Financial Assistance, Programs and Resources for Expanding Black Homeownership

For a long time, owning a home has been associated with the American dream. However, this ambition has proven to be a more challenging reality for Black Americans. Black Americans' path to homeownership has been paved with obstacles that have stalled them from this opportunity to accumulate wealth. This prevalent issue persists in the United States, highlighting how urgently access and equity in the housing market need to be examined.

Let’s look at why homeownership remains elusive for Black Americans and explore the tools and resources available to navigate this challenge and create a stronger path to homeownership. Owning a home can build wealth, stability and a sense of accomplishment. It’s also linked to better outcomes for children, communities and overall health, according to the National Association of Realtors®. However, for many people of color, this opportunity seems unattainable.

Historical discrimination, such as redlining and other biased practices, has significantly hindered Black homeownership and wealth-building in the United States. The results of it left a massive homeownership gap and ongoing financial disparities for Black Americans.

While the wealth gap plays a role, historical discrimination, such as redlining — the practice where Black neighborhoods were marked as risky for investment — has hurt Black homeownership for generations. These areas were marked in red on government-sponsored maps where poverty was most concentrated and housing was deteriorating. Started by the Home Owners' Loan Corporation (HOLC) and used by banks and insurers, redlining prevented many Black Americans from buying homes and building wealth.

Historically, urban communities and areas populated with Black Americans were a large target of this legalized discrimination. Today, the concentration of Black individuals in redlined areas remains high. There are 8.25 million people who live in neighborhoods that the federal government redlined 80 years ago, and the average redlined neighborhood is predominantly Black at 32%.

Other discriminatory practices revealed that over the past decade, Black and Latino borrowers were often charged more for mortgage loans than white borrowers in similar financial situations.

During the early 2000s housing boom, Black homebuyers were often targeted by predatory lending practices and offered subprime mortgages with higher interest rates and less favorable terms. Lenders benefit from targeting minorities for subprime loans by charging higher interest rates and fees, expanding their market and earning more money through commissions and selling bundled loans. This resulted in a disproportionate impact on Black homeowners during the 2008 financial crisis, leading to unprecedented rates of foreclosures within Black communities.

Despite an uptick during the COVID-19 pandemic due to low interest rates that helped Black families buy homes, the ownership rate rose only by two percentage points between 2019 and 2021. Following a persistent decline since the Great Recession, this modest increase in Black homeownership rates still left them behind their white peers.

"Obstacles faced by Black Americans in the home buying process are well known and quite extensive. The current rate environment has further impacted their options," explains Daniel Smith, Founder & CEO of Keepingly. This end-to-end platform helps homeowners to manage, maintain and grow the value of their homes.

In 2021, 65.5% of Americans owned homes — the highest rate since 2011. However, only 44% of Black Americans owned homes, which is much lower than the 72.7% homeownership rate for white Americans, according to a 2023 report by the National Association of Realtors®. Over the past decade, the homeownership rate for Black Americans has barely increased, going up only 0.4%. Black homeowners and renters face higher housing costs compared to others. Plus, the same 2023 report found that fewer than 10% of Black renters can afford to buy an average-priced home. This means Black families are missing out on a key way to build wealth.

A 2024 report by the National Association of Realtors® exploring homeownership trends and challenges faced by minorities found that 20% of mortgages for Black borrowers have rates exceeding 6%.

According to the Bureau of Labor Statistics, the Black job market thrived in 2023, with unemployment reaching a record low of 4.8% in April of that same year. This economic progress empowers more Black Americans to qualify for mortgages and afford homeownership. However, despite a Black homeownership rate of 45%, far below the 2004 peak of nearly 50%, long-standing barriers still prevent many from achieving equitable homeownership rates.

Black homeownership rates lag significantly behind Asian, Hispanic and white Americans at 72.3%. Since 2012, the gap in homeownership between Black and white Americans has widened from 27% to 28%, according to the 2024 National Association of Realtors® report mentioned above.

A recent analysis by U.S. Bank highlights that consistently high mortgage rates are still slowing down housing market activity, with sales of existing and new homes below levels from a year ago. Homebuyers must adjust by making a larger down payment or allocating more of their monthly budget to housing costs.

When the Federal Reserve increased rates in 2022 and 2023 to control inflation following the pandemic, it also hiked mortgage rates, making getting a home more expensive. This slowed down the housing market for new and existing homes. Potential buyers and sellers were hopeful of lower rates in 2024, but it hasn't happened yet. Ongoing inflation prevents the Fed from lowering rates, keeping mortgage rates high despite dipping below 7%.

Let’s explore the policy measures and advocacy efforts that aim to bridge the racial gap and create a more equitable path toward Black homeownership. One key policy is the Fair Housing Act (FHA), an important law enacted in 1968 to prevent unfair housing treatment based on factors such as race, religion, gender and disability. Here’s a look at its core protections and amendments.

The Fair Housing Act (1968) protects people from discrimination (based on race, color, religion and sex, including gender identity and sexual orientation) regarding house-related activities such as renting, buying, financing or advertising.

Meanwhile, the Fair Housing Amendments Act (1988) expanded protections to include people with disabilities and families with children under 18.

Key protections include:

• Reasonable accommodations and modifications must be provided for individuals with disabilities.
• Harassment based on protected characteristics is illegal.
• Retaliation against those who file fair housing complaints is prohibited.

Enforcement of these acts is handled by the Department of Housing and Urban Development (HUD), a federal agency that tackles housing needs through programs like mortgage insurance, grants for community development and affordable housing and rental assistance for low-income families. It also enforces fair housing laws to ensure equal access to housing, investigates complaints and provides remedies for those who experience discrimination.

In recent years, the federal and state governments have been working on fixing homeownership disparities. HUD's initiative, the Affirmatively Furthering Fair Housing (AFFH) rule, established in 2023, is a good example. It requires communities to take proactive steps to address segregation, enhance housing opportunities and remove barriers to fair housing choice. The intention is that 55 years after the Fair Housing Act, this mandate will help greatly enhance equity, human dignity, social welfare and justice for all protected class groups.

While the FHA attempted to set the foundation for fair housing, more support is needed to effectively tackle long-standing racial disparities in homeownership. The following programs are designed to empower Black Americans in homeownership, especially first-time homebuyers. From tailored credit options to down payment aid, these aim to provide vital support in overcoming financial obstacles and navigating home purchases.

The Equal Credit Opportunity Act (ECOA) allows banks to create Special Purpose Credit Programs (SPCPs) to offer favorable credit terms to economically disadvantaged groups, like those defined by race or income. These programs aim to boost homeownership in Black communities, like the support white Americans received from the New Deal. There are three types: local or federal-run credit assistance programs, nonprofit-administered assistance programs and for-profit organization special purpose credit programs.

How to find them: Many lenders are still unaware of SPCPs, so ask your lender if they have a program. Freddie Mac has an option, and so does Fannie Mae.

Various down payment assistance programs exist to help Black homebuyers cover initial costs. These programs generally assist first-time homebuyers and help with grants or low-interest loans that may be forgivable or repaid with low or no interest, a critical step in obtaining and keeping a home.

How to find them:

1. Check your state's housing finance agency.
2. Check your city or county website.
3. Check HUD’s website, which has a list of local homebuying programs by state.
4. Ask your lender about their offerings.

Maintaining a home can be as challenging as buying one. Ongoing support post-purchase, especially for maintenance due to higher repair needs, is crucial. Programs can address structural repairs, building improvements and plumbing or electrical enhancements to create a safe living environment.

How to find them: Check your city or county website. Some cities’ programs are funded by various federal sources, including Community Development Block Grants (CDBG), HOME Investment Partnerships Program, as well as American Rescue Plan Act (ARPA) funds. These sources may have active lists of participating areas.

First-generation homeowner programs aim to assist individuals whose parents have never owned a home. These programs often include financial education, counseling and monetary assistance, providing crucial support for navigating the complexities of homeownership.

How to find them: Visit HUD’s website to find your state’s available assistance programs. For example, North Carolina offers the Durham Affordable Housing Coalition and the Center for Home Ownership, while Ohio offers Communities First, a down payment assistance program. The Black Home Initiative also serves the greater Seattle region.

Nonprofit organizations and community-driven initiatives play a crucial role in promoting Black homeownership. Nonprofits provide resources, advocacy and direct assistance, while local housing cooperatives and community land trusts create affordable housing and empower Black communities to control their housing futures and build collective wealth:

• National Urban League: Offers two programs: Comprehensive Housing Counseling and Restore Our Homes.
• NAACP: Advocates for policies to support Black homeownership and affordability, rental assistance programs and public housing support
• 3bythe30: An initiative to increase the nation’s Black homeownership rate.
• NAREB’s Two Million New Black Homeowner Program (2MN5): Provides advocacy for Black homeownership, access to credit and community development, including a $50 million commitment for down payment assistance from LBC Funding.
• Homeownership Equality Research Organization (HERO): Fights to increase homeownership rates for Black, Latino and other marginalized individuals.
• CAN I LIVE: Supports affordable housing, economic inclusion and personal responsibility through education, entrepreneurship and civic engagement.
• Legacy Institute: Focuses on improving financial stability, providing workforce development and building generational wealth

The federal government offers a variety of resources and programs to help make homeownership a reality. Explore options for down payment assistance, rental assistance and veteran loans, along with counseling services.

Options for lower down payments and flexible:

• FHA Loans: A popular choice for first-time and low-income homebuyers. With just a 3.5% down payment and flexible credit requirements, FHA loans make homeownership accessible.
• Fannie Mae and Freddie Mac Programs (HomeReady & Home Possible): Aimed at low-to-moderate-income borrowers with limited cash for a down payment, these programs allow down payments as low as 3% and offer assistance with closing costs. They are available through participating lenders.
• USDA Rural Development (RD) Loans: Aimed at rural areas. They often require no down payment and potentially lower interest rates.

Support beyond down payments:

• HUD Homeownership Programs: HUD offers many programs, from the Good Neighbor Next Door program, which offers discounts in revitalization areas for essential workers, to the HOME Investment Partnerships Program, which supports affordable housing initiatives.
• Housing Choice Voucher Program (Section 8): This program provides rental assistance vouchers to help low-income families, older people and people with disabilities afford and purchase a home.
• VA Loans: Veterans and eligible service members can take out VA loans, which have competitive interest rates and often require no down payment.
• HUD-Approved Housing Counseling: Find free or low-cost counseling on buying a home, credit issues and foreclosure avoidance.

State and local programs vary widely, but many offer valuable resources tailored to the needs of Black homebuyers.

"Limited availability of affordable housing in many areas disproportionately affects Black families,” says Smith. “However, there are some strategies to overcome obstacles and achieve homeownership.” He notes, for example, community lending institutions. “Local credit unions and community banks often have more flexible lending criteria and are more committed to serving their communities," he explains.

From down payment assistance to first-time homebuyer programs, these initiatives below offer crucial financial support and education. Here are some examples of successful programs throughout the nation.

Beyond financial programs, other valuable resources can equip Black Americans for success. Homebuyer education courses, financial literacy workshops and mentorship programs from experienced homeowners offer the knowledge and support you need to navigate the path to homeownership.

• NACA: A nonprofit that provides homebuyer workshops to introduce homebuyers to the NACA program and educate them on the process.
• MyMoney.gov: Features calculators, interactive budget worksheets on retirement planning and savings and checklists to help you manage your finances.
• 360 Degrees of Financial Literacy: A national volunteer effort by Certified Public Accountants to enhance Americans' financial literacy and money management skills.
• Consumer Financial Protection Bureau: A U.S. government agency dedicated to ensuring citizens are treated fairly by banks, lenders and other financial institutions. You can talk to a housing expert for free, get help buying a home, saving for college and more.