Financing Homeownership

Two new research reports will inform the Trust’s strategy to advance equitable and safe financial solutions to increase and sustain Black and Latinx homeownership.

In Partnership With

Homeownership is an essential wealth-building tool for Black and Latinx households. For households of color, home equity is a larger – if not the largest – portion of their wealth-building portfolio in comparison to other ethnic groups. White families have a more diverse portfolio of assets, which helps them weather financial setbacks and economic downturns.

Financing Homeownership

Increasing access to homeownership has long been a priority for The Chicago Community Trust. With our current focus on closing the racial and ethnic wealth gap, homeownership has emerged as a priority that spans our strategies to close the gap at the household, neighborhood, and community levels.

The availability of flexible, safe, and affordable capital is a huge obstacle for Black and Latinx households to purchase and sustain their homes. By improving our understanding of homeownership capital flow and innovative financing solutions, new research by Urban Institute’s Housing Finance Policy Center and New America’s Future of Land and Housing program informs our strategies to improve financial support for homeowners and advocate for structural change in the lending industry.

Measuring Lending Gaps in Mortgage and Small Business Loans in Chicago’s Communities

28%

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14.5%

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39.6%

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4/10

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The Urban Report

Urban Institute’s study takes a deep dive into patterns in lending between 2019 and 2021. The study finds that in Chicago, the distribution of mortgage and small business lending is shaped in part by race and place. This report quantifies those two categories of lending relative to consumer demand by race, neighborhood location, and demographics. In addition, it provides a qualitative analysis of the challenges and needs among communities of color and communities with low incomes and puts these challenges in the context of new legislation aiming to promote lending in these communities.

Disparities in lending affect the financial well-being of individual people and households and the economic resilience of broader communities. Limited capital, wealth, and financial security constrain community members’ abilities to invest in their futures and contribute to their local economy and tax base.

Urban’s report was funded by the Kresge Foundation through the Shared Prosperity Partnership.

Addressing the Racial Homeownership Gap: Increasing Affordable Financing Options for Communities of Color

Despite persistent obstacles, many banks, credit unions, local governments, and Community Development Financial Institutions (CDFIs) have created innovative financial products to help LMI families in Black and Latinx communities for whom homeownership has been out of reach.

To scale these solutions and move the needle on closing the racial and ethnic homeownership gap, we need to coordinate efforts across the public and private sectors and focus on systemic changes. In addition to bridging the gap between what LMI buyers can afford to pay and the price of home on the private market, equally important is grappling with how credit markets perceive risk, unlocking financing for entities providing credit access, and exploring permanent affordability and shared-equity models that exist outside of the speculative housing market.

New America’s Future of Land and Housing program conducted a national scan of financial products and flexible lending pools designed to address one of the most common barriers that LMI communities of color across the United States face: affordability.

Findings from the Report

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Recommendations

Many affordable homeownership programs are explicitly designed to impact those on the brink of homeownership, whose only barrier is the lack of savings or intergenerational wealth for a down payment. Lenders should develop programs with the target community in mind, notably what level of financial assistance and additional resources it would take to meaningfully impact access to sustainable homeownership.

One way to generate revenue for affordable homeownership is by recycling capital from ongoing loan payments to generate additional lending by selling loans on the secondary market. However, secondary market investors such as Fannie Mae or Freddie Mac typically have their own criteria for the kind of loans they are willing to purchase, which can jeopardize lending flexibility.

The New America Report

When low and moderate-income buyers have access to safe and affordable financing to buy and sustain a home, homeownership can offer a way to build wealth and economic stability that can be passed down to future generations. The opportunity cost of lost wealth amounts to much more than differences in assets over time: wealth buys better health, education, and financial security and allows families to plan for the future they want, not just the one they can afford.

Get Involved

To learn more about the Trust’s Protecting & Advancing Equitable Homeownership initiative or partner with us, please contact Shandra Richardson, Program Director for Strategic Initiatives, at srichardson@cct.org.

Growing Household Wealth

Growing household wealth is about much more than income equality. It’s about leveraging opportunities over the course of a lifetime—from paying for a college education to buying a house and saving for retirement—that allow individuals and families to build assets, have financial security, and pass wealth along to the next generation.

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Closing the Racial & Ethnic Wealth Gap

We’ve made a 10-year commitment to closing Chicago’s racial and ethnic wealth gap. The work will not happen overnight, but in partnership with donors, nonprofits, community members, business leaders, and local government, it can be done.

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