Best shot at narrowing racial homeownership gap at risk, progressives say

Housing advocates are warning that a once-in-a-generation opportunity to help close the widening wealth gap between Black and white families is in danger of being cut from a massive spending package as moderates look to reduce the overall price tag.

Rep. Maxine Waters (D-Calif.), who chairs the House Financial Services Committee, has been lobbying Democratic colleagues to protect the proposal, which would provide down payment assistance to first-generation homebuyers, in addition to other housing measures she says are being eyed by fellow Democrats as potential cuts.

Under the proposal, the secretary of Housing and Urban Development would be tasked with establishing and managing a new program with nearly $10 billion in funding.

That funding is seen as a key step toward helping first-generation homebuyers access thousands in down payment assistance, a move advocates and experts say could be groundbreaking in advancing equity in housing for Black people and people of color.

The gap between Black and white homeownership is now bigger than it was in 1968, when lawmakers first passed the Fair Housing Act to end racial housing discrimination.

Research from the real estate website Redfin last year found that the homeownership rate for Black families stood at less than 45 percent nationwide, compared to the 73 percent rate for white families.

Meanwhile, MIT has released research showing that Black Americans pay more than white Americans to own a home, making it harder for Black households to accumulate housing wealth at the same rate as their white counterparts.

In an interview with The Hill, Janneke Ratcliffe, associate vice president for the Urban Institute’s Housing Finance Policy Center, said it’s clear that the lasting effects of slavery and racist practices like redlining have contributed to the growing racial homeownership gap.

And that gap, Ratcliffe and others say, has played a role in racial disparities in wealth, as homeownership is one of the primary drivers of wealth-building in the country for many Americans. 

“By barring access to homeownership to one generation of people, and allowing another generation to start homeownership, and then wealth builds and compounded for those families who did have access to homeownership and did not do so for families that didn’t,” she said.

“As the result over the long haul, you’ve sort of built in this wealth advantage for white households, who then had more assets that they can use to pay for college and help their kids buy their first home and invest in businesses and so on,” she said.

Ratcliffe said research conducted by the Urban Institute has also shown how some of those disadvantages have embedded themselves areas such as lower credit scores for non-white households and less wealth.

The House Financial Services Committee approved the proposal for down payment assistance last month as part of a sweeping $300 billion the panel green-lighted for investments in affordable housing that has been lauded by lawmakers as historic.  

But it remains unclear whether the proposal — as well as others aimed at providing housing choices vouchers to thousands of people and creating and rehabilitating millions of affordable housing units — will make the final cut in the Democrats’ massive spending plan.

Party leadership has set their sights on finishing the package and passing it through both chambers by the end of the month using a procedure called reconciliation, which will let them pass the bill without Republican support in the evenly-split Senate.

But the party has had trouble remaining unified amid negotiations. As different factions have disagreed over the size of the package, particularly the initially proposed $3.5 trillion price tag of the final bill, members are at odds over what should be trimmed to reduce costs.

“All of this funding is now at risk of being cut from budget reconciliation entirely,” Waters said of the housing aid at a news conference earlier this week, where she was also joined by Reps. Emanuel Cleaver (D-Mo.), Sheila Jackson Lee (D-Texas), Nydia Velazquez (D-N.Y.), Nikema Williams (D-Ga.) and others.

“This is our chance. This is a once-in-a-generation opportunity to finally invest in our housing programs, our communities and our future and investment that is long overdue,” she said.

And housing advocates agree.

“If you want to advance equity, that you have to make a substantial investment in housing, because so many of our nation’s current barriers to advancement are tied to our nation’s legacy of housing discrimination,” said Nikitra Bailey, senior vice president of public policy at the National Fair Housing Alliance, said.

“You definitely have to have targeted intervention in the housing market and really what this is, is a down payment on the future of our nation,” Odette Williamson, an attorney at the National Consumer Law, told The Hill.

Other housing legislation also being considered as part of the Democrats’ reconciliation plan would allocate funding for the creation and preservation of affordable housing in certain areas, including those with high and persistent rates of poverty, unemployment and underemployment, as well as populations at risk of displacement due to rising housing costs. 

President Biden has proposed similar legislation as part of his Build Back Better agenda aimed at improving racial equity in the nation.

At a time the country has seen a historic rise in housing costs, Ratcliffe said there’s a “lack of equitable and affordable homeownership” in the nation, while adding a current home supply shortage also needs to be addressed. 

Senator Ron Wyden (D-Ore.), who chairs the Senate Finance Committee, introduced legislation earlier this year aimed at addressing the housing crisis. The bill would implement a $15,000 first-time home buyer tax credit that would be fully refundable.

But Ratcliffe said the creation of a new down payment tax credit for first-time homebuyers could have a diluting effect without the targeted proposal aimed at first generation homebuyers. 

“It’s going to dilute their equity is fast by making it available to all potential first-time homebuyers,” Ratcliffe said, “because instead of being focused just on the first-generation population, it’s going to be available to all people.”

“So, you’ll have some dilution of the capacity of such a tool to make some redress to the racial wealth gap and the racial homeownership gap,” she said. 

If bold action isn’t taken soon to address the disparities in the homeownership, Ratcliffe said projections by the Urban Institute show that racial gap that persists in housing is likely to increase.

“Based on current trends and without any interventions, we predict that the overall homeownership rate will decline slightly by 2040, and that the Black homeownership rate will decline even further,” she said.

While Bailey, whose organization has been working with the House Financial Services Committee to provide input in housing proposals, said “down payment assistance is not going to solve everything,” she called it a “critical first step” that must be taken to tackle existing housing disparities.

“We can bring in those families most burdened by our history, and the ongoing legacy of federal exclusionary housing policies.” Bailey said. “We made intentional choices that some Americans could have access to opportunity and wealth through housing policies, and those Americans have disproportionately been white.” 

“And now, we have an opportunity to bring in the very communities that we’ve left behind,” she said.