SAINT LOUIS, MISSOURI, JUNE 6TH, 2023 | New research conducted by The Urban Institute in partnership with Urban Strategies Inc. (USI) and funded by JP Morgan Chase indicates that increased use of a currently underused homeowner voucher program could significantly shrink the racial gap between Black and white home ownership.
The study found that more widespread use of the Housing Choice Voucher (HCV) could help reduce the current racial disparity in homeownership, which is the highest it has been in 50 years. A key change would allow households with an HCV to apply their voucher to a monthly mortgage rather than to rental housing.
One major contributor to the racial gap is the disproportionately high burden that mortgage costs place on Black potential homebuyers. Inequity in income, along with structural racist policies, lead to nearly half of all of the vouchers going to Black non-Hispanic households the analysis of the use of housing choice vouchers found.
But it also discussed the program’s limitations, including the facts that it does not appear to be suited to high-cost metropolitan areas and that some housing agencies may see the program as beyond their scope. Still, many staff members at public housing agencies noted the program’s potential long-term benefits for families and their financial security.
Ultimately, a summary concluded, successful implementation requires collaboration between housing agencies, lenders, and other first-time-homebuyer programs.
“Over the last 45 years, Urban Strategies, Inc. has built stability bridges for individuals and communities. With this thought leadership piece, we ask ourselves and others what innovative ways we can collectively make thriving bridges that leverage the best assets of communities, the PEOPLE, more equitable and accessible,” said Donovan Duncan, Executive Vice President, USI.
Homeownership is among the primary vehicles for wealth-building in the United States. According to the Federal Reserve, the median net worth of a homeowner in the United States in 2019 was $225,000 compared to $6,400 for renters.
While home ownership can generate positive financial and social gains, the overall impact of home ownership in the context of low-income communities is harder to evaluate, because historical discrimination has been responsible for a disparity in both access to home ownership as well as to its benefits.
Other factors involved include the fact that Black households tend to incur higher home ownership costs, in part because of a greater likelihood of living in inadequate housing that requires more upkeep and paying relatively more in property taxes. Legacies of redlining and present-day discriminatory lending have also hampered Black households’ opportunities for equitable access to quality, high-value housing.
Key findings of the Urban Institute study (https://www.urban.org/sites/default/files/2023-05/Using%20Vouchers%20to%20Support%20Homeownership.pdf) include:
- The HCV home ownership program is limited in size and scope. Nationally, 736 public housing agencies (PHAs), about 22 percent, participate in the homeownership program, with 11,672 active vouchers in 2021.
- Home ownership voucher usage is higher in places with lower housing costs and lower fair market rent. PHAs in places with high housing costs are less likely to use a substantial share of vouchers for home ownership.
- PHAs that use the highest share of vouchers for home ownership tend not to have majority Black non-Hispanic clientele. However, four out of five of the PHAs with the most participants serve majority Black non-Hispanic households in their programs: Philadelphia, Chicago, New Orleans, and Louisville.
- Foreclosures and non-payment are uncommon. Many households roll off the program prior to their maximum 15-year eligibility period because their income eventually exceeds eligibility thresholds.
Four strategies that the study said could help close the voucher gap would:
- Increase income limits for participants.
- Create a distinct class of HCV vouchers earmarked for homeownership.
- Extend the length of subsidy allowed in the HCV home ownership program.
- Increase the funding available under the lump sum/down payment option.
Founded in 1978, Urban Strategies, Inc. is a national nonprofit leader with extensive experience in implementing results-based human capital development strategies in communities that are undergoing physical revitalization. USI supports communities while working with partners to develop economic opportunities, cradle-to-college/career success, high quality health services and a range of comprehensive service supports.
The organization is leading people efforts and neighborhood transformation in 24 cities and 41 neighborhoods across the nation. USI’s mission is to help ensure that all families will be stable and thriving. For more information www.urbanstrategiesinc.org.
The Urban Institute is a nonprofit research organization that provides data and evidence to help advance upward mobility and equity. They are a trusted source for changemakers who seek to strengthen decision making, create inclusive economic growth, and improve the well-being of families and communities. For more than 50 years, Urban has delivered facts that inspire solutions.