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It’s about righting the wrongs of decades of housing discrimination by turning redlined areas in the city into ‘green lined’ opportunities, where Black and Brown families can accumulate wealth through homeownership.
The Honorable Mayor Malik D. Evans
The development of affordable housing in Rochester, NY remains one of the most critical issues, as in many parts of the world, mainly in urban markets of the U.S.
Several factors have contributed to the myriad of challenges facing city leaders, in their quest to offer a best path forward to providing adequate, affordable, and attainable housing for their constituents.
This report will address 7 key gap areas, that when approached with new strategies, can help support a more innovative methodology to achieving more equitable results for the city, and their constituents
They are as follows:
1) The Cost Gap - This section addresses the effectiveness of reducing capital costs associated with traditional construction, with more cost-effective methods, e.g., prefab construction, volumetric modular construction, 3D printing construction, and other forms of mechanized building technologies
2) The Equity Gap - This section addresses the advantage of having more inherent equity built in on the front end for a new homeowner, based on the reduced costs of construction and the increased asset value of their new home.
3) The Appraisal Gap - This section addresses inequity of appraisal values, which take place far too often in urban markets, particularly inner-city neighborhoods, and how this can be mitigated utilizing a 4-square block UrbanVillages™ approach.
4) The Finance Gap - This section addresses the 30-year mortgage, how the banking industry has profited from this means of financing at the expense of LMI households, and how a more equitable approach for new home acquisition can be achieved through Shared Home Equity / Insured Lending Agreements (SHEILA™).
5) The Wealth Gap - This section addresses an effective means of building wealth for new homeowners, through the diversification of product types, and how this leads to a greater proportionate share of the overall wealth within a community.
6) The Workforce Gap - This section addresses the positive economic impact of partnering with the private sector, that leads to the creation of more jobs in the construction trades, project management, technology, and other professional service industries.
7) The Legacy Gap – This section addresses the clear and present opportunity for creating wealth that can be passed to the next generation, and how this can be a vital element for sustaining the black community for generations to come.
We do not propose to have all the answers for every problem in the complex landscape of closing gaps that has been decades, if not centuries in the making. We will, however, offer solutions that have been tried, tested, and proven to be successful and sustainable in other cities, and people groups, that share the similarity of having a significant BIPOC community.
It is remarkable how advanced we are in many aspects of society. Yet, when it comes to certain industries, we are still using technology that is antiquated and outdated, to say the least. One of the prime examples of this reality is the construction industry.
For centuries, buildings have been constructed from the ground up, using shovels, saws, chisels, hammers, nails, screws, and other materials that have been around for centuries. Is there a more efficient means of construction? The answer is yes, and when executed properly, can lead to some or all the following:
1) Reduced Capital Costs
2) Reduced Labor Costs,
3) Better Quality of Design,
4) Shorter Construction Timelines,
5) Better Site Management,
6) Better Material Efficacy,
7) Better Quality Control,
8) Better Energy Efficiency,
9) Better Budget Predictability, and
10) Better Proforma Outcomes.
In 1938, R. Buckminster Fuller, philosopher and inventor of the geodesic dome, coined the term “Ephemeralization”, defined as: The ability of technological advancement to do "more and more with less and less until eventually you can do everything with
nothing". It is the accelerated increase in the efficiency of achieving the same or more output (building affordable housing), while requiring less input (incentives and subsidies).
The application of materials and technology in modern cell phones, compared to older computers and phones, exemplify the concepts of Ephemeralization whereby technological advancement can drive efficiency in the form of fewer materials being used to provide greater utility
Fuller uses Henry Ford's assembly line, as an example of how Ephemeralization can continuously lead to better products at lower cost with no upper bound on productivity. The same case can be made in the development of next generation, more cost-effective affordable housing.
There are several more efficient means of construction we could showcase For this report however, we will focus on volumetric modular construction / off-site constructionThe process of assembling partially or fully enclosed, building modules in an offsite factory, setting, and then joining them together to construct one larger structure
It must be noted however, that the choice to utilize any construction methodology should be based on the specific project's requirements, site conditions, budget, and the goals of the developers. A careful evaluation of these factors will help determine which construction method is more cost-effective for a particular project.
The Stack House, Seattle, WA
The Stack House, located in the heart of everything, is footsteps away from the Amazon campus, Westlake center, and many famous restaurants and cafes. Stack House is ideal urban living to its core and is an affordable housing project that utilized modular construction. It reduced construction costs by 20% and completed the project 30% faster than traditional methods.
The Stack House in Seattle, as a case study, experienced cost savings due to modular construction methods, which included reduced labor costs, shorter construction timelines, efficient material use, quality control, and energy efficiency.
This successful project serves as an example of how modular construction can be a costeffective and efficient way to develop housing.
Daybreak, San Diego, CA
Daybreak by Hallmark Communities, is a newly modular-built collection of 3 and 4 bedroom solar townhomes with private backyards now selling in El Cajon. Walkable to schools, restaurants, shopping, and parks, this ideally located community is perfect for first time buyers and growing families looking to settle down in a historic San Diego neighborhood. CLICK
Remember how easy it was to stack those alphabet blocks you had as a kid? That’s the basic concept behind modular housing construction, a form of building that’s used to create homes and apartments. But if you’re thinking prefab and double-wide trailer homes, stop right there: LVL 4125, a 74-foot-tall apartment building that just opened in University City, the tallest building of its kind in the city, is hardly low-budget.
Alterra Property Group finished the six-story project in a mere 13 months; it would have taken closer to two years to build the conventional way. While the 15-foot-wide, 60foot-long modules were being built, a crew from Vaughan Buckley, one of the area’s largest modular builders, spent six months preparing the site and foundation.
The Pinion Park project was the first by the nonprofit developer Rural Homes. The offshoot of the Telluride Foundation helped persuade San Miguel County to donate the acreage for the 24 homes. The effort included grants and low-interest loans from major philanthropic groups that have identified housing as a critical health issue facing Coloradans.
The developer negotiated low-interest loans for local workers whose salaries do not come close to affording the price of homes around Telluride. The combination of grants, philanthropy, modular homes designed in a Buena Vista factory and no short order of patience by the builders and homebuyers has yielded a model for housing local workers… where home prices have more than doubled in recent years.
The following images are links to 25+ single-family homes, built in the Upper Northeast, via the modular construction method. Click on the links for virtual tours of each property.
Day 2 of the Living Cities site visit, on a tour of the International Plaza, the new Latin-themed event space and marketplace on N. Clifton Avenue. Curated by City Council President, Miguel A. Melendez, Jr., and colleague, the venue showcases local entrepreneurs and/or existing businesses who can locate and sell their products and services in a low risk, low cost, flexible environment that is an incubator for neighborhood economic development.
It is no secret that many Americans live paycheck to paycheck. According to recent data by The Federal Reserve in their report entitled: Economic Well-Being of U.S. Households in 2022, shared the following stats:
1) Consistent with declines in overall financial well-being, 63 percent of adults said they would cover a hypothetical $400 emergency expense exclusively using cash or its equivalent, down from a high of 68 percent in 2021.
2) When asked for the largest expense they could cover using only savings, rather than how they would pay a small emergency expense, 18 percent said the largest expense they could cover with savings was under $100 and an additional 14 percent said the largest expense they could cover was between $100 and $499.
3) Inflation affected people’s spending and saving choices in several different ways. Nearly two thirds of adults stopped using a product or used less because of inflation, 64 percent switched to a cheaper product, and just over one-half (51 percent) reduced their savings in response to higher prices.
In 2021, the Rochester Beacon published an article entitled: A Racial Divide in Home Values, in which it noted that “The Rochester area ranks ninth worst in the nation in disparities between white and Black homeowners’ property values.” Couple this statistic with other key socio- economic factors that particularly plague the Black community, it is no secret why many would-be Black homeowners do not have the upfront
10%, 5%, or even 3% equity required as a downpayment for the purchase of the home.
Source: U.S. Census Data
For this reason and more, the potential home buyer must seek upfront equity from other sources, e.g., FHA, VA, USDA, State Housing Finance Agencies, Local DPA programs, NonProfits, Neighborhood Stabilization programs, Good Neighbor Next Door programs, Employer Assistance programs, Native American Home Loan programs, and others.
There is a colloquial phrase that says, “Cash is king.” In the world of real estate however, a more appropriate phrase is “Equity is king.” Helping first-time or new homebuyers who are Black, walk through the front door with more equity, and accumulate it in a more expeditious timeframe, is one of the most important steps in closing the gap in Rochester.
Creating more equity for the homebuyer can be accomplished through a series of steps, that require all parties in the total transaction equation, to equitably shoulder a part in a true risks/rewards deal structure More will be covered on this in the section entitled: The Finance Gap.
1) Two Parties (Lender and Buyer) come together in a Partnership Agreement to purchase an asset. In this case “the house.”
2) Each Party contributes their monetary share towards the purchase price of the house. The Buyer contributes capital in the form of a down payment and the Lender’s capital contribution is the financing amount.
3) The Buyer uses the home for his or her benefit, rent is paid to the Lender for using their share of the property The rent is the “profit” the Lender derives from investing in this partnership.
4) The Buyer acquires the property from the Lender over a 10, 15, 20, or 30-year term of monthly payments. Over time, the Buyer becomes the sole owner of the property.
DEFINITION: Musharakah is a joint enterprise or partnership structure in Islamic finance in which partners share in the profits and losses of an enterprise. Since Islamic law (Sharia) does not permit profiting from interest in lending, musharakah allows for the financier of a project or company to achieve a return in the form of a portion of the profits according to a predetermined ratio. However, unlike a traditional creditor, the financier also will share in any losses should they occur, also on a pro rata basis. Musharakah is a type of shirkah al-amwal (or partnership), which in Arabic means
1) A Subsidy is applied to reduce the purchase price of new or existing homes within a certain area of a city, to a level affordable to homeowners at the target median income level.
2) Sale/Resale Restrictions are put into place requiring that the home be sold, and eventually resold, to buyers meeting certain qualifications.
3) The Agreement can be enforced by the city, an affordable housing agency, a CDC, a CHDO, or selfenforced. The agreements, however, need to be actively monitored by an entity with an interest in maintaining ongoing affordability for the community at large.
4) MPDU’s (Moderately Priced Dwelling Units) are built pursuant to stipulations in the deed restrictions, limiting how units can be sold/resold; ensuring they only go to those who meet approved affordable eligibility standards.
DEFINITION: Deed restrictions are written rules and regulations that spell out what a piece of land or property can and can't be used for. In general, a deed restriction applies to the property itself, regardless of who owns it any given time. Deed restrictions can impose different types of restrictions, including: 1) How the property is used (i.e. residential, commercial, etc.), 2) The type of activities that can be carried out on the property, and/or 3) What kind of structures can be built on the property
1) A Family purchases a “share” in the cooperative rather than a standard property interest in the home, thus becoming a member.
2) Each Member of the cooperative receives a right to occupy one unit, as well as a vote on matters of common interest.
3) The Cooperative members share responsibility for maintaining common areas and admitting new members.
4) Share Price/Value is set by a formula contained in the co-op’s bylaws, subscription agreement, and stock certificates.
1) A Family or individual purchases a house that sits on land owned by the community land trust.
2) The purchase price is more affordable because the homeowner is only buying the house, not the land.
3) The homeowners lease the land from the community land trust in a longterm (often 99-year), renewable lease.
4) The homeowners agree to sell the home at a restricted price to keep it affordable in perpetuity, but they may be able to realize appreciation from improvements they make while they live in the house.
5) The community land trust balances the interest of its residents, the broader community, and the public interest to promote wealth building, retention of public resources, and solutions for community needs.
Published in 2006, John Emmeus Davis, then Research Fellow for the National Housing Institute, authored the publication entitled: Shared Equity Homeownership – The Changing Landscape of Resale-Restricted, Owner-Occupied Housing.
In the Preface Alan Mallach, then Research Director for the NHI wrote: “John Emmeus Davis, one of America’s leading authorities on shared equity housing, provides a detailed description of the principal shared equity homeownership models, and the policy and design issues they raise.
Davis also examines the criticisms that have been raised. While recognizing that many issues remain unresolved, Davis clearly establishes the value of shared equity homeownership as a means of providing and maintaining affordable housing and strong neighborhoods.”
CLICK HERE for the full version at Shelterforce.
Source: The John Davis report on shared equity models, published by the National Housing Institute in 2006
Affordable housing remains a critical issue in many parts of the world, with the appraisal gap being a significant hindrance to its development.
The Rochester area ranks ninth worst in the nation in disparities between white and Black homeowners’ property values. Homes in predominately white Rochester-area ZIP Codes are worth 321 percent more on average than homes in the city’s predominantly Black neighborhoods, a newly published report found.
In Rochester, the comparison was between an average value of $60,656 in predominantly Black neighborhoods and an average value of $255,403 in predominantly non-minority neighborhoods.
In Erie and Niagara counties, the BuffaloCheektowaga-Niagara Falls area also made the 10-highest property value disparity list, ranked 7th highest with Black-owned homes with an average $74,839 value versus $350,361 for non-minority owned homes’ values.
Source: Real estate data firm Clever and Dream Builders 4 Equity
In a recent report by The Brookings Institute entitled: How racial bias in appraisals affects the devaluation of homes in majority-Black neighborhoods, it was noted that “homes in Black neighborhoods are valued roughly 21% to 23% below what their valuations would be in non-Black neighborhoods.” This is the unfortunate circumstance commonly known in the real estate industry as “Appraisal Bias.”
It should be noted that Fannie Mae guidelines state that "Comparable sales from within the same neighborhood (including subdivision or project) as the subject property should be used when possible. Sale activity from within
the neighborhood is the best indicator of value for properties in that neighborhood as sales prices of comparable properties from the same location should reflect the same positive and negative location characteristics.”
This report assesses the efficacy of reducing the appraisal gap costs of affordable housing through volumetric modular construction, and the consolidation of building resources in a concentrated area of a city, to maximize the impact of new builds, and new renovations, which directly affects the positive appraisal values of surrounding neighborhoods. This is known as the UrbanVillages™ approach.
In years past, a 1-mile rule was what most appraisers used for comps. However today, it depends on the individual underwriter, and on which location box they check: Urban, Suburban or Rural.
By focusing key development assets to lift a 4-square city block area, a de facto appraisal bias-free zone is established. Every house, on a city block should be either newly renovated, or newly built. Then, the next or adjacent block should be approached in the same fashion. This process should be repeated until a 4-square block area is completed.
When this happens, it has the same net effect as when a military unit establishes an FOB or Forward Operating Base, in hostile territory, to form a green zone, that established safer logistical channels for the supply chain. In the case of the UrbanVillages™ model, using the 4-block approach ensures a greater form of fiscal maximization, as the city’s investment of land, incentives, and subsidies, are not depleted via a scatter gun approach.
(Continued on page 22)
Day 2 of the Living Cities site visit, on a tour of the Edna Craven Estates, a 164-unit multi-family, and townhome development. The tour, curated by Carol Wheeler, Manager of Housing at City of Rochester, NY, showcased one of the newest affordable housing efforts by the city, in support of its residents.
Day 3 of the Living Cities site visit, in the council chambers, against the backdrop of a convening of various stakeholders from throughout the city. LaKeeshia Fox, Associate Director of Strategy for Living Cities, addresses those in attendance and shares critical data, which will help to spur the conversations of the
When added together with a concentrated deployment of development assets within a 4square block sector of a city, volumetric modular construction, supports a very promising model for closing the appraisal gap.
Benefits a city can expect to realize from using the UrbanVillages™ approach, are as follows: 1) Improved appraisal perimeter, 2) Lower crime rate, 3) Greater sense of safety, 4) Improved support for local school district, 5) Better roads and maintenance, 6) Improved community amenities, 7) Enhanced conditions for the elderly, 8) Improved sanitary
conditions, 9) More safe, walkable green spaces, 10) and more.
To harness the full potential for equity in the appraisal gap cost disparities, it is recommended that: 1) Local governments streamline permitting and zoning processes for modular construction, and 2) Developers consider the long-term cost savings and energy efficiency benefits of modular construction.
Health and Well-Being: Urban Villages™ spaces that are designed to promote regular physical activity. Knowing that chronic diseases like obesity, diabetes, and cardiovascular conditions are at all-time highs in inner cities, access to well-maintained recreational spaces help to encourage the overall health and well-being of residents.
Social Interaction: The nature of the human ecosystem of Urban Villages™ fosters a strong sense of community. Residents have easy access to amenities such as parks, plazas, cafes, and community centers, which serve as gathering places for social interaction and cultural exchange.
Green Spaces: Urban Villages™ prioritize sustainability through features such as green building practices, energy-efficient design, and access to parks and walkable spaces. These initiatives enhance environmental quality, promote human movement and contribute to an overall higher quality of life for residents.
Density: By concentrating development in a compact footprint, Urban Villages™ promote higher population density. This density supports efficient land use, reduces urban sprawl, and helps to preserve natural areas and farmland on the outskirts of cities.
Mixed-Use: Urban Villages™ typically incorporate a mix of residential, commercial, and recreational spaces within a compact area. This mixed-use approach encourages walkability, reduces the need for car travel, and fosters vibrant, pedestrian-friendly neighborhoods.
Transportation: Urban Villages™ are well-connected to public transit networks, including buses, trains, and light rail. This accessibility to transit options encourages residents to use public transportation, reducing congestion and air pollution while providing convenient mobility choices.
Culture and The Arts: Urban Villages™ incorporate amenity centers for community learning, cultural and arts, featuring galleries, theaters, music venues, and public art installations. These creative hubs add to the cultural richness and diversity of cities, attracting visitors and fostering a sense of identity and pride among residents.
Lower Crime: Urban Villages™ foster lower crime rates through increased human interaction, safe public spaces, and enhanced surveillance. Tight-knit neighborhoods, social cohesion, and shared responsibility contribute to safer environments, reduction in incidents of crime, a lessened Public Safety cost burden on cities, and enhanced residents' sense of safety and security.
Affordability and Diversity: Urban Villages™ provide a range of housing options, including apartments, townhouses, and condominiums, at varying price points. This diversity of housing types and affordability levels promotes socioeconomic diversity and helps to address housing affordability challenges in urban areas.
Workforce Development: Education and training programs within Urban Villages™ help prepare residents for employment opportunities in various sectors of the economy. By attaining skillset training and certifications, residents can access higherpaying jobs and contribute to their local economies, which benefits local cities.
Once a potential new homeowner has gone through the required credit worthiness test, fits the appropriate debt-to-income ratio profile, completed the necessary “financial literacy” courses, they may get approved for the DPA.
However, the next challenge they face for the next 3 decades, is making good on payments for their “affordable” 30-year mortgage, managing the increasing costs of utilities, managing the ongoing costs of repairs and maintenance, keeping up with their property taxes, and more.
The American Dream, for some, can turn into a nightmare; especially if they are not fully prepared and equipped to handle the “total cost” of a 30-year Mortgage.” Financing a real estate transaction can be one of the most complicated things a person does in the entire life. On top of that, once you have closed the deal, moved in, and realize that no one is going to show up to change the light bulbs, fix the sink, cut the grass, or shovel the snow, the realities of ownership begin to set in.
Rev. Jesse Jackson once said “Your house is your first small business. It’s where your investment is and [where] your greatest asset is.” These are profound words. Why? Because most people do not view their new house as a business. Rather, they see it as an ongoing series of expenses that they signed up for, for the next 30 years.
Ironically, both the builder and the bank, view their transactions with the buyer through the lens of a business entity. Both are doing business and incorporated, while the buyer is merely a consumer; the lesser of the two sides in a deal. Is there a different way to approach this very import transaction? Absolutely.
The origin of mortgages can be traced to the reign of King Artaxerxes of Persia, who ruled modern-day Iran in the fifth century B.C. The Roman Empire formalized and documented the legal process of pledging collateral, to set up loans and charge borrowers interest
First, the Fiducia, Latin for “trust” or “confidence,” required the transfer of both ownership and possession to lenders until the debt was repaid in full. Ironically, this arrangement involved no trust at all.
Second, the Pignus, Latin for “pawn,” allowed borrowers to retain ownership while sacrificing possession and use until they repaid the debt.
Finally, the Hypotheca, Latin for “pledge,” let borrowers retain both ownership and possession while repaying debts.
Excerpt taken from “A brief history of the mortgage, from its roots in ancient Rome to the English ‘dead pledge’ and its rebirth in America.” – CLICK HERE
Home Value $180,000
Down Payment 3% ($5,400, one-time)
Interest Rate 8% (Nat’l avg. as of 10.23.23 - Forbes)
Loan Term 30 years
Property Tax $2,916 (1.620% of Assessed Value)
PMI N/A*
Home Insurance $1,200 (per year)
Loan Type FHA
Monthly Payment Summary
Monthly Payment $1,281
Monthly Property Tax $243
Monthly Home Insurance $100
Annual Out-of-Pocket $19,488
Totals
Total Mortgage Paid $461,215
Total Interest Paid $286,615 (> 2x purchase price)
Total Tax Property Paid $87,480
Total Home Insurance Paid $36,000
30 YEAR TOTAL COST $552,295 (> 3x purchase price)
NOTE: Amounts rounded to nearest hundredth. Total cost does not include costs of utilities, repairs, maintenance, and other expenses. In this 30-year model, it takes Buyer at least 10 years to build 20% equity in home
One of the best ways to create upfront equity for a new home buyer is to find a property listed below its market value and/or maximize the down payment. Can you create this scenario with a new built property, and have the same net effect of a purchasing a below market and having a larger down payment?
But aren’t many people living paycheck to paycheck? Are there other ways that city governments can support a better playing field for builders, buyers, and banks? Are there better ways to lower the costs of housing, without sacrificing quality and craftmanship?
Is it possible to offset the rising costs of building materials, increased labor costs, scarcity of debt financing, and other inflation factors?
The answer to all these questions is yes. It is possible to build a better product, at a lower cost per unit (volumetric modular construction), pass the savings on to the end user, i.e., the new homebuyer, and invite banks to participate in the deal by offering alternative methods of funding which, does not require a traditional downpayment, nor an interest rate attached to a loan.
With the added savings of a better built product at a lower cost of construction, that appraises at a better fair market value; the builder can pass the savings to the buyer via a mechanism called “Transfer of Shared Equity”. It is very similar to a “Gift of Equity” one would convey to a family member, but within the deal structure of an “Investment Partnership” between a builder, a benefactor (non-profit), a buyer, and a bank.
When properly executed, it can create instant equity for a new home buyer, with the added benefit of a shorter timeline to paying off a 10year loan, as opposed to a 30-year mortgage.
Loan Type Term
Home Value $180,000
Down Payment 3% ($5,400, one-time)
Interest Rate 0% (Based on SHEILA™ Model)
Loan Term 10 years
Property Tax $2,916 (1.620% of Assessed Value)
PMI N/A*
Home Insurance $1,200 (per year)
Monthly Payment Summary
Monthly Payment $1,455
Monthly Property Tax $243
Monthly Home Insurance $100
Annual Out-of-Pocket $21,576
Totals
Total Loan Paid $174,600
Total Interest Paid $0 ($0 on top of purchase price)
Total Property Tax Paid $29,100
Total Home Insurance Paid $12,000
10 YEAR TOTAL COST $215,700
NOTE: Amounts rounded to nearest hundredth. Total cost does not include costs of utilities, repairs, maintenance, and other expenses. In this 10-year model, Buyer walks in the door with approximately 20% equity in home
Index Investment Account
Term 10 years
Return Rate 10% (Indexed to the S&P 500)
Starting Amount $24,600
Earned Interest $39,206
End Balance $63,806
NOTE: Starting amount funded by collateralization of 30% transferred equity in home via Builder After 10 years, all earned interest is paid to Bank in lieu of 0% loan, and Buyer is refunded original starting amount.
A Maine bank is offering a first-of-its kind home loan in the state. Because it's geared toward Muslims, there's technically no interest charged for it, so the cost is structured differently.
It's difficult to say just how many Muslims are in Maine. Some estimates put it around 15,000 people. Many might avoid getting a home loan altogether because of their religion.
“The deal is structured in a way that provides more security for the homeowner, a balance of risk and interest on both sides,” Ahmed Mitchell said.
“This is an alternative way of financing home ownership,” Greater Portland Immigrant Welcome Center Executive Director Reza Jalali said. “The bank still makes money,”
The Greater Portland Immigrant Welcome Center says it approached Androscoggin Bank about the need for this. CLICK
Stephen Ranzini runs University Bank in Michigan, and he prides himself on serving the local community. But one day, a Muslim man walked into his office and said: If your bank is so great at community service, how come you're not serving my community?
According to many scholars, Islamic law prohibits charging interest. Interest, of course, is fundamental to banking. Stephen Ranzini decided to find out: Is it possible to do what a bank does without charging interest?
UIF Corporation is the faith-based subsidiary of University Bank, Member FDIC, located in Ann Arbor, Michigan. As of the airing of this episode, UIF had made $850M+ worth of Islamic-compliant mortgages. They signed a Home Acquisition Master Commitment from Freddie Mac, which helped create a secondary market for Sharia-compliant loans to assist in home acquisitions by Islamic homebuyers.
A customer showed up at little Devon Bank on Chicago's North Side, asking for a loan to open a neighborhood shop. But there was a hitch, the would-be borrower explained: "We can't pay any interest. Can you help?" At the time, seven years ago, the answer was: "Nope," recalls David Loundy, Devon's vice president and legal counsel.
That was then. Since fielding that first request, Devon Bank has transformed itself into a specialist in the kind of no-interest Islamic financing the customer was seeking. Islamic financing now accounts for more than 75% of the bank's mortgage portfolio, Loundy says.
Speech - Thomas C. Baxter, Jr., Executive Vice President, and General Counsel, Federal Reserve Bank of New York.
U.S. financial institutions are beginning to recognize the importance of the Islamic financial market. Major U.S. banks, such as Citigroup, now operate Islamic windows abroad.
In New York, HSBC Bank USA currently offers three products principally targeted at Muslim consumers: Murabaha Home Finance (through HSBC Mortgage Corporation), HSBC Interest Free Checking, and HSBC MasterMoney® Debit MasterCard®.
SHAPE Financial Corporation has developed a number of proprietary sharia-compliant products that are currently sold through University Bank in Ann Arbor, Michigan. These include an ijara-based mortgage substitute and a profit-sharing deposit product.
Whether buying a home is the best investment for an average person / family, depends on a wide range individual circumstances, financial conditions / goals, and the broader socioeconomic landscape for Black Americans and BIPOC communities Yes, owning a home can be a valuable investment for many, but it's a complex and nuanced decision, one that is not a one-size-fits-all solution.
The Elephant in the room is this. In what world is going into debt for the next 30 years, paying in excess of 3x the initial cost of goods, being responsible for all of the upkeep, repairs, and management of the asset, having to de-risk the investment by paying a monthly insurance premium for both the debt on the asset (PMI) and the contents of the asset (HOI)?
Add the fact that you’re paying asset (property) taxes, that if ever defaulted on, you can lose all your investment to someone who can simply pay the back taxes, then walk away with all the cost you’ve incurred, to date. Still think that’s a good deal?
According to the Federal Reserve, in the United States, the average Black, Hispanic or
Latino households earn about half as much as the average White household and own only about 15 to 20 percent as much net wealth.
As seen in the image below, this wealth gap has widened drastically over the past few decades (left panel). At the same time, overall wealth inequality, as measured by the Gini in the right panel, has also grown.
The illusion of wealth and having real wealth are two distinct concepts that can reflect completely different financial and material circumstances. Understanding the differences between the two is essential for sound financial decision-making and achieving long-term financial security.
For many in the Black community, the wealth gap seems out of reach. But if we peel the onion of what is real wealth, then focus on becoming more literate and knowledgeable about wealth and how to make, manage, and multiply it, those who are in the Black community can realize living their dreams.
While it's not technically a game, managing and reducing debt quickly and effectively
can be seen as a financial challenge However, with the right strategies, and tools, you can certainly "win" by achieving financial stability and freedom, which in turn puts you on the best footing to accumulate wealth.
Winning in the Game of Debt when it comes to purchasing / owning a home is one of the best ways to accumulate wealth at a more exponential rate.
As stated earlier in the section, closing the wealth gap, especially when it comes to racial or socioeconomic disparities, is a complex issue influenced by a range of factors. However, homeownership can be one part of a broader strategy to address wealth inequality. Here's how buying a house can help you build wealth, and how it fits into the overall goal of closing the wealth gap:
1) Equity Building: When you own or control a home, you can build equity (e.g., debt that has been liquidated) as you pay down a mortgage or loan, preferably a loan as discussed in the section entitled: The Finance Gap. Over time, as a property's value appreciates, so too will your wealth position increase.
2) Stability / Long-Term Investment: For a person, partnership, or family, owning a home can provide stability and a long-term investment opportunity. It can help establish financial roots, which often is associated with social and economic stability.
3) Generational Wealth: Passing down a home to the next generation can be a way to create generational wealth, which is crucial for closing the wealth
gap, especially for those in the Black community.
4) Asset Control / Ownership: A home is an asset that can be owned in several different ways. Which way works best for you is for another discussion. However, your home can be owned via a family trust, an LLC, or a number of other suitable entities, which give you the benefit of ownership, minus the liabilities, which can sometimes be associated with ownership of assets.
5) Tax Benefits: Homeowners may be eligible for certain tax benefits, such as mortgage interest deductions, writeoffs for having a home office(s), deductions and depreciation of equipment used in the course of managing your asset (home), and more; all of which can help reduce one’s tax burden.
Redeveloping parts of the City of Rochester, incorporating innovative means for building, such as in the use of volumetric modular construction, supports an opportunity to create a workforce for the next generation of youth, who need good paying jobs. A means to the formation of this workforce, can be realized via the incorporation of employeeowned cooperatives (or coops) - businesses owned and controlled by the people who use their services or who work there. Supporting workforce development through coop ownership is a promising strategy, that empowers employees, fosters economic stability, and enhances job security.
Through automated modular home construction, the entire building industry is shifting much of the production of homes to factories, like in the image seen above. This innovative way to build, creates new jobs,
reduces construction time, cuts debt and material costs, answers the shortage of skilled workers challenge, supports eco-sustainability, and can be a huge financial shot in the arm for a community who opens its arms to one
Day 2 of the Living Cities site visit, on a tour of Buy the Block development in the 14614 area of Rochester, NY. The single-family home shown in the photo (under construction) is one of many new homes being built with subsidized funds, to “green line” the area.
Real estate has long been a popular vehicle for wealth preservation and transfer. Leaving a financial legacy through real estate is a strategy that involves using real estate investments to first build wealth, and then convey it to one’s heirs and survivors, for the benefit of future generations.
In the Black community, the need for leaving a financial legacy via real estate is becoming more and more of a reality, but one that yet remains a challenge. In cities like Rochester, the need to scale the aggregation of wealth and transfer of a legacy is of utmost importance.
Why? Because According to a study published by ACT Rochester and the Community Foundation entitled: Hard Facts, Rochester is one of the most racially segregated communities in the U.S. The city has one of the greatest income disparities in America based on race and ethnicity, as well as one of the country's greatest concentrations of poverty.
In the face of these known facts by those who live, work and call Rochester home, the good news is this – there’s only one place to go, and that is up.
There is a golden opportunity to change the narrative for generations to come. Building wealth in our youth, helping them understand the nuances of business ownership, home ownership, wealth management, and more, can be the ingredients that change the entire outcome of a city which ranks at the bottom of the statistical list in several critical areas.
A very well-known proverb says, “A good person leaves an inheritance to their
children’s children.” Another well-known proverb says, “Train up the next generation, and when they become older, they will not depart from the ways of their training.” Why are these sayings so important? Because it is incumbent upon leadership to pour into those who deserve a better future – the youth.
Other than real estate, one of the most powerful forms of empowerment is education. For youth, there are several invest types than can lead to the funding of their future endeavors. Here are several to consider:
1) 529 Plans - An IRS code section specifically allowing adults to save for college in the name of a child.
2) Coverdell Education Accounts - A taxadvantaged way to contribute up to $2,000 a year to a child’s account.
3) Uniform Gift to Minors Act - A custodial account, wherein your child or a minor can own investments like stocks and mutual funds.
4) IRA accounts -An account for qualified college payments if the contributions are made for at least five years.
It is a fact, based on studies conducted by the Urban institute, that the Black community in the U.S. gives the largest share of its wealth to philanthropy, when compared to all other ethnic or racial groups.
Source: Urban Institute – CLICK HERE
Furthermore, studies also show that Black families donate 25% more of their annual income as opposed to white households.
Source: Forbes – CLICK HERE
With this in mind, let’s look at some of the leading black philanthropies investing in the next generation.
The following list are some of the top foundations by and for Black-led nonprofits:
1) The Fund for Black-Led Change
The Meyer Foundation houses this fund that has committed $20M to strengthen the infrastructure and sustainability of Black-led and Blackcentered organizations.
2) The Libra Foundation
This Black-led foundation's guiding principle is that "those closest to the issues understand those issues the best." Their Democracy Frontlines Fund seeks to disrupt traditional practices and deepen the conversation about antiracism within philanthropy.
3) The Power Fund
A new initiative from Robin Hood, this fund is explicitly designed to support nonprofit leaders of color working on solutions to end poverty in New York City.
4) The California Black Freedom Fund
Dozens of foundations back this statewide fund. The California Black Freedom Fund has committed $100M over five years to bolster Black-led organizations working to end systemic racism across California.
5) Vida Afro Latina Fund
Vida Afro Latina Fund is an international women's fund. This fund facilitates participatory grantmaking with Black women-led organizations working to address sexual violence in Latin America.
6) One Million Black Women
The Goldman Sachs Foundation funds this project to give a total of $10M to
50 Black women-led charitable nonprofits over the next two years.
7) Black Art Futures Fund
A Red Olive Culture Commons project, Black Arts Futures Fund successfully granted $115K to 12 Black-led cultural organizations across eight states in 2021.
8) Brooklyn Community Foundation
This foundation is committed to moving foundation money and individual donations to BIPOC-led organizations historically underfunded by philanthropy. People of color lead more than 70% of their Community Fund portfolio grantees.
Grants for Black-led nonprofits
From local, state, and federal government grants to those from massive corporate foundations like Coca-Cola and Walmart, and Google. It can be challenging to sort through to find the ones you're eligible for.
Grant Watch lists more than 1,500 grants for nonprofits, businesses, and schools led by or serving BIPOC communities. And tools like GrantStation, Candid, and Instrumentl can help you navigate this massive landscape. Keep reading for more fantastic grants that prioritize Black-led organizations.
The following list are some of the top grant opportunities, by and for Black-led nonprofits:
1) Well-being for All
A Power of She Fund project of the Women's Sports Foundation, Wellbeing for All is a $10K grant for women of color entrepreneurs and nonprofit leaders working to make fitness and wellness more accessible to and inclusive of female BIPOC communities. They even have Alicia
Keys on board as an advisor to grant recipients.
2) Chicago Beyond Rapid Response Fund
Trust and flexibility are drivers of this unrestricted fund for hyperlocal Black and Brown-led Chicago organizations responding directly to their communities' needs.
3) Mobilize Power Fund
Another rapid response grant, this one from the Third Wave Fund, supports grassroots gender justice groups (no 501(c)(3) status required) facing timesensitive projects. Prioritized grantees are lower-budget organizations whose leadership identifies as young, BIPOC women or gender nonconforming/intersex/queer folks.
4) Black Equity & Excellence Grant
This grant from the Central New York Community Foundation has funding levels from $10K to $75K per year for community-based projects benefiting Black communities in this geographic region.
5) Arts Program
The Scherman Foundation houses this rolling application grant. The Arts Program gran gives an average of $30K over two-year periods to performing arts-based organizations led by and serving BIPOC communities in New York City.
Black Philanthropic Giving Circles
A lesser-known form of philanthropy, giving circles are groups of people that pool their financial resources and decide where to donate their money. Approximately 2,000 giving circles exist across the U.S. Many build on the legacy of Black-led giving circles that
support under-funded organizations and programs in their communities.
A few such circles are listed here. You can find many more, as well as resources for starting your own giving circle, over at the Triangle Foundation or through, Philanthropy Together
The following list are some of the top philanthropic resources by and for Black-led nonprofits:
1) Black Giving Circle Fund
The Hartford Foundation created this fund out of a shared desire to celebrate Black philanthropy in the greater Hartford, CT community. The Black Giving Circle Fund is committed to creating sustainable change through collaborative giving.
2) Philadelphia Black Giving Circle
The Philadelphia Black Giving Circle cultivates charitable giving by leveraging community resources to build strong, Black-led organizations. This giving circle continues to address the discrepancy in funding between Black and white-led nonprofits in Philly.
3) New Generation of African American Philanthropists
This started as a 15-person giving circle in Charlotte, NC. Now, the New Generation of African American Philanthropists has become a powerhouse of Black giving history, resources, and community initiatives committed to "disrupting conventional philanthropy."
4) African-American Women's Giving and Empowerment Circle
Arizona Community Foundation endows this giving circle committed to
empowering Arizona's Black women and girls. It's been running for nearly a decade!
5) Philanthropic Initiative for Racial Equity
Philanthropic Initiative for Racial Equity is a project of the Tides Center that works with foundations to make racial equity an absolute priority. They also create critical resources like "What does philanthropy need to know to prioritize racial justice?" and their 2022 report, titled "Mismatched: Philanthropy's Response to the Call for Racial Justice."
6) Give 8/28
"Black Giving is Magic!" proclaims Give 8/28, the only giving day in the U.S. dedicated to Black grassroots nonprofits. It is now in its fifth year. Young, Black, & Giving Back Institute spearheads this project which is a capstone to Black Philanthropy Month each August.
7) Communitas Ventures Accelerator
From Communitas America, this business incubator supports a 4-month cohort of primarily BIPOC and women social entrepreneurs in New York City. This cohort boasts leaders of brilliant organizations like The Bronx is Reading and Black Women's Echo Chamber.
8) Abundance Movement
Chicago Beyond, Grand Victoria Foundation, and the John D. and Catherine T. MacArthur Foundation launched this platform for philanthropic institutions to join "a movement to free mindsets, dollars, policies, and practices to address antiBlackness in philanthropy."
While not a black led foundation, Bloomberg Philanthropies has started a new initiative which could prove to be a good fit for Rochester. The Bloomberg Philanthropies’ Greenwood Initiative, a first-ever Bloomberg Philanthropies portfolio dedicated solely to advancing racial wealth equity, is a bold philanthropic effort that seeks to accelerate the pace of wealth accumulation for Black individuals and families and address systemic underinvestment in Black communities.
Day 2 of the Living Cities site visit, at The Commissary, a collaborative community, providing shared kitchens combined with food industry specific business assistance to help aspiring entrepreneurs build great food companies, create jobs, and strengthen our regional food economy.
