A Harvard Joint Center for Housing Studies study highlights a persistent gap in homeownership rates between white and non-white households. This exclusion of households of color from homeownership creates financial and social inequality and is attributed to past and current racist policies. The authors recommend implementing policies and programs to support historically disadvantaged households.
One such program that could help overcome a lack of savings and intergenerational wealth, which is one of the most significant barriers to buying a home among people of color, is downpayment assistance. The study assesses how many Black and Hispanic renters could purchase a home in their market area with up to $25,000 in assistance, as proposed in the Downpayment Toward Equity Act.
According to the study, $25,000 in financial assistance could help 1.1 million income-ready Black and Hispanic renter households aged 25-55 to afford homeownership by covering the 3.5% downpayment on a moderately priced home in their state, except Hawaii. This could increase Black and Hispanic homeownership rates in this age group by 8.0 and 3.2 percentage points, respectively.
Despite the suggested intervention, the study recognizes that the significant gaps in homeownership rates between white households and Black or Hispanic households of 31.8 and 20.6 percentage points respectively would not be completely eliminated. Furthermore, the effect on homeownership rates among Black and Hispanic households would differ from state to state, with the greatest potential impact in states with lower home prices and a higher proportion of middle-income Black and Hispanic renter households.
Moreover, the potential to narrow homeownership rate gaps with white households would mostly be among higher-income households. In high-cost states, virtually all income-ready households must earn over 120% of the area median income to afford a moderately priced home. Therefore, the analysis suggests that downpayment assistance programs would benefit higher-income Black and Hispanic households for whom barriers other than income are the main deterrent to homeownership.
Although down payment assistance would help increase Black and Hispanic homeownership rates, it wouldn’t be enough to close the gap entirely. The study suggests that flexible financing, shared equity programs, and special-purpose credit programs would be additional pathways to increase homeownership sustainably for these disadvantaged groups.
