October 25, 2016
Black homeownership rates have declined to 43 percent, their lowest level in nearly 20 years. The feds must act now. Chicago, December 07, 2015
Black homeownership rates have declined to 43 percent, their lowest level in nearly 20 years. The feds must act now. December 07, 2015
By: Diane Odell
For many Americans, the majority of their assets and accumulated wealth are in their homes. A concentration of homeowners is crucial to the local economy, impacts the quality of our schools, and stabilizes communities. Yet here in the Midwest, homeownership rates among people of color are staggering. In Illinois, white families have a homeownership rate 1.6 times higher than households of color, placing Illinois at number 32 in worse homeownership performance, according to a 2013 analysis by the Corporation for Enterprise Development (CFED).
Although Illinois' homeownership rates for people of color are among the highest in the Midwest, this is a distinction without honor. Midwest states make-up 7 of the 20 worst performers, when including Illinois, Michigan, Indiana, Ohio, Iowa, Minnesota, and Wisconsin. Only 39 percent of households of color own their home in Minnesota, as compared to 77 percent of white households, according to a 2012 report. In Des Moines, Iowa, only 33 percent of African Americans own their homes, compared to 72.2 percent for white households.
Nationally, African American homeownership rates have declined to 43 percent, their lowest level in nearly 20 years, and from a peak of nearly 50 percent in 2004. According to a report from the Urban Institute, between 2007 and 2010, home equity for black homeowners declined by an average of 28 percent; retirement savings declined by an average of 35 percent; and overall wealth declined by 31 percent.
Absent the Administration's immediate attention to rebuild and repair the nation's housing finance structure, this link between homeownership and wealth may be severed for generations to come. With Fannie Mae and Freddie Mac (GSEs) under conservatorship—and their profits diverted away from affordable housing, into paying down the national debt—our nation's housing finance structure is stripped of its ability to operate on all necessary cylinders. During the financial crisis, the government provided the GSEs a $187.5 billion line of credit, concerned that loans purchased by the GSEs, and loans under their guarantee were at risk of failure. Today, although Fannie Mae and Freddie Mac have fully repaid all government investments, the treasury continues to limit the GSEs' intended role to facilitate affordable credit, market liquidity, and sustainable affordable housing opportunities. Under the current structure of conservatorship, credit remains tight and the safety and soundness of the housing finance system is at risk.
Now is the time to release Fannie Mae and Freddie Mac from conservatorship, and permit them to effectuate their intended purpose. GSE profits should be obligated to the affordable housing mission, including the housing trust fund, and not to service general purpose debt.
Fannie Mae and Freddie Mac have played a pivotal role in opening up the world of homeownership for minority or low-income families. For years, the discriminatory practice of “redlining” kept people of color from owning homes, and more recently, discriminatory subprime lending practices eroded gains achieved leading up to the great recession. The Administration has the power to change course and take action. With little more than a year remaining in the President's term, we urge him to act now.
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