5 ways Big Money targets the racial gap in housing



For decades, the racial gap in homeownership has remained a stubborn reality. According to the US Census Bureau, only 45% of black Americans owned their homes in the second quarter of 2021, compared to almost 74% of white Americans.

Despite reforms such as the Fair Housing Act of 1968, the racial divide persisted and even deepened. This historic legislation has not corrected discrimination in housing.

Instead, the National Fair Housing Alliance and others say the Black-White Gulf widened over the next half-century. “What we are seeing is the result of a system that has not corrected itself,” says Marvin Owens, director of engagement at investment firm Impact Shares and former senior director of economic development at the NAACP.

Since homeownership is such an important tool in creating wealth, the effects reverberate throughout the economy.

“You have families who own a house and can pass it on to their children,” says Owens. “African Americans just didn’t have this opportunity to match the pace of whites.”

For years, the thankless job of addressing housing inequalities has been undertaken by nonprofits such as the NAACP and the National Fair Housing Alliance. Now, however, things are changing. The big housing players on Wall Street and Silicon Valley are targeting racial disparities in homeownership.

Here are some initiatives that could make a difference in the racial gap.

1. Chase’s $ 30 billion investment in racial equity

With $ 3.2 trillion in assets, JPMorgan Chase Bank is a giant. Last year, Chase announced it would invest $ 30 billion over five years in an initiative to narrow the racial gap.

“Systemic racism is a tragic part of American history,” JP Morgan & Chase CEO Jamie Dimon said during the unveiling of the pledge.

Chase also announced an expansion of Homebuyer Grant programs that provide up to $ 5,500 to first-time homebuyers in 6,700 eligible neighborhoods in the United States. The bank provides $ 2,500 in grants to customers who refinance with the Chase DreaMaker program. Grants help cash-strapped buyers cover down payments and closing costs.

In another initiative, this year, Chase pledged $ 3 million for the Appraiser Diversity Institute. The mega-bank said its goal was “to remove the stigma in the home appraisal process.”

2. The apologies of the National Association of Real Estate Agents

With over a million members, NAR is a major force in national politics, let alone the housing industry. Last year, the group formally apologized for their decades-long role in promoting racial segregation and inequality.

NAR first opposed the passage of the Fair Housing Act in 1968, and the group once excluded members based on race and gender. Black real estate brokers were forced to form their own professional association.

“What the realtors did was an affront to our morals and our ideals. It was a betrayal of our commitment to fairness and equality,” said NAR chairman Charlie Oppler. “We we cannot go back to fix the mistakes of the past, but we can look this problem directly in the eye. ”

As part of its apology, NAR announced a new focus on fair housing. The real estate agent business group has also partnered with the United States Chamber of Commerce’s Equal Opportunity Initiative. The goal: to remedy and, hopefully, reduce economic inequalities.

3. The Mortgage Bankers Association Equity Programs

MBA is another major player that is focusing its attention on home equity. Last year, he announced a pilot minority homeownership program in Memphis, Tennessee. This year, MBA launched a similar initiative in Columbus, Ohio.

MBA says the pilot programs will look for creative ways for the mortgage industry to partner with government and nonprofits to boost homeownership.

Like Chase and NAR, MBA says it’s time for the housing industry to take a close look at its policies and practices. “For too long, our country has faced dire shortcomings in minority home ownership,” said Bob Broeksmit, Group President and CEO.

4. A hire-purchase company financed by venture capital

Landis, a startup that aims to turn tenants into owners, doesn’t just focus on the racial gap, but addressing this issue is part of its business model.

Landis raised $ 165 million this year from a group of investors led by Sequoia Capital, the Silicon Valley venture capital firm. Other backers include actor Will Smith and Jay Z’s Roc Nation. The nonprofit National Community Reinvestment Coalition has praised Landis’ offer as a way to bridge the racial divide when it comes to membership. property and wealth.

About a third of its customers are African-Americans. For future owners, Landis fulfills many roles. It supports them in improving their credit rating. He supervises the bank accounts on which they establish their deposits. And the startup buys homes and then serves as an owner while its clients get their finances in shape.

“The objective is to get as many tenants as possible to buy a home,” explains Cyril Berdugo, co-founder of the company.

5. A way to invest in mortgages granted to black and brown borrowers

In July, Impact Shares launched a new exchange traded fund listed on the New York Stock Exchange. The fund, known as the ticker symbol OWNS, invests in mortgage-backed securities underlying loans issued to minority families and low- to moderate-income borrowers.

OWNS home loans include mortgages in census tracts where more than half of the population is non-white and at least 40 percent of residents live at or below the poverty line.

OWNS also aims to invest in mortgage-backed securities from non-traditional originators, including community development financial institutions and minority-owned banks.

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