With the lingering issue of racial inequality, especially among African Americans, the National Association of Realtors (NAR) proposed a five-point plan below to drive up the number of African American homeowners and help narrow the ongoing homeownership rate gap between white and African Americans.
Below are the steps the NAR looks to take:
Increase the supply of new homes by building more: Due to lag in viable purchase options and competition driving up home prices, some potential first- time buyers have more difficulty gaining a foothold in the market.
Focus on opportunity zones to build more homes: These zones are strongly supported by the NAR as a way to invest in the revitalization of economically distressed areas.
Make down payment assistance easier to secure: Unlike some others, fueled by historical gaps in assessing and accumulating wealth, African- Americans experience more difficulty securing substantial financial assistance from family members, enhancing the importance of greater access to federal down.
Reinforce the Federal Housing Administration’s loan program: First- time buyers and minority households haven depended in these loans for financing. Mortgage insurance premiums and monthly mortgage payments could be lowered by shirting federal dollars to strengthen this program.
Expansion of alternative scoring models to include rent and utility payments: Doing so would add more positive payments histories to better reflect financial responsibility and perhaps abet homeownership opportunities for minority and first-time buyers.
Strategies like this seemingly assume added importance considering that according to data from a report from the Urban Institute, titled “How Economic Crises and Sudden Disasters Increase Racial Disparities in Homeownership,” the homeownership gap between people of color and white people often worsens in light of a recession because people of color are disproportionately harmed.
“A closer look at 285 metropolitan statistical areas suggests that rapid employment growth combined with increased supply constraints from zoning and other regulations contributed to this disproportionate price growth for low-price homes,” according to Urban’s report.
Unaddressed, these same supply constraints will “restrict the ability of low-income households to prosper as we emerge from the crisis and exacerbate income inequality.”
While African-Americans are subjected to disparities unrelated to economic cycles, these cycles still seem to exacerbate these differences. This could stem in part from black and Hispanic households that had greater vulnerability as the cyclical downtown became a reality, according to the institute
Added Redfin Chief Economist Daryl Fairweather: to buy homes even when prices were at their lowest point, meaning many missed out on opportunities to build wealth and put down roots in their communities through homeownership.”
"The growing racial homeownership gap has widened the wealth gap, as home equity remains one of the most significant wealth-building tools,” Fairweather continued. Now, with home prices higher and more rigid lending standards than prior to the housing crash of 2008, minorities find it difficult as ever to break into the housing market, which is likely to contribute to growing economic inequality in the U.S., he said.
Meantime, the recent uptick in mortgage applications to purchase a new home is butting up against a lack of supply, according to the NAR.
May housing starts slightly rebounded in May from the month prior, yet this marks two straight months of depressed levels, down from a year ago by more than 20%, stemming from the economic lockdown. Over perhaps the next three years, a large bump in new home construction is needed, the NAR stated.
Prior to the COVID-19 pandemic, the housing shortage—due to a string of years of underwhelming production of new homes—was about 5-6 million. Today, that shortage has gained momentum. This will culminate in escalating homes prices, further crimping the ability of first-time buyers to gain a foothold in the market and ratcheting up the importance of new home construction, said the NAR.