Kamala Harris Proposes $100 Billion Plan to Combat Race Gap in Homeownership 

Inside Subprime: August 12, 2019

By Aubrey Sitler

Senator and Democratic Presidential candidate Kamala Harris released an equity-focused $100 billion plan earlier last month that would aim to bridge the longstanding racial homeownership gap. Without explicitly setting aside funds for anyone of a specific race, the California senator’s proposal acknowledges racial inequity in today’s homeownership statistics and pitches this plan to assist primarily black and Latinx people in purchasing homes, targeting communities that have been historically affected by redlining and continue to experience inherently racist exclusion from participation in homeownership.

Her pitch for this plan begins by framing the issue of black homeownership in a racial and economic justice lens: “A sign of economic justice in our country is the distribution of wealth…  But on our current trajectory, by 2053, the bottom 50% of Black households’ liabilities will equal or exceed assets.  Overall Black households will continue to have just a fraction of the wealth held by white households.”

Harris’s website attributes this gross inequity to two main causes. The first is historic redlining, in which the Home Owners’ Loan Corporation targeted predominantly black neighborhoods by discouraging lending in those communities, which led to only 2% of FHA loans going to households of color between 1934 and 1962. Although over fifty years have passed, these communities’ home values and lending practices carry significant racial disparities to this day.

Harris also attributes the G.I. Bill for granting permission to private lenders to refuse mortgages and loans to black borrowers, despite that this program was supposed to help millions of low-income veterans with opportunities to build wealth through things like homeownership.

Policies like these have led to widespread racial inequity in homeownership that will continue to self-perpetuate with no intervention: 73% of white households own homes today, while only 45% of black households and 47% of Latinx households are homeowners.

Harris argues, “If we eliminate racial disparities in homeownership rates, median Black wealth would grow $32,113 per household, and the wealth gap between Black and white households would shrink 31%.  Median Latinx wealth would grow $29,213 per household, and the wealth gap between white households would shrink 28%.”

To make this happen, Harris proposes investing $100 billion in down-payment and closing-cost assistance to people buying or renting homes in historically red-lined neighborhoods. This would include up to $25,000 per household and is anticipated to serve up to four million homebuyers. The plan includes a number of eligibility caveats, and borrowers’ ability to make mortgage payments would also be taken into account.

The plan also links into proposed policy changes around credit reporting and lending requirements. Harris uses this platform to pitch amendments to the Fair Credit Reporting Act to take into account things like rent, phone bill, and utility payments for the 26 million people who are otherwise “credit invisible” or the 19 million whose credit is “unscorable” due to their lack of participation in things like credit cards or student, auto, and homeownership loans. As Harris points out: “Many ‘credit invisible’ consumers pay rent, utilities, and cell phone bills, in full and on time, but this responsible payment history is not positively reflected in their credit score.”

Harris’s proposed changes to lending requirements include things like having FHA loan mortgage underwriters use monthly rather than annual debt-to-income ratio calculations and using both traditional and non-W2 income contributions that affect black and Latinx workers disproportionately. She also pitches strengthening anti-discrimination lending laws and enforcement mechanisms to ensure borrowers are not tricked into taking out risky, high-cost, and otherwise predatory loans.

Finally, her plan includes a financial literacy component to make sure people are supported in sustaining their homeownership.

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