The National Association of Real Estate Brokers is calling on Congress to enact a $10 billion down payment assistance program for first-time, first-generation homebuyers. Additionally, the Federal Housing Finance Agency released its long-awaited Underserved Markets Plan for 2022-2024 that includes funding for manufactured housing, rural housing, and affordable housing preservation.
The brokers' initiative comes as part of the effort to counter decades of housing discrimination that prevented Blacks and other minorities from becoming homeowners and building 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 pares down legislation to attract support needed for passage in the reconciliation process, NAREB believes it’s critical that the down payment assistance provisions remain in the bill.
“For decades Black families and other families of color have been victims of housing discrimination that has prevented them from reaping the generational benefits of home ownership,” Lydia Pope, NAREB president, said. “As a result, many Black families haven’t been able to pass down homes from generation to generation in their families, creating the wealth that can be used for down payments. That’s why this legislation is crucial. It helps right the ship and put Black families on a path towards home ownership and building wealth.”
NAREB points to research that shows Black families lack the funding for down payments because wide-range housing discrimination over decades has limited the accumulation of intergenerational wealth that can provide money for upfront costs when purchasing a home.
Data shows that more than half of all U.S. homes on the market are affordable for families that earn at least $100,000 annually. Yet, only 20% of Black families nationwide reach that income threshold.
Additionally, NAREB claims government policies played a major role in limiting Black homeownership and wealth. For example, government-subsidized mortgages were the main driver of middle-class wealth. Yet, the Federal Housing Administration was “blatantly racist” with its mortgage insurance program. From 1934 to 1968, 98% of all FHA mortgages went to white families. Furthermore, if even one Black family lived in a neighborhood where a buyer sought a mortgage, FHA financing was refused.
NAREB cites the Urban Institute which says that an $80 billion down payment assistance program could provide more than 5 million families with a $15,000 down payment for purchasing a house. Black, white, and Hispanic families would qualify. However, smaller annual budgets would be needed for newly eligible applicants in the coming years.
Much of this research is backed by NAREB’s annual State of Housing in Black America (SHIBA) report, which details the status of Black homeownership in the U.S. Key findings from the report also show:
- For Black applicants, conventional and nonconventional combined, denial rates for home-purchase loans were more than double those of white applicants—16% versus 7%.
- Credit history represents the second most prevalent reason for denials among both Black applicants (25%) and white applicants (19%)
- Overall, Black applicants experienced a loan origination failure rate of 35%, compared to a white applicant rate of 23%.
Despite the federal government’s lethargic attitude towards the declining Black homeownership rate, certain agencies seem to be waking up to the issue. On April 27, the FHFA published the 2022-2024 Underserved Markets Plans for Fannie Mae and Freddie Mac (the Enterprises) under the Duty To Serve Program.
The 2022-2024 plans also includes an increase in low-income housing tax credit (LIHTC) loans and equity investment in LIHTC properties–with an emphasis on rural areas. Both Fannie and Freddie saw an increase last fall in their annual investment cap for LIHTC equity from $500 million to $850 million annually. The Duty to Serve provisions are mandated by the Housing and Economic Recovery Act of 2008.
“Providing sustainable liquidity for affordable housing preservation, rural housing, and manufactured housing in a safe and sound manner is an integral part of the Enterprises’ responsibility to serve underserved markets,” FHFA Acting Director Sandra L. Thompson said. “The additional activities and objectives to be implemented under these Plans are important steps toward the Enterprises fulfilling their Duty to Serve mandate over the coming years.”
