The homeownership problem

Homeownership promises to build wealth through exclusion. Can we fix it?

This week, New York Attorney General Letitia James released a report detailing the racial disparities in homeownership across the state.

The report points to the legacy of redlining, unequal access to credit, predatory lending, the 2008 foreclosure crisis and the recent COVID-19 pandemic as factors in the homeownership racial disparity.

Albany, NY — where I live — has the second widest racial homeownership gap in the entire country. Nearly 70% of white households in the city own their homes compared with just 20% of Black households.

At Habitat, we issued a local response about the report’s findings, excerpted below:

From subsidizing new construction and rehabs to making down payment assistance and access to credit more readily available for Black households, we know how to remove the barriers that currently shut out too many Black families from homeownership. The question is whether our public and private sectors will meet this challenge.

I own a home. I grew up in a home that my parents owned. At Habitat, I sell homes. When it comes to homeownership, I’m in deep. I believe in many of its promises for families and neighborhoods. I’ve seen access to safe, affordable homeownership drastically improve lives.

And yet, the promises of homeownership have always been predicated on exclusion.

Exclusion that often tracked along racial lines, and that always depended on some people having access to homeownership at the expense of others.

Jerusalem Demsas (one of the most thoughtful observers and writers out there today) wrote this in The Atlantic last year:

At the core of American housing policy is a secret hiding in plain sight: Homeownership works for some because it cannot work for all. If we want to make housing affordable for everyone, then it needs to be cheap and widely available. And if we want that housing to act as a wealth-building vehicle, home values have to increase significantly over time. How do we ensure that housing is both appreciating in value for homeowners but cheap enough for all would-be homeowners to buy in? We can’t.

We promote homeownership as a way to build personal wealth — and it does. Sometimes. For some people. Homeownership has never worked for everyone. It wasn’t designed to.

Photo by Kostiantyn Li on Unsplash

How does homeownership build wealth?

Homeownership builds personal wealth if the value of your house increases and then you sell it. That’s the dominant rationale driving the market.

The conventional wealth-building model depends on someone else footing the bill.

We assume that someone else will pay the higher price of your house when you sell it. You will build your wealth at the exclusion of others from the housing market. Your rising property value is someone else’s affordability crisis.

“It’s a great time to sell!” people said. Why? Because someone else will pay the higher price and transfer wealth to you.

It also depends on scarcity.

Over the past few years, we saw a huge demand from homebuyers without the supply to match it. Blame it on whatever you’d like: the remote work transition enabling folks to move to new areas, the large Boomer generation staying put in their homes, a shortage of new home construction since the 2008 recession. The point is, there weren’t enough homes to satisfy demand, and prices rose.

When we view homeownership first and foremost as a wealth builder, we start hoarding.

We start using “property values” as a proxy for success. For people and places to be successful, we think they need to have high property values.

And because local governments and schools are so dependent on property taxes, the actual success of government and school districts are affected by high property values— and thus high tax revenue — too.

Wrapping up your home’s market value as a measure of success and future wealth means that some homeowners begin to protect the perceived market value at all costs. How? By opposing new multi-family buildings, affordable housing, zoning reform, commercial development, bike lanes — really anything that will have a perceived negative effect on their property values. So fewer housing units are built, neighborhoods remain segregated and opportunity is further restricted for others. This too is an exclusion.

But I think we can fix it

Knowing this about homeownership, it makes sense that it was such fertile ground for racist policies to take root. Add in all of the subjective touchpoints in a typical transaction — from the real estate market to mortgage lending to home appraisals — the system is ripe for exploitation and discrimination.

Homeownership’s promise, at least in the 20th and 21st centuries, has been to build individual wealth by excluding others from the market. It’s been set up as a zero sum game.

The Attorney General’s report lays out important recommendations to expand access to credit, safeguard against discrimination, and subsidize down payments and interest rates. Last year, a coalition of Albany housing providers and advocates issued our own policy recommendations for addressing the legacies of redlining and housing discrimination. Our findings track with the research released this week.

We know the solutions and now we need the political will to pursue them.

There are also already paths forward that reconfigure homeownership’s costs and benefits so that they can be more widely shared: limited equity co-ops, community land trusts and other forms of shared equity homeownership, to name a few.

These alternative models offer broad promise for how homeownership might begin to serve a collective good, rather than just individual ones.

I believe in homeownership, and I also believe that it should be so much more than a zero sum stock market game. I think we can fix it.

Elsewhere recently:

I was quoted in a WNYT story about the NY Attorney General’s report on racial disparities in homeownership, and you can read Habitat’s full local statement too.

Also, Habitat for Humanity Capital District was recently honored as the Northeastern Regional Affiliate of the Year by Habitat for Humanity New York State.