LISC President Denise Scott takes a look at what it takes to promote homeownership for people of color and underserved communities, as inflation raises new barriers to access and affordability. From preservation and development programs to financial assistance strategies, “progress requires remedies focused on households that have been directly affected by unfair housing practices,” she writes.
The first quarter of 2023 has been a bumpy ride for the U.S. economy, and it has left a great deal of uncertainty about what comes next for inflation, interest rates, development activity and jobs—with new concerns about the banking sector exacerbating all those questions.
What we know, for sure, is that the people least able to withstand financial shocks are the ones who are hit hardest by this kind of upheaval. Economic uncertainty raises new barriers for communities that already face a host of challenges, from shuttered storefronts to low-paying jobs to access to healthy food. In the 40 years I’ve been working in community development, that difficult fact has always been a constant.
What is encouraging, though, is that our community development tools and talent have evolved over the years to help us address these concerns. We have programs today that didn’t exist at the outset of the 2007 financial downturn or even at the beginning of the pandemic. While the headwinds are still strong, we are better positioned to support our local partners, replicate promising solutions and make the case for policy action that has broad benefits.
Let’s look in particular at the housing market and ownership opportunities for people of color. The United States has been in the midst of an affordable housing crisis for decades, with racial disparities becoming more pronounced rather than less. You know the numbers as well as I do: 75 percent of white households are homeowners, while just 45 percent of Black households and 48 percent of Hispanic households own their homes.
Those numbers are a disgraceful illustration of how much discriminatory housing laws have stolen from people of color. Many of the housing industry’s marketing, underwriting and appraisal strategies still unfairly attach credit risk to skin color, even if inadvertently. And, in doing so, they limit wealth-building and economic growth for Black and Brown families for generations.
LISC is tackling immediate concerns, like financing gaps for affordable housing developments, while also breaking down the systemic underpinnings of housing discrimination. Toward that end, we are primarily focused on three key strategies.
Housing Preservation: It is absolutely critical that we help Black and Brown households hang on to their properties and protect their home values so they can pass on those gains to the next generation. That’s why home repair programs are, essentially, a housing preservation strategy. Through low-cost financing programs, we can help people avoid code violations and subsequent foreclosures, fend off speculative investors, and keep neighborhoods stable and healthy—offering long-term benefits that go beyond any one household.
Addressing heirs properties is another key preservation strategy. Having a clear title means families can better access financing and other funds, like state and federal disaster relief, to maintain the value of their homes. There isn’t enough good data on the scale of the heirs property challenge, but we do know that it is significantly impacting Black wealth across the South and in parts of the Midwest and West. It is a growing priority for LISC and other community development organizations.
Housing Development: Plain and simple, there just isn’t enough affordable housing—not in any state in the country. I hear about this from city officials and corporate executives all the time. They struggle to attract talent because there aren’t enough affordable homes for teachers, firefighters, health care workers and other essential employees.
Building more housing is far from simple. From zoning debates to skyrocketing materials costs to expensive project financing and insane land values, there are myriad roadblocks to progress. In places where affordable housing is most desperately needed, the cost to build homes often outstrips what low- and moderate-income buyers can afford to pay, and rising interest rates have pushed that opportunity even further out of reach.
LISC has continued to leverage our housing programs to support new development activity, and we are working on the policy front for remedies like the Neighborhood Homes Investment Act, which would make it more affordable to build and renovate homes for low- and moderate-income buyers, much like the Low Income Housing Tax Credit does for rental production.
When I testified recently before the Senate Finance Committee I shared why this legislation is so important: it has the potential to yield 500,000 new homes in rural areas, communities impacted by disasters, and other places where property values are lower than the costs to build or renovate. Half a million new homes would make a serious dent in the national housing shortage (estimated at 3.8 million units or higher, depending how you count). I am glad to see so much bi-partisan support for this and other urgent tax policy fixes.
Down payment assistance: In a rising cost environment, down payment assistance programs have to be big to succeed. There is no other way. They are most effective when part of comprehensive plans that connect the dots from homebuyer education to affordable mortgage financing to market level efforts to increase available stock for purchase, taking a real-world view of how hard it is for low- and moderate-income buyers, especially people of color, to compete for quality homes.
Even with the right partners and programs in place, 2023 is a difficult time to shepherd people through the process. But we can’t afford to take a step back and just wait out the current conditions. We have to keep at it. CDFIs need strong relationships with housing counselors to help families make smart choices, and we need strong relationships with philanthropic contributors to scale up assistance programs to meet current conditions.
We’ve been encouraged to see lenders step up with programs that specifically address gaps for Black and Hispanic homeowners, and we’re proud of our partnerships with financial institutions and others that are fueling the work of community-based groups, which are by far the best positioned to drive homeownership gains.
Programs like these recognize that there is no “lift all boats” approach to dismantling housing discrimination. The systemic bias is too deeply ingrained to simply ebb away as part of other housing efforts. Progress requires remedies focused on households that have been directly affected by unfair housing practices. We welcome your ideas and your partnership as we move forward.
About the Authors
Denise Scott, President
With more than three decades of experience in community development, Denise leads LISC’s investment in 38 local offices in cities and rural communities across 49 states with a firm commitment to ensuring local leaders have the platform and capacity to drive strategies for equitable community change. She is responsible for providing vision and setting the strategic direction for local offices and national programs and leading implementation of enterprise priorities like Project 10X. Denise previously served as LISC’s Executive Vice President for seven years. In this role, she elevated the field agenda and refined a service delivery system for national resources, investments and technical assistance to maximize LISC’s impact.
@LISCDeniseScott