Commentary: Investing in homeownership funds can close racial wealth gap
By Markita Morris-Louis, Josh Muncey, originally published in the Boston Business Journal
Sep 8, 2023
Homeownership, a cornerstone of the American dream, is one of the most powerful ways that families build and pass on wealth. Yet it remains painfully out of reach for many Black and Brown families in Massachusetts and across the country. Our current affordable housing crisis has been exacerbated by historic inflation and rising interest rates that disproportionately impact families led by Black and Hispanic/Latino women.
According to data compiled by the Center on Budget and Policy Priorities, the homeownership rate among white households in Massachusetts in 2020 was nearly 70%, while only 38% of Black households and 27% of Hispanic households were also homeowners. That gap is expected to remain in the coming decades unless we take action.
To narrow the racial wealth gap, we must recognize the history of housing discrimination and broader systemic racism. When slavery was abolished, the federal government failed to repair the profound and generations-long harm — financial and otherwise — that slavery caused Black families and actively worked against Black families building wealth. Racial disparities were intentionally perpetuated for future generations through discriminatory measures like segregation, redlining, and restrictive zoning.
While many white families benefited from homeownership programs, many Black families were shut out. For example, after World War II, Black veterans were disproportionately denied access to benefits, such as low-interest loans, that allowed their white counterparts to establish this country’s middle class and to build wealth.
Some progress was made during the Civil Rights Movement through the enactment of policies like the Fair Housing Act of 1968. But after the 2008 financial crisis, net worth among Black households dropped by 53%, compared to 16% for white households – owing in large part to the racist and predatory lending practices that drove the crisis.
In 2020, as many of us grappled with the murder of George Floyd and the broader reality of racism’s pervasive role in our society, there was increasing interest in righting these historic wrongs.
For one of us, Josh, a successful Realtor in Boston, that time of reckoning and reflection planted the seed for the Welcome Home Fund, which provides unrestricted cash grants to Black and Hispanic/Latino families to become first-time homeowners in Greater Boston.
After a listening tour with community leaders, Josh approached Compass Working Capital about partnering to administer the Fund. Compass is a nonprofit that partners with families with low incomes to build assets as a pathway out of poverty. In partnership with affordable housing providers, Compass administers HUD’s Family-Self Sufficiency (FSS) program, America’s largest asset-building program for families with low incomes. FSS redirects the automatic rent increase families pay when their income increases into a savings account. This enables participants to build savings to use towards their financial goals, creating a pathway for families with low incomes to build intergenerational wealth.
More than 90% of Compass’ clients are women, and 93% identify as a person of color. The most common goal for participants is homeownership. But even after doing everything right— improving their credit, paying off their debt, and building savings to make a down payment—the dream of homeownership often remains out of reach.
And that is where the Welcome Home Fund comes in. In a pilot run this past year, Josh and another philanthropist created an initial funding pool that enabled four Compass FSS graduates to purchase homes, providing $20,000 to each family to use for a down payment and other expenses to purchase their first home. After a successful pilot, the Welcome Home Fund is now raising dollars for an additional round of grants.
What is powerful about this Fund is that it places deep trust in families and communities, and it is driven by a sense of urgency – to take immediate and truly helpful action in response to a problem. For people who want to have a direct and meaningful impact on the racial homeownership gap in Greater Boston right now, the Welcome Home Fund is a great place to start.
At the same time, we know that programs like this cannot do all the heavy lifting to address the racial homeownership gap.
The housing crisis facing Black and Brown families demands immediate action. State and federal lawmakers must make homeownership accessible by investing in programs like the Family Self-Sufficiency program and exploring additional initiatives. In doing so, policymakers can dismantle systemic barriers that have brought us to this point and put the "American Dream" back within reach for marginalized communities.
Markita Morris-Louis is CEO and executive director of Compass Working Capital. Josh Muncey is founder of the Muncey Group.