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The Housing Gap: It’s Still a Problem
What REALTORS® Can Do to Better Serve All Coloradans
For decades, the real estate industry has been looking at what factors are contributing to the “housing gap,” a term often used to describe segments of the population who are not keeping up with homeownership rates of white families. There are various reasons: everything from access to credit, education, socioeconomic and social considerations, barriers due to race or ethnicity, discrimination, lending issues, and more.
Statistically, the United States overall has been seeing a gap of 30 percentage points between white and black populations, with Hispanic and Asian populations falling behind white homeownership rates by 25 percent and 14 percent, respectively.
Incredibly, in 1960, before the Civil Rights movement and Fair Housing laws, there was a 27-point gap between Black homeownership (38%) and White homeownership (65%). Why has this housing gap actually widened since then, and what can REALTORS® do to help? Over the years, real estate organizations such as the National Association of Real Estate Brokers (NAREB), the National Association of Hispanic Real Estate Professionals (NAHREP), the Asian Real Estate Association of America (AREAA), and the National Association of Gay & Lesbian Real Estate Professionals (NAGLREP) have done studies to learn about the obstacles that Black, Hispanic, Asian, LGBTQ, and indigent communities face in attaining homeownership. One of the main recommendations that comes out of this research is educating families and individuals on the process and benefits of buying a home. Many first-generation homebuyers do not have the knowledge of financial literacy passed down to them. In many cases, their parents and grandparents had never owned a home. Some populations report overall nervousness and fear about the credit/mortgage process and believe it will be difficult to get a mortgage.
REALTORS® can also make a difference by collaborating with their local housing officials, attending public meetings, volunteering for spots on planning commissions, and being at the table anywhere a
conversation about housing is happening. Taking the opportunity to learn how redlining and other exclusionary practices impacting the communities they serve is important.
The future client base for a REALTOR® is a diverse community. Does your business model think about the future of who your buyers will be?
Education is Key
• Black renters interested in becoming homeowners reported a lack of information (how to buy a home, get a REALTOR®, get a mortgage) as barriers to homeownership.
• Asian American and Pacific Islander homeownership rates may be directly positively impacted through education about credit history, credit systems, and the mortgage process.
• 56% of Hispanics believe it would be difficult to get a home mortgage, and the number of mortgage applications submitted reflect this belief, even with FHA/RHS loan types.
• LGBTQs continue to rent vs. own due to the drastic need for targeted education about the home buying and mortgage process. Over half of LBGTQ report feeling fearful about the credit/mortgage process.
Tools to make sure your clients are “mortgage-ready” are available on CAR’s Consumer Center and with your local associations. And of course, the period after buying a home is just as critical. Looking at a new homeowners’ budget, debts, tax obligations, and maintenance is an equally important part of sustaining homeownership. Educating clients around credit, mortgage, contracts, appraisals, insurance, inspections, and their rights if they experience discrimination are all ways that REALTORS® can ensure their clients become successful home owners.
Other Resources for Clients
First Time Home Buyers Savings Accounts: In 2016, CAR was also one of the first states in 2016 to implement the First Time Home Buyers Account “to meet people where they are.” A First‐time Homebuyer Savings Account allows any Coloradan to set aside up to $50,000 toward the costs of closing on a new home. The earnings on those funds — interest and capital gains — are free from Colorado state taxes forever.
Dearfield Fund by Gary Community Investments. Black first-time homebuyers can apply for down-payment assistance that can be used toward buying a home. The innovation comes when the homeowner sells or refinances. The homeowner then returns the original amount plus five percent of the home's appreciation “to support the next home buyer on their journey to wealth.”
Down Payment Resources. Since 2008, Down Payment Resource has maintained a centralized database of every homebuyer and down payment assistance (DPA) program in the country. The database can help potential homebuyers identify down payment resources for veterans, first-time buyers, people who work within certain professions (first responders, education, healthcare workers), people with disability, or programs to help people based on race or ethnicity.
How CAR is Working to Close the Gap
Thanks in part to CAR’s 2021 Century of Opportunity legislation package, high school graduation requirements now include financial literacy so that students have a better understanding of credit, debt, and student loans, as well as preparing for homeownership and retirement (HB21-1200).
Any REALTORS® who might want to get involved should collaborate in their local school district to volunteer to be a part of these discussions around financial literacy, credit, and homeownership.
The CAR Government Affairs Division has done detailed research on how access to credit in communities can minimize access to housing. “The biggest hurdle in diverse communities is making the down payment,” said VP of Government affairs Liz Peetz. “We know that affects additional costs over the life of the loan. For many diverse communities, entering the homebuying market later in life means a loss of $70,000 of lost wealth generation.”
The Century of Opportunity package also included HB211134, which allows for credit building through pilot programs that level the playing field for populations of color by giving renters opportunities to build their credit by being reliable, and responsible tenants.
“The Century of Opportunity legislation was developed and based on our NAR and diverse REALTOR® housing groups’ research showing that in diverse populations of color, there were barriers to accessing affordable homeownership. We wanted to take the conversations that we were all having about racial justice during the pandemic and turn that energy into impactful public policy that can positively open doors to homeownership for all Coloradans,” said CAR CEO Tyrone Adams. “We worked side by side with an amazing thought leader at Habitat for Humanity, who was also working on related issues and became our Century of Opportunity partner.”
CAR’s Government Affairs team and the Legislative Policy Committee hope to advocate for builders and developers with a "rent to own" model. This is becoming popular in places with land outside of the more expensive urban areas. “If you can build credit while renting, you are that much more prepared to enter into the homebuying process. A person can identify a house to rent, and then work their way into ownership,” said Peetz.
3 by 30
The Black Homeownership Collaborative, a new coalition of more than 100 organizations and individuals, launched a commitment to create 3 million new Black homeowners by 2030 through an ambitious 7-point plan.
The Black Homeownership Collaborative identified seven areas requiring attention to make it its goal possible within nine years: 1) homeownership counseling; 2) down payment assistance; 3) housing production; 4) credit and lending; 5) civil and consumer rights; 6) homeownership sustainability, and; 7) marketing and outreach. Among the actions called for by the group are increased funding for housing counseling services, a targeted down payment assistance program, and restoration of all legal doctrines and provisions of law that address systemic discriminatory policies.
The Black Homeownership Collaborative is led by a steering committee of executives from the Mortgage Bankers Association, NAACP, National Association of REALTORS®, National Association of Real Estate Brokers, National Fair Housing Alliance, National Housing Conference, National Urban League, and Urban Institute.
“The persistent gap in homeownership rates among Black and white Americans illustrates how racial inequality in our society translates into wealth inequality,” said Bryan Greene, vice president of policy advocacy at the National Association of REALTORS® (NAR). “NAR is pleased to join this dedicated group of widely-respected organizations in the Black Homeownership Collaborative to pursue our shared goals. We look forward to continuing our work to secure federal and local-level policies which will raise Black homeownership levels, strengthen communities, and improve the American economy.”
Other Initiatives to Create Additional Housing and Down Payment Resources:
In the recent report from the Colorado legislature’s Transformative Interim Report on housing, the recommendation is to spend unused COVID-19 relief dollars on 15,000 affordable homes. For perspective, Colorado usually builds around 40,000 homes in one year. Based on research conducted by the state of Colorado, the state needs 325,000 new homes per year for the housing market to return to a “balanced market”. Generally, a balanced market will lie somewhere between four and six months of supply.
Among dozens of affordable housing initiatives across the state, Governor Polis’ office is looking into new home products involving 3D printing prefabrication technology. They are also looking at commercial adaptive reuse and Denver’s City Council just approved miles of new zoning to allow for Accessory Dwelling Units along Colfax Ave.
New Federal Legislation: On April 14, 2021, lawmakers introduced 17 housing-related bills. One of them, the Downpayment Toward Equity Act of 2021, also known as the $25,000 First-Time Home Buyer Grant, addresses a related campaign promise of the Biden administration: To give Americans direct financial assistance to help them buy quality housing. This bill establishes a grant program through the Department of Housing and Urban Development for states and other entities to provide qualifying assistance to certain first-time, firstgeneration home buyers in purchasing a home.
Qualifying assistance includes down payment for mortgage, closing costs, reduction of mortgage interest rates, subsidies for shared equity homes, or certain preoccupancy modifications to a home to accommodate persons with disabilities. The Committee on Banking, Housing, and Urban Affairs held hearings about the Downpayment Toward Equity Act of 2021 on February 10, 2022. No votes were held and no changes to the bill were reported. The bill was introduced to Congress but has yet to be heard.
April is Fair Housing Month
CAR’s Diversity and Inclusion Committee has planned an array of educational opportunities to help REALTORS® keep their commitment to Fair Housing. Join us for engaging sessions, including: • History of the Fair Housing Act in Colorado • NAR’s Implicit Bias Training • A challenge to complete NAR’s Fairhaven Simulation • Daily practices to support diverse communities in your neighborhood
Visit http://www.coloradorealtors.com/fairhousing to explore these educational opportunities.
Join the Ranks for 2023-2024 CAR Leadership
CAR Officer Applications Due by April 7
CAR Leadership members manage CAR business; provide direction and leadership to our membership; and act on behalf of the CAR Board of Directors between its two annual meetings.
Why Get Involved As a CAR Officer?
1) Expand exposure for yourself and your firm. 2) Connect with people outside of your market. 3) Build leadership skills that will improve your business. 4) Represent at the local and state board level. 5) Provide valuable input in the decision-making process. 6) Form relationships with people who are experts in other disciplines. 7) Gain foresight into industry issues and trends. 8) Help CAR achieve its mission, goals, and priorities.
Openings for 2023-2024
Chair-Elect, Treasurer, District Chair-Elects, and NAR Directors.
