The National Association of Realtors laid out a five-point plan for how the real estate industry can step up to provide support in increasing the number of Black American homeowners.
While the homeownership rate for Black households has slightly improved and now sits at 44%, compared with an overall U.S. rate of 65.3%, it was only a year ago that it fell to 40.6%, which not only was the lowest level in the Census Bureau’s quarterly data going back to 1994 but was also the smallest share recorded for Black households since the 1950 decennial Census when it was 34.5%.
NAR Chief Economist Lawrence Yun said that “given the events of the recent weeks, it highlighted the progress, or lack of progress, among the African-American community,” adding that the access to homeownership is a critical source for building financial wealth.
Yun added that this list isn’t new, but rather, it’s something the association has been pushing for and highlights conversations and discussions that have been taking plans among members. The five-point plan includes:
- Build more homes to increase supply: Yun stated that since the pool of potential first-time buyers is higher in the minority population, if the industry can increase supply, it could help minority households lock in a home.
- Build more homes in Opportunity Zones: Yun posed the question: “Since the industry needs to build so many homes, why not build or sell homes in the Opportunity Zones to help revive some of those areas?” He added that there is even a tax break in certain geographically defined opportunity zones for developers to go in and build homes, helping the revitalization of economically-distressed areas.
- Increase access to down payment assistance: While family members are stepping in to help address affordability issues, NAR stated that it is still much more difficult for Black Americans to obtain substantial financial assistance from family members. They added that increased access to federal down payment assistance based on a certain income threshold is vital, particularly for Black Americans.
- Strengthen FHA’s loan program: Yun explained that many minority households are able to become first-time buyers by using FHA mortgages, making the product an important source of financing. NAR stated that shifting federal dollars to strengthen the FHA program could lower mortgage insurance premiums and monthly mortgage payments.
- Expand alternative credit scoring models: NAR outlined that expanding credit scoring models to include rent and utilities payments would help Black Americans boost their credit score. Yun also shared an estimate from the National Association of Real Estate Brokers that alternative credit scoring would open up buying to 115,000 Black Americans annually.
To turn these five points into tangible change, Yun suggested that Realtors should take these points with them as they speak with their local officials, showing their leaders the ways they can help minority homeownership. This is especially important since things like housing supply is often determined at the local level when it comes to zoning rules and fees.
Yun concluded by adding that the industry needs to ensure that it doesn’t make the mistakes of the past, especially 10 years ago with subprime lending. The homeownership rate for Black households fell more than seven percentage points from 47.8% at the start of the financial crisis to last summer’s record low after some predatory lenders focused on minority communities.
“We need to ensure successful homeownership, not just temporary homeownership,” said Yun.