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Closing the Housing Gap

Closing the Housing Gap
Bush administration sets ambitious goal to increase minority homeownership; observers point to previous administration for model
By Ronald Roach

The announcement by President George W. Bush this past June of his administration’s plan to expand minority homeownership by at least 5.5 million families by the end of the decade has set forth an ambitious goal. Considering that minority homeownership increased by nearly 1.2 million families between 1993 and 1999, a period during which the minority homeownership rate increased faster than that of White families, the Bush administration needs a highly effective plan to realize an increase of 5.5 million families. In 1999, homeownership by African Americans, Hispanics, Asian Americans and American Indians was 12.4 million families, according to U.S. census data.

“Two-thirds of all Americans own their homes, yet we have a problem here in America because fewer than half of the Hispanics and half the African Americans own the home. That’s a homeownership gap. It’s a gap that we’ve got to work together to close for the good of our country, for the sake of a more hopeful future. We’ve got to work to knock down the barriers that have created a homeownership gap,” President Bush declared during the announcement of the minority homeownership campaign.

The Bush proposal, which has been unveiled as a broad strategy, will focus on four key program areas:

n Educating homebuyers. This involves providing potential buyers with information about homeownership opportunities.

n Increasing the supply of affordable homes. The focus will be on increasing the supply of affordable housing in areas where housing is scarce. Strategies will range from using proven and effective federal housing programs in order to boost supply, to reducing local regulatory burdens.

n Providing assistance with down payment and closing costs. Programs will help families overcome one of the most common obstacles to homeownership — high down payment and closing costs — by expanding their options and giving them new opportunities to acquire the necessary capital.

n Offering financing options. Mortgage lending, including increasing funds for affordable mortgage loans, redoubling efforts to root out illegal discrimination, and cutting closing costs through federal regulatory reform will take center stage.

Observers say Bush administration officials should pay close attention to the record of the Clinton administration. Many housing advocates and experts credit Clinton for taking measures that helped accelerate the purchase of homes by minority families. Between 1993 and 1999, the homeownership rate for African American families grew by 4.7 percentage points from 42 percent to 46.7 percent while the White family homeownership rate jumped 3 percentage points from 70.2 percent to 73.2 percent, according to a U.S. Department of Housing and Urban Development (HUD) report. During the same period, the Latino family homeownership rate grew by 6.1 percentage points from 39.4 percent to 45.5 percent.

Housing advocates point to the Clinton administration’s beefed up enforcement of the Community Reinvestment Act (ACT) and HUD’s revitalization of the Federal Housing Administration (FHA) which led to increased mortgage lending opportunities for minorities. In addition, HUD under Clinton used its supervision of mortgage fund giants Fannie Mae and Freddie Mac to push those enterprises to sponsor outreach efforts targeting minority and low-income borrowers, according to officials.

“It’s very clear that the Clinton administration made a significant difference,” says James Carr, the senior vice president of innovation, research and community technology at the Fannie Mae Foundation.

While acknowledging the role of the Clinton administration, housing researchers are taking a careful look at the increases in minority homeownership during the 1990s. For many researchers, it’s unclear how much a factor Clinton-era reforms contributed to homeownership gains compared to other factors, such as the booming economy and the rise of the stock market during the 1990s. Housing experts say they believe Bush administration officials will be paying close attention to the conclusions researchers reach on explaining 1990s homeownership gains among minorities.

Dr. Lance Mark Freeman, an assistant professor in the graduate school of architecture, planning and preservation at Columbia University, recently completed a HUD-funded study that examined the extent to which the Clinton-era reforms had on reducing the minority homeownership gap. He says his study says there’s plenty of evidence that the reforms have an indirect link to minority homeownership gains.

“I think there’s pretty strong indirect evidence the (Clinton-era reforms) made a contribution. As more census data becomes available, you’ll see more studies filtering things out,” Freeman says.

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