The National Association of Realtors is calling on Congress to pass a $10 billion down payment assistance program for first-generation, first-time buyers. Additionally, the Federal Housing Funding Agency released its long-awaited plan for underserved markets for 2022-2024, which includes funding for manufactured housing, rural housing and affordable housing preservation.
The brokers’ initiative is part of efforts to address decades of housing discrimination that have prevented black and other minorities from owning property and creating intergenerational wealth.
In passing the original Build Back Better Act, HR 5376, the House included the Down Payment Assistance Program. But now, as the Senate scales back legislation to garner the necessary support for the reconciliation process to pass, NAREB believes it is essential that the down payment assistance provisions remain in the bill.
“For decades, black families and other families of color have faced housing discrimination that has prevented them from reaping the generational benefits of homeownership,” said NAREB President Lydia Pope. “As a result, many black families have not been able to pass down homes from generation to generation in their families, creating the wealth that can be used for down payments. That is why this bill is crucial. It helps to right the ship and put black families on the path to home ownership and wealth creation.
NAREB points to research that shows Black families lack funding for installments, as large-scale housing discrimination over decades has limited the accumulation of intergenerational wealth that can provide money for costs. upfront when buying a home.
Data shows that more than half of all US homes on the market are affordable for families earning at least $100,000 a year. Yet only 20% of black families in the country meet this income threshold.
Additionally, NAREB asserts that government policies have played a major role in limiting black property and wealth. For example, government-subsidized mortgages were the main driver of middle-class wealth. Yet the Federal Housing Administration was “obviously racist” with its mortgage insurance program. From 1934 to 1968, 98% of all FHA mortgages went to white families. Additionally, if even a black family lived in a neighborhood where a buyer was applying for a mortgage, FHA financing was denied.
NAREB cites the Urban Institute as saying an $80 billion down payment assistance program could provide more than 5 million families with a down payment of $15,000 towards the purchase of a home. Black, white and Hispanic families would be eligible. However, smaller annual budgets would be required for newly eligible applicants in future years.
Much of this research is supported by NAREB’s annual State of Housing in Black America (SHIBA) report, which details the status of black homeownership in the United States. The key findings of the report also show:
- For black, mainstream, and non-mainstream applicants combined, home loan rejection rates were more than double those of white applicants, at 16% versus 7%.
- Credit history is the second most common reason for rejection among black applicants (25%) and white applicants (19%).
- Overall, black applicants experienced a loan origination failure rate of 35%, compared to white applicants’ rate of 23%.
Despite the federal government’s lethargic attitude to the decline in black homeownership, some agencies seem to be taking notice of the issue. On April 27, the FHFA released the 2022-2024 Underserved Markets Plans for Fannie Mae and Freddie Mac (the businesses) under the Duty To Serve program.
The 2022-24 plans also include increased Low-Income Housing Tax Credit (LIHTC) loans and equity investments in LIHTC properties, with a focus on rural areas. Fannie and Freddie saw an increase in their annual investment cap for LIHTC equity last fall from $500 million to $850 million per year. The obligation to serve provisions are imposed by the Housing and Economic Recovery Act 2008.
“Providing sustainable liquidity for the preservation of affordable housing, rural housing and manufactured housing in a safe and healthy manner is integral to the responsibility of businesses to serve underserved markets,” said FHFA Acting Director, Sandra L.Thompson. “The additional activities and targets to be implemented under these plans are important steps for the companies to fulfill their duty-to-serve mandate in the years to come.”