Careful screening

Increasing minority homeownership will pump $256 billion into the national economy, according to a new report.

The report, prepared by the U.S. Department of Housing and Urban Development, was released last week at a White House conference that brought together a variety of real estate companies and groups to discuss the goal of boosting minority homeownership.

According to the HUD report, increasing minority homeownership can spur job growth, particularly in the construction trades, and consumer spending. More importantly, according to some housing experts, homeownership over the long-term builds stability for families and communities and aids in building wealth among minorities.

“Owning a home has been the one of the best, if not the best, asset-building tools,” said Nicolas P. Retsinas, director of Harvard University’s Joint Center for Housing Studies.

Just as other cities across the country would benefit from minority homeownership, so would Bay State cities like Boston, Lawrence and Springfield, said Daniel J. Monti, a Boston University sociology professor who studies urban issues and has written about American ethnic relations. Those cities have had larger numbers of minority residents move in during the last decade or two who have been mostly locked out of the housing market, he said.

“It [increasing homeownership] will provide a more solid residential base for minority communities that find their numbers eroding because they can’t afford the rents,” he said.

While both Monti and Retsinas praised the goal of increased minority homeownership, they also stressed how critical it is to make sure sustainable homeownership is being created.

Monti said the screening of would-be owners has to be done carefully to ensure that buyers can carry the mortgage and property maintenance.

Retsinas echoed those remarks. “We do no one a favor if we make someone a homeowner, and the next year the lender has to foreclose on that property,” said Retsinas, who attended last week’s conference.

Persistent Gap

The conference and the release of the HUD report comes several months after President George Bush announced his goal to close the “homeownership gap” that exists between minorities and whites. In June, President Bush announced a new goal to increase minority homeownership by 5.5 million by the end of the decade.

Some 825,000 of the 5.5 million minority households that will become homeowners over the decade are likely to purchase a new single-family home. That will generate more than 4 million full-time jobs in construction and construction-related industries, according to the report, and those jobs will translate into more than $150 billion in new wages.

The increased home sales and new construction will also bring in $80 billion in first-year tax revenues, according to the report. Homeownership also helps businesses that sell appliances and other home furnishings. Average homebuyers of all races who move into a new home spend an additional $4,912 in the first year for furnishings and other home purchases, and those moving into an existing home spend $3,706, according to the report.

A longer-term benefit of homeownership is that it will increase minority household wealth. In many cases, housing is the primary source of wealth for families. Among owners with household incomes below $20,000, home equity accounts for about 72 percent of household wealth. For owners with incomes between $20,000 and $50,000, home equity constitutes about 55 percent of their total wealth.

The homeownership rate among white households is about 74.2 percent compared to 48.5 percent for minority households. Some 47.1 percent of African-Americans and 47.2 percent Hispanics are homeowners.

In Massachusetts, where the homeownership rate overall is lower than the national rate, the disparity between white and non-white homeownership is even wider. The white homeownership rate is 66 percent, while 31 percent of African-Americans and 21 percent of Latinos own homes.

“We do have a persistent homeownership gap in Massachusetts that not only mirrors but exceeds the gap nationally,” said Retsinas.

One of the reasons for the bigger gap in Massachusetts has to do with the housing stock, which is much more urbanized, said Retsinas. Cities tend to have a higher rental stock, and minorities are more likely to live in cities.

Retsinas said that age also plays a role. The minority population is younger, he said, and younger people don’t own homes at the same rate as older households.

Massachusetts has a variety of innovative community-based programs and lending tools that have greatly assisted in the creation of affordable housing, particularly for minorities, he said.

The Federal Home Loan Bank of Boston, for example, has provided millions of dollars to its member banks through its Affordable Housing Program to fund a variety of initiatives that create and preserve rental and homeownership units. Many of the bank’s homeownership initiatives have benefited minorities.

“We’ve made some progress, but clearly not enough progress,” said Retsinas.

HUD Report: $256B Expected From Minority Homeownership

by Banker & Tradesman time to read: 3 min