rooted problem.
“People are realizing how we got here. They learn more about restrictive covenants and restrictive covenants, things that prevented black families from owning a home, ”says Dr. Tiffany Manuel, founder of TheCaseMade, a social justice leadership training organization.
Since the 2008 financial crisis, the rate of black homeownership has lagged; and the gap between black and white homeownership is now wider than it was more than 50 years ago, just before the passage of the Fair Housing Act of 1968 to create equal housing opportunities for minorities, according to an Urban Institute report.
In the first quarter of 2021, the homeownership rate for non-Hispanic white households was 73.8%. This contrasts sharply with the 45.1% of black households, according to the US Census Bureau.
New plans to add 3 million black homeowners by 2030
In recognition of National Homeownership Month and June 19, 2021, which commemorates the end of slavery in the United States, a powerful group of lawmakers and members of The Black Homeownership Collaborative are meeting Friday in Cleveland to announce an initiative to help 3 million Blacks become homeowners by 2030.
The initiative is supported by U.S. Housing and Urban Development (HUD) Secretary Marcia Fudge (former Ohio Rep.), Who joins Sen. Sherrod Brown (D-Ohio), Rep. Tim Ryan (D-Ohio ) and over 100 organizations that make up The Black Homeownership Collaborative as part of this effort.
It will be a difficult but not impossible housing task, said David Dworkin, president of the National Housing Conference, which is part of the Collaboration, with the Mortgage Bankers Association, the NAACP, the National Association of Realtors and the National Fair Housing. Alliance, to name a few.
“We worked with our economists to determine what was feasible. When we got to that number (3 million), they said it would be difficult but not impossible, ”says Dworkin. “Truth be told, we cannot achieve this goal under current market conditions. So we have to change a lot of things. “
Among these things are increasing the supply of housing, offering down payment assistance for first generation homeowners and renovating the obsolete housing stock – via the Investment Law in President Joe Biden’s Homes – aimed at helping first-time buyers and homeowners in neglected or obsolete communities increase their homes. values.
“We know homeowners have more wealth, but a lot of black buyers today are first generation buyers and that’s because of the laws that discriminate against their parents and grandparents,” says Dworkin. . “So to people who think this aid is unfair, we understand that it was not your fault that these laws were made. But if we don’t do anything about what happened in the past, it’s our fault.
Rewriting discriminatory housing laws remains a challenge
One of the main reasons the country has not collectively addressed decades of the growing property gap for black Americans is that history was quickly forgotten, says Richard Rothstein, author of “The Color of Law.” .
Before anti-discrimination rules like the Fair Housing Act and the Community Reinvestment Act of 1977, which aimed to encourage lending to low and moderate income neighborhoods, the Federal Housing Administration (FHA) was known for its actions that suppressed property blacks.
This included using a system called “redlining” to determine high-risk areas where it would refuse to provide loans in predominantly non-white neighborhoods. The most at-risk areas were marked in red on maps, and banks were instructed not to grant federally guaranteed loans in these areas.
At the time, the FHA also urged homeowners to include race-discriminatory covenants, often including fines for homeowners who sold their homes to black buyers. Although the Fair Housing Act prohibited such clauses, the practice can still be seen today.
More recently, predatory lenders have specifically targeted black homeowners during the housing crisis, which robbed them of home equity and caused many to lose their homes.
“Racialized housing policies have deprived generations of black households of the ability to create wealth over the years. It robbed them of the equity and wealth that could have been passed on to help their children and grandchildren buy their first homes, ”says Michael Stegman, a non-resident researcher at the Urban Institute.
Rothstein says people miserably assume that the separate housing models happened naturally or “de facto.” In other words, that black and white Americans have chosen to separate.
“African Americans and whites do not realize that there was an intentional racist policy in this country that held back African Americans and also separated neighborhoods,” Rothstein said. “There were white projects and there were African-American projects. Before that, there were integrated neighborhoods. This is why we have to educate people early.
Black families generally have much less net wealth than white families who earn similar income, largely because they lack multigenerational wealth, according to a Brookings report. Real estate is generally the primary means by which Americans accumulate wealth in this country.
By the time the Fair Housing Act was passed in 1968, many of those homes that millions of World War II veterans and other black families could have afforded in the 1940s were no longer. affordable, says Rothstein.
What do we do about the black homeownership gap
A recent study by Freddie Mac found that 1.7 million black millennials are in a prime position to get a mortgage, based on their credit rating and debt-to-income ratio (DTI).
However, being a first-time buyer can be an overwhelming setback for black buyers. According to the report, “the difference in parental property and wealth explains 12% to 13% of the property gap between black and white young adults.”
Stegman points out that down payment assistance is a major hurdle black homebuyers face. Unlike their white peers, who often get help from family, black buyers are less often given an inheritance or family money due to the huge wealth gap.
In order to secure down payment assistance for first generation homebuyers, more financing is needed. Stegman is proposing to shift the current fees for single-family mortgages purchased or guaranteed by Fannie Mae and Freddie Mac, which expire in October, to a down payment assistance fund for first-generation homebuyers.
This fee comes from the Temporary Payroll Tax Reduction Continuation Act (TCCA), which was put in place in 2011 to finance an extension of the payroll tax reduction. Now that it’s about to expire, Stegman says those funds (which run to around $ 5 billion a year) could help first-generation buyers get their down payment.
The Biden administration has presented numerous plans to close the racial wealth gap and invest in communities that have been the target of racist policies or have been collateral damage in a system designed to separate people by skin color.
Some of these plans include tackling valuation bias, which involves evaluating black-owned homes or homes in predominantly black communities that are inferior to white-owned homes with otherwise equal characteristics.
The New Movement to End Racial Segregation is a grassroots national movement meant to empower ordinary people to take their own action, says Tiffany Manuel, who works with Rothstein on the project.
“Addressing racial segregation will be different in different communities. There is no one-size-fits-all solution, ”says Manuel. “We want this to be an inclusive multiracial and multiethnic movement where we can work together to find solutions to some of the problems of the past. “