House key on a house shaped silver keyring in the lock of a door
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Last week, Democratic presidential candidate Senator Kamala Harris proposed a $100 billion program for “homebuyers who rent or live in historically red-lined communities.” Her plan would provide up to $25,000 in down payment and closing cost assistance to 4 million households who rent or live in historically redlined communities.
Sen. Harris acknowledges on her campaign website that the “percentage of Black homeowners has remained basically unchanged since 1968.” The website doesn’t acknowledge the lack of change shows federal programs have failed to increase black homeownership. Instead, she uses that 50 years of failure to justify the urgency of doing more of the same but bigger and better.
The longevity of these programs is puzzling given their lack of results. Perhaps, they’re judged by how good they make us feel, or their noble intentions, or whether they generate votes or campaign contributions from the mortgage industry. Obviously, they aren’t judged by how much they improved the black homeownership rate.
In fact, they may have been a lot worse than ineffective, they may have hurt homeownership.
A few months after the Fair Housing Act of 1968 was signed into law, a new federal mortgage program was started that targeted previously redlined central city areas. The minimum down payment was $200 and the federally subsidized interest rates went as low as 1%. President Johnson bragged about the $200 down payment program when he signed into law the Housing and Urban Development Act of 1968.
Despite President Johnson’s intentions, that program became filled with fraud and abuse and ended in scandal with FHA foreclosing on blocks of houses in historically redlined areas. That particular program was eventually reined in but it was succeeded by other less bad but still, very high-foreclosure mortgage programs.
By one estimate, from 1975 to 2013, one in eight FHA house buyers was foreclosed on and in many urban neighborhoods, the foreclosure rate routinely exceeded 10 times the rate of conventional mortgages. Maybe those, and other, high-foreclosure mortgages are a factor in the racial homeownership gap.
The Senator’s campaign website continues, “Black and minority families were also disproportionately impacted by the subprime mortgage crisis and the subsequent Great Recession.” The website doesn’t mention President Clinton’s 1995 “National Homeownership Strategy.” It doesn’t mention the requirement started in 1992 that 30% of Fannie Mae and Freddie Mac mortgage purchases be related to affordable housing. By 2005, the requirement was up to 52%. Because of that bipartisan federal requirement, for years Fannie and Freddie were the largest purchasers of subprime mortgages and their purchases were key to the growth of the entire non-prime mortgage industry. The campaign website doesn’t mention how much of the disproportionate impact on black and minority homeowners was caused by misguided federal intervention.
Finally, did you know that the black homeownership rate increased 20% from 1950 to 1970? Yes, despite horrific discrimination and FHA mortgage programs that specifically excluded blacks for most of that time, the black homeownership rate increased 20% from 1950 to 1970.
Have our affordable housing programs since 1968 been worse than redlining in the 1950s? Did we somehow find a way to increase both house prices and foreclosures at the same time in neighborhoods with high concentrations of high-foreclosure mortgages? Without the federal help, would neighborhoods with high concentrations of “affordable” but high-foreclosure mortgages have seen fewer foreclosures, more affordable house prices and higher homeownership rates?
From 1950 to 1970, the real median black family income doubled. That’s where our efforts should be focused, increasing black family income.
Today, the black homeownership rate should be the same as, or at least close to, the white homeownership rate. We could keep doing what we’ve been doing the last 50 years for the next 50, but I think we have enough evidence to show that despite how good they make us feel, the affordable housing programs of the past 50 years have been spectacular failures and we need to focus on results instead of good intentions if we’re ever going to remove the racial homeownership gap.