Presented to the City of Tampa Community Redevelopment Agency by Habitat Hillsborough CEO Tina Swain
In her book, “The Color of Money: Black Banks and The Racial Wealth Gap” author Mehrsa Baradaran suggests: “The wealth gap is where historic injustice breeds present suffering.” Indeed, we continue to see this in our own communities year after year.
Nearly 1/3 of Black renters pay more than half of their income on housing — higher than any other racial or ethnic group — leaving little in the budget for food, health care, transportation or savings.
In early 2020, Brookings released data indicating that the net worth of a typical white family ($171,000) is nearly 10 times greater than the net worth of a typical Black family ($17,150). These are sobering numbers. As a result, Black parents have dramatically less wealth, assets and economic security to pass on to their children, driving economic, educational and housing disparities for the next generation as well.
Not surprisingly, the gap in homeownership rates between white families (71.9%) and Black families (41.8%) is a significant contributor to the wealth gap. Homeownership continues to be the primary mechanism that American families use to build wealth.
An analysis of Habitat Hillsborough homes sold from July 2012 – June 2018 (41) where current online values were compared to the appraised value at the time of purchase to determine wealth accumulated showed:
Homeowners were 61% African American, 22% Hispanic and 17% other.
The average wealth accumulated from homes built during that period is $2.6 million, an average of $63,175 per household. The average wealth accumulated for African American homeowners in the sample is $66,253 and $52,397 for Hispanic homeowners.
In fiscal years ended June 30, 2019 & 2020, Habitat Hillsborough sold 13 and 23 homes, respectively.
If the average wealth accumulated of $63,175 is applied to these 36 homes, in the next five years we could see an accumulation of wealth of an additional $2.3 million from only two years of building. If we had the funding to increase our building efforts, the impact could be considerably greater.
The increased wealth accumulated by homeowners from the Habitat for Humanity affordable housing strategy is narrowing the wealth gap for minorities in Hillsborough County. Black Habitat for Humanity homebuyers are building equity and generational wealth.
On average, Black households started the COVID-19 crisis with higher housing cost burdens, lower accumulated savings, and fewer assets that could be liquidated to provide financial cushion during the shock. These “preexisting conditions” left Black households more economically vulnerable to the job losses caused by COVID-19. The result is a greater threat of housing loss during this crisis, and with it greater risk of virus exposure, stress, and negative impacts on children’s school performance.
Disparate housing conditions in turn are a likely contributor to the higher rate at which Black Americans are dying from COVID-19. Black families disproportionately live in substandard homes with conditions that increase rates of asthma and heart disease — two of the underlying conditions linked with greater risk of patients dying from the virus.
Hillsborough County and the City of Tampa elected officials can play a role in promoting wealth building opportunities for minority families through a variety of public policies. When making allocations of housing related funds, elected officials should carefully consider the role that homeownership plays in wealth building. With strong population growth projected for the foreseeable future, it is reasonable to assume that residential real estate will continue to be a wealth building asset for families who own homes in Hillsborough County. By contrast, renters will not share in the wealth building enjoyed by owners of residential real estate.
Given the recent focus on social injustices throughout the nation, especially as it relates to Black families, it is imperative that solutions to solving the wealth gap be examined. The extent in which Black families participate in homeownership wealth building will be impacted by local housing policies and funding allocations. Elected officials should consider the positive role they can play in promoting homeownership wealth building and should correspondingly ensure that a considerable portion of housing funding is aimed at homeownership.
Suggested Housing Policy Solutions
Given our history of local, state and federal policies that significantly disadvantaged Black families and communities, and given the clear housing disparities that persist, governments at all levels have an obligation to correct the harm and narrow these divides. As Chris Coleman, president and CEO of Twin Cities Habitat for Humanity in Minnesota, said: “We need to be as intentional about solving our ongoing racial segregation and economic disparities as we were in creating them.”
In particular, here are a few housing policy solutions that would begin to help our nation and local communities heal.
1. INCREASE OPPORTUNITIES FOR BLACK HOMEOWNERSHIP
Closing the homeownership gap is essential if we seek to end racial wealth disparities in and achieve true racial equality. Eliminating disparities in homeownership rates and home equity gain would shrink the racial wealth gap by 31% and 16%, respectively, according to a recent analysis.
Key strategies for closing the Black homeownership gap include:
a. Increasing access and funding to down payment assistance for Black homebuyers
DPA will be especially important during the recovery from COVID-19, as lost income has depleted savings for many renters, and banks are starting to require higher down payments in response to the crisis.
b. Increasing access to affordable credit for Black homebuyers
Use our voices and influence to be more proactive about extending mortgage and business credit to underserved, low-income and minority homebuyers and communities.
c. Investing in affordable homeownership
Even when down payment assistance is available, unaffordable home prices remain a major obstacle to homeownership in many communities. Expanding the allocation for homeownership activities through allocations of the federal HOME program and complementary state and local investments can help mission-driven builders such as Habitat for Humanity leverage private contributions to create lasting, sustainable homeownership opportunities. Resources for affordable homeownership are needed in all types of communities, including and especially communities with appreciating home values.
d. Retargeting the mortgage interest deduction to make it more equitable
The mortgage interest deduction for homeowners, or MID, is breathtakingly inequitable. It not only excludes renters but is inaccessible to many lower-income homeowners and provides the greatest tax benefits to high-income homeowners who itemize deductions and hold the most expensive mortgages. This tax subsidy is also very expensive. We can use our voices to advocate for limiting the credit to homeowners earning less than median income would free up scarce federal resources for other housing solutions that can help close the racial homeownership gap, improve affordability for renters, and help Black families move to communities of opportunity
2. INVEST IN DISTRESSED, RACIALLY SEGREGATED COMMUNITIES TO PROMOTE INCLUSIVE RECOVERY
Many formerly redlined communities and other highly segregated neighborhoods continue to suffer from disinvestment and economic distress. Significant reinvestment and thoughtful tax incentives should be targeted to these communities to spark recovery and opportunities for all residents.
a. Consideration for allocating more funding that would make it economically feasible to rehabilitate distressed homes for homeownership in communities with low home values and expand affordable homeownership opportunities for local residents.
b. Parallel public investments in home repairs and affordable homes are also important for ensuring existing residents can stay and benefit as neighborhood conditions improve.
c. Property tax relief for low-income homeowners can also help prevent displacement of existing residents in revitalizing neighborhoods or in localities where tax increases are planned to recoup losses due to COVID-19.
3. STOP PERPETUATING SEGREGATION: INCREASE OPPORTUNITIES FOR BLACK HOUSEHOLDS TO RENT AND PURCHASE HOMES IN COMMUNITIES OF OPPORTUNITY
a. Reforming zoning to allow mixed-income communities
Localities can make their zoning codes more racially and economically inclusive by supporting a greater diversity of homes in their communities. Helpful reforms can take various forms, including lowering minimum home-size and lot-size requirements, permitting duplexes and triplexes, allowing apartments in more locations, and minimizing discretionary review processes.
b. Building and preserving affordable homes in existing — and emerging —communities of opportunity
Local and state governments can help by increasing investment resources for affordable homes, incentivizing mixed-income housing developments, and making public land available in well-resourced neighborhoods at low cost for intentionally affordable homes.
c. Increasing the mobility of families with housing choice vouchers
Federal housing choice vouchers, in theory, help very low-income households afford modest rental homes in any neighborhood of their choosing. But landlord resistance, high deposit requirements, unaffordable moving expenses, and limited neighborhood familiarity often impede families from using vouchers outside of high-poverty, segregated neighborhoods.
Voucher mobility programs that include landlord outreach and mediation, tenant counseling and moving cost assistance can dramatically improve access to high-opportunity neighborhoods for families with vouchers.
4. INVEST IN AFFORDABLE RENTAL HOUSING
Local, state and federal investment in rental affordability is critical for remedying the disproportionately high cost burdens and housing instability experienced by Black households.
Greater investment in programs such as the Family Self-Sufficiency Initiative, including resources for more financial counselors, can help more participants in rental assistance programs save up for homeownership.
5. MINIMIZE THE DAMAGE AND COMPOUNDING EFFECT OF COVID-19FOR BLACK HOUSEHOLDS
A crucial, immediate step for remedying racial housing disparities is funding programs that prevent eviction and foreclosure for renters and homeowners during and after the pandemic.
Habitat for Humanity invites volunteers, donors, partners and policymakers of all backgrounds to join us in raising our voices in support of housing and land use policy reforms that increase racial equity and can help our communities heal. We are at a critical juncture. Now is not the time for small steps, but for bold action. With new clarity, intentionality and energy drawn from the profound challenges of 2020, our collective advocacy can make great progress toward achieving a more racially just and inclusive world. Together, we can ensure that every family — no matter who they are, where they live or how much money they earn — can build the foundation for a stable, healthy future for themselves and their families.