Our 7-point plan to create 3 million net new Black homeowners by 2030

Homeownership is the primary way that most Americans build wealth. Unfortunately, historic and ongoing discriminatory housing policies result in Black families and other people of color being excluded from having access to owning a home, even when they have sufficient income to cover debt service. As a result, persistent and growing racial wealth gaps continue with many hardworking families lacking the resources to save for a down payment to purchase their first home. Additionally, many first-time homebuyers receive down payment support from their family members, especially their homeowner parents. Black young adults, whose parents are less likely to be homeowners and have wealth are less likely to receive support to make down payment.  A substantial, sustainable and targeted down payment assistance program will serve as a critical first step in addressing these disparities, strengthening the wealth building capacity for millions while also growing the economy.

Housing supply shortages are greatest for entry-level and lower-priced homes affordable to first-time homebuyers. Rising land prices, zoning restrictions on housing development, costly building permits, labor shortages and the high cost of lumber and other materials all contribute to the under-supply of for-sale, entry-level homes. Many of these costs are fixed, making more affordable starter homes comparatively less economic. Another contributing factor to supply shortages is the lack of market incentive to rehabilitate dilapidated homes in many distressed communities where vacant homes sit underutilized. The cost of new construction or rehabilitation often exceeds what the home could sell for in these communities. This dynamic, known as the “value” or “appraisal” gap, discourages investment and perpetuates a downward spiral of declining home values in communities that have been left behind. Without economic interventions in distressed communities, land use reforms, and public investment in dedicated affordable homes, the shortage of decent, affordable entry-level homeownership opportunities will continue to pose a major barrier to Black homeownership.

Credit remains a major barrier to homeownership, particularly for Black homebuyers. The high cost of origination and servicing also creates barriers to obtaining home loans in communities where home prices are most affordable and smaller mortgages are essential. Innovation in mortgage credit scoring and mortgage products are an essential component of any successful strategy. Achieving homeownership is not enough. Sustaining homeownership is the ultimate objective. Not everyone is ready to be a homeowner immediately, but credit evaluation needs to do a better job of identifying those that are ready and those that are not ready yet and provide referrals to housing counselors who can turn a “no” into a “not yet.” Mortgage products also need to target populations that have not only been historically underserved by the mortgage finance system; they have been specifically excluded. Addressing these inequities requires direct interventions like special purpose credit programs (SPCP) and specified pools for mortgage securitization.

A legacy of housing and lending discrimination, which excluded Black households from communities, denied them access to credit, and constrained opportunities to build household equity, all contributed significantly to the homeownership gap we witness today between African Americans and white Americans. The federal government must fully enforce the nation’s fair housing and consumer-protection laws to mitigate the role of ongoing discrimination in perpetuating the homeownership gap. The government must utilize, protect, and restore all legal doctrines and provisions of law that address systemic discriminatory policies and other practices that serve as unlawful barriers to housing opportunity. Federal agencies must also be fully resourced to effectively implement fair housing and consumer-protection laws.

Black homeownership rates have fallen in part because Black homeowners have shorter spells of ownership than white homeowners.  Sustaining homeownership has received less attention than helping renters become owners. Loss of a home impacts not only the family experiencing foreclosure, but the expectations for homeownership of their friends and family. For older homeowners, foreclosure may not be recoverable due to approaching retirement. According to the Federal Reserve Bank of St. Louis, people of color experienced foreclosure rates significantly higher than comparable white homeowners. Early intervention, ex-ante counseling and COVID-19 related homeownership assistance are essential components of sustaining homeownership.

The first step to successfully reaching mortgage ready Black homebuyers is to complete a comprehensive marketing study to develop a targeted advertising and marketing campaign. This will be followed with a major national advertising campaign. Pre-pandemic there were 1.7 million mortgage-ready Black millennials who made $100,000 or more annually, according to Freddie Mac. At least 3 million Black households were identified as mortgage ready, and more than 2 million were able to meet income requirements, but didn’t have enough credit history to meet traditional requirements for home loans, Freddie Mac found. Why is this? Without detailed answers to this fundamental question, many of the strategies in this plan will be undercut by a lack of interest. There are likely many factors at play, including the impact of mass foreclosures and equity stripping in communities of color during the Great Recession, the multigenerational impact of racism on attitudes about the meaning of “the American Dream,” lack of informed parental support and guidance available to first generation homebuyers, who are disproportionally people of color; significantly higher levels of student debt despite high incomes; and other factors not yet identified. In the 1990s, homeownership among all people of color rose significantly. Moving the needle in the 2020s will require a concerted effort that is consistent with 21^st century marketing tools and outlets.