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The top economist at the National Association of Realtors this morning released a statement offering a five-point plan to help close the racial wealth and homeownership gaps in America.
Protests in recent weeks following the murder of George Floyd at the hands of a Minneapolis police officer shone a powerful spotlight on racial inequality in America, and pushed many large corporations to collectively pledge billions of dollars to address the issue in its many forms, including Bank of America’s promise to spend $1 billion in four years on everything from affordable housing investments to health services focused on communities of color to partnering with historically black colleges and universities on hiring and research programs
NAR’s Lawrence Yun called for more homebuilding inside and outside Opportunity Zones, increased down payment assistance, more federal money for FHA loans and the expansion of alternative credit-scoring models. With homes providing the bulk of many families’ wealth and a large source of wealth transferred from one generation to another, many have argued that boosting the African American homeownership rate can help close the racial wealth gap.
The lack of for-sale housing supply, he wrote in a statement, drives up competition first-time buyers face, he said in a statement, and more housing in Opportunity Zones – frequently located in economically distressed areas – can help revitalize communities that have seen little investment in their housing stock. Broader access to down payment assistance programs can lower what is often the biggest hurdle for renters waiting to become homeowners, he said.
“In recent years, a growing number of first-time buyers received help from family members with their down payments. However, due to historical gaps in accessing and accumulating wealth, it’s much more difficult for African-Americans to obtain substantial financial assistance from family members,” he said.
Likewise, expanding FHA lending can create more low-cost opportunities for working-class African Americans to buy homes, he said.
Lastly, Yun urged lenders to reform how they evaluate credit-worthiness in potential homebuyers. Advocates of alternative credit-scoring models say FICO scores unfairly penalize many middle- and working-class people of color.
“Expanding credit scoring models to include rent and utilities payments – and thereby adding more positive payment histories to better demonstrate financial responsibility – can help increase homeownership opportunities for minority and first-time buyers,” Yun said.
