Although the U.S. rate of homeownership surged during the COVID-19 pandemic, minority, low- and moderate-income homebuyers did not benefit from the surge. The overall rate of homeownership increased but the gap between homeownership rates among whites and among Black and Brown families widened. The race among more affluent, primarily white homebuyers to purchase homes during COVID-19 drove up prices and reduced housing stock, exacerbating the challenges that many Black and Brown individuals and families face when buying a home.
There is a national shortage of affordable for-sale homes—particularly starter homes—and an increasing number of families are priced out of purchasing a home, thereby losing the ability to build intergenerational wealth for the future.
Increasing the rate of homeownership is not enough: We must create more opportunities for low- and middle-income families—particularly Black and Brown families—to purchase homes. At Smith NMTC, the first organization to pioneer the use of the New Markets Tax Credit (NMTC) program for affordable for-sale housing, we believe that increasing the use of this federal tax credit for affordable for-sale housing development can help greatly in addressing the housing shortage and transforming communities across the nation.
Unpacking the Rate of Homeownership Today
Rates of Home-Buying
The COVID-19 pandemic spurred a home-buying spree: In 2020, the U.S. homeownership rate climbed to 65.5 percent, a 1.3 percent increase from 2019 and the largest annual increase on record. Today, more Americans are likely to own a home than during any year following the Great Recession.
Wealth & Race Inequities
Staggering race and wealth inequities persist in national homeownership rates. In fact, at 43.4 percent, Black Americans are facing the lowest rate of homeownership since the 1960s. This underscores the widening gap between Black and white Americans in home-buying—and the unique challenges that many minority homebuyers are facing.
Cost of Homes
Housing affordability has also continued to decrease. Since 2019, home prices have spiked 30 percent, or roughly $80,000, for an average home. Meanwhile, the available housing inventory continues to decline—and now reports are showing that developers are pausing construction. And, income rates, especially for low- to moderate-income families have not kept pace.
Availability of Homes
There are simply not enough available homes—particularly for low- and moderate-income families. In 2021, it was estimated that the nation is short 3.8 million housing units to keep up with household growth (Housing Supply: A Growing Deficit, Freddie Mac, 2021).
Real Estate Discrimination
As recently as August 2022, a story from the New York Times highlighted appraisal discrimination when a Black couple’s home was appraised at $472,000—but when a white colleague stood in for them, the home was appraised at $750,000. This underscores the pervasive discrimination in real estate: One-third of Black respondents noted facing stricter requirements because of their race and witnessed or experienced discrimination with the type of loan product they were offered.
Why Homeownership Matters
Restoring access to homeownership serves as a powerful mechanism for individuals and families to become connected and embedded in their communities. Homeownership leads to deeper community investment in our neighbors, our local schools, our small businesses, and the overall quality of our community.
For low- and middle-income families and families of color, owning a home can act as a catalyst to unlocking new opportunities and possibilities, including:
- Financial benefits, such as long-term intergenerational wealth-building opportunities due to the equity in one’s home—the largest asset of low- to moderate-income families
- Greater community involvement
- Better health and well-being
Creating New Opportunities with New Markets Tax Credits (NMTCs)
At Smith NMTC Associates, we were the very first organization to use the New Markets Tax Credit (NMTCs) program to facilitate affordable, for-sale housing opportunities. Since our founding, we have structured and facilitated funding for 123 transactions in over 30 states using more than $500 million in New Markets Tax Credits and other financing tools to create more than 4,200 homes.
What is the New Markets Tax Credit (NMTC) program?
The federal New Markets Tax Credit (NMTC) program offers incentives for investment in low-income communities. Nonprofit developers, business owners, and other mission-driven companies can use the NMTC program to dramatically increase the availability of for-sale housing.
This program has the ability to transform lives and communities—and with the continued use and expansion of the NMTC program, it is possible to affect the national affordable for-sale housing shortage.
Interested in learning more?
We offer transparency with our proprietary models because we believe so deeply in homeownership—and its ability to enact sustainable change in the lives of low-income families across the country. You can access our available resources, including our three models, by clicking here.
We’re also committed to serving as a resource and a collaborative partner for anyone interested in utilizing the NMTC program for affordable for-sale homeownership. Reach out to us at firstname.lastname@example.org to schedule a call or learn more.