Envisioning Transformational Change in Who Builds Wealth and How
(Above: Interior of the live/work units in El Camino Crossing, a mixed-use development in Santa Fe, New Mexico; Courtesy of Homewise)
What could the next 30 years bring? At Homewise we are working towards a future in which a growing and increasingly diverse spectrum of Americans have the opportunity to build intergenerational wealth and foster strong communities through homeownership. We believe that this work, if taken to scale and adequately resourced, could transform the distribution of wealth and opportunity in America within 30 years.
Homeownership is widely recognized as the primary mechanism by which Americans build wealth. It is also a powerful tool of neighborhood stabilization and community development; but homeownership is a tool to which only some Americans have access and from which some Americans benefit far more than others. Homeowners have higher net worth than renters, regardless of race; but White Americans are 50 percent more likely than Black or Hispanic Americans to own their homes.
White households also generate higher average returns from their housing investments than do African American and Hispanic households. This is due to differences in income and education as well as more insidious but equally pervasive factors such as racial segregation, predatory mortgage lending practices, devaluation of property in minority communities, and the heightened likelihood that families with few liquid assets have of experiencing foreclosure or other forms of distressed sale. White households are significantly less likely than households of color to be preyed upon by subprime lenders and/or lose their homes to foreclosure.
During the housing crisis of the previous decade, almost 8 percent of African American and Hispanic families lost their homes to foreclosure, compared to under 5 percent of White families, and while the ‘typical’ White family lost 16 percent of its assets during this time, the typical African American family lost over half its assets and the typical Hispanic family saw its wealth decline by two-thirds.
The uneven access and disproportionate risk non-White Americans confront in their efforts to become homeowners must be remedied if we are to fully harness the power of homeownership to reduce disparities and drive beneficial social change. Critical to these efforts are policies and programs that prepare people for homeownership and, once ready, provide them with resources, like down payment assistance, that enable them to purchase homes they can afford in neighborhoods of their choice. Cultivating successful homeowners also requires standing with them through financial setbacks and helping them to avoid foreclosure. Homewise does this work every day on behalf of ordinary New Mexicans, but delivering these comprehensive services at the scale needed to chart measurable progress at the national level requires a strong and well-resourced commitment in every state and at every level of government.
Peering 30 years down the road at a future in which the potential benefits of homeownership are fully realized for all Americans, we at Homewise see a country in which:
- Americans embrace affordable homeownership as a commodity beneficial to all and, rather than organizing to prevent affordable housing from going up in their neighborhoods, coalesce around more inclusive community goals that preserve everyone’s property values such as walkable streets and safe schools.
- Competition from responsible lenders for market share in communities of color deprives subprime mortgage lenders of access to their target demographic thereby decreasing the disproportionate financial risk many non-White households take on when becoming homeowners.
- Sufficient capital to support the growth of homeownership, especially among low-income households and households of color, flows from diverse funding sources. Recognizing the sweeping economic and social benefits of affordable homeownership, new individual and institutional investors and funders join longstanding supporters in making long-term, low-cost capital available to community lenders and developers of affordable homes. This vision stands in stark contrast to the current reality in which raising adequate capital remains an ongoing struggle for developers of affordable housing. Homewise obtains capital from numerous sources, some traditional and others, like the Homewise Community Investment Fund, both innovative and homegrown. The Community Investment Fund provides a diversified source of capital to support mortgage lending and successful homeownership in New Mexico as well as an opportunity for individual investors to generate quantifiable community benefits with their investment portfolio. Investments in the fund are pooled and used to finance fixed-rate mortgages for low- and moderate-income households, energy and water conserving home improvement loans and the development of affordable homes.
- Systematic under-investment in communities of color is displaced by well-resourced community development efforts that are driven by the needs and priorities of community members and increase the community’s capacity for sustainable economic growth. Here again, Homewise has undertaken, on a modest scale, the sort of efforts needed nationwide. The Community Development team at Homewise learns all it can about the communities in which Homewise works through surveys and direct outreach to residents and local businesses. This information drives the development of strategies that strengthen neighborhoods in ways that are responsive to specific community priorities, strengths and challenges. For example in Santa Fe, an extremely tight housing market with a dearth of workforce housing, Homewise builds new mixed-use developments to increase homeownership while simultaneously fostering proximity, walkability and neighborhood vibrancy. In Albuquerque, where the need for starter homes is less acute, but decades of sprawl development has decimated portions of the urban core, Homewise buys and restores empty residential and commercial buildings and then helps community members and local businesses back into them, so that locals are not displaced by rising property values. These redevelopment efforts preserve neighborhoods while also catalyzing new investment in communities that have experienced decades of disinvestment.
- The role of affordable homeownership in addressing broader social issues such as climate change, community health, and education is recognized and leveraged. Homeownership practitioners play a central role in the development of housing policy, but also in crafting policy solutions to broader issues that intersect with affordable housing, such as urban sprawl, chronic disease, and equitable access to high-quality public education. Through these intersections, strong partnerships and collaborations are forged between homeownership advocates and environmental advocates, neighborhood associations, community groups, employers, educators, economic developers, and numerous other traditional and non-traditional allies.
- Homeownership initiatives are adequately resourced and regarded as viable alternatives to subsidized rental housing rather than overly complex niche programs from which relatively few are permitted to benefit. Homeownership with a conventional 30-year fixed mortgage is more stable and often costs less than renting and is the only truly sustainable form of affordable housing. One-time down payment assistance paired with financial education and coaching can provide a permanent solution to a family’s housing problems without any additional costs to the public sector. As an investment, this compares quite favorably to the cost of paying the same family’s rent every month for years. It is our hope that 30 years from now, US housing policy reflects this fact.
- US anti-poverty policy recognizes and rewards the willingness and ability of low-income households to invest wisely in their financial futures and, in so doing, embraces truly sustainable, affordable homeownership solutions.
The next 30 years could see the emergence of a more equitable and prosperous America – one in which our housing and lending systems are purged of systemic inequities and the cycle of poverty is broken. Making this vision a reality will require hard work, thoughtful policy, and sustained public investments in the programs and processes that make homeownership more accessible and beneficial to the broadest possible spectrum of Americans.
Article by Kelly O’Donnell, who joined Homewise in 2021 as the Director of Homewisdom. Prior to Homewise, O’Donnell was a research faculty member at the University of New Mexico and a private economic and public finance consultant for governments and nonprofits in New Mexico and nationwide. Prior to that, she held a series of senior leadership roles in New Mexico state government including Director of Tax Policy, Deputy Cabinet Secretary for Economic Development and Superintendent of the New Mexico Regulation and Licensing Department and served as research director for New Mexico Voices for Children. She holds a PhD in Economics from the University of New Mexico.