Homeownership disparities a Minnesota blight

Minnesota Housing Finance Agency wants to cure it

Minnesota has ranked among the worst states in terms of racial disparities in homeownership. The Minnesota Housing Finance Agency (MHFA) has made it a priority to mitigate those inequities and close the gap.

“Minnesota’s homeownership disparities between White households and Households of Color has been persistent and continues to be one of the worst in the nation,” stated Kasey Kier, the assistant commissioner at MHFA. “Currently, I believe that we are the fourth-worst in the nation.”

The 2020 State of Housing in Black America report, commissioned by the National Association of Real Estate Brokers, revealed that in 2019, 73.4% of White households owned their own home. In contrast, the report stated that only 42.1% of Black households owned their homes. In 2020 the national gap between Black and White homeownership was 26%.

In Minnesota according to 2019 American Community Survey (ACS) data, White/non-Latinx individuals own homes at a rate of 76.9% compared to Blacks who own at a rate of 25.3%, a  homeownership gap of more than 50%.

“When we look at Minnesota having one of the highest homeownership rates in the nation but one of the largest homeownership disparity gaps, we need to think about how to tackle it,” Kier said. “The industry itself is not doing a good job of getting there and closing that gap, so Minnesota Housing is really stepping in.”

“In Minnesota the mortgage industry is serving the BIPOC communities at about 15%,” said Kier. “Minnesota Housing is serving the BIPOC communities at about 35%, so more than the industry average.”

Alexis Bolton (center) poses for a picture with her daughter (left) and employees of MN Housing Finance after signing closing documents on her house.

One of MHFA’s goals for 2021 is to increase their percentage of mortgage loans from about 35% to 40%, which is almost three times the state average.

MHFA has been helping people like Alexis Bolton achieve homeownership for over 45 years. “[MHFA] helped me in more ways than one,” she said.

“For the most part, I didn’t know about [first-time homebuyer programs], and then somebody introduced it to me and then made it possible,” said Bolton, a first-time homebuyer in 2017 using MHFA programs.

 Bolton, who is African American, was initially overwhelmed by the journey to homeownership because no one in her family had gone down that path before.

“Without [the first-time homebuyers program], to be honest, I wouldn’t be in my house,” said Bolton. “I would feel like I had to make a whole lot more money. I would feel like I had to put $20,000 down. No one has that type of money off the top.”

“One of the things that we do at Minnesota Housing is, we have programs that are specifically tailored to households of color to help them enter the market,” explained Christina Akinola, the business development representative at MHFA.

“There’s a lot of people who have the income to support homeownership but either have student loans or just don’t have the savings for the upfront down payment,” explained Kier.

“Down payment and closing costs are the number-one reason why people don’t get into homeownership,”Akinola said. “It would take [a typical family] an average of 17 years if they are saving 5% of their household income to save the typical down payment amount at 20%.”

Akinola pointed out that in Minnesota the median cost for a home is about $250,000, which, at a down payment rate at 3%, would be about $10,000-$17,000 needed for down payment and closing costs alone.

MHFA combats the challenges of down payments and closing costs for first time homebuyers and the BIPOC community by providing down payment assistance programming. They provide up to $17,000 in down payment and closing cost assistance.

Alongside their down payment assistance programs, MHFA has programs that drop the down payment percentage to 3% to make homeownership more attainable.

“Our most utilized loans are deferred payment loans. They’re structured as zero percentage loans.” Kier said. “Thirty year deferred and repayable at the end of the term or if the home is sold or refinanced.”

Providing funds to BIPOC communities to achieve homeownership is one of MHFA’s goals. During their last program year, the agency spent over a billion dollars in first-mortgage financing to help support 5,000 homeowners, said Kier.

“Our programs are available statewide and we never run out of money,” Akinola said. This is in comparison to other loan programs that run out of money or force buyers to settle in the Twin Cities.

Effects of systemic racism

“[Black people] don’t have enough money in savings because we also know that there’s an income gap,” Akinola said. “Our BIPOC communities typically earn less, therefore they can only save less.”

Racial gaps in income and wealth are classified as primary contributors to the homeownership gap. Lower incomes and wealth levels result in Black buyers having less capacity to qualify for large mortgage loans and expensive homes, according to the SHIBA report.

It was important for Bolton to buy a home because neither she nor her mother nor her grandmother ever owned homes. “If I can have this, how can I pass it down to my kids so that they can generate money in the future or give them a little bit of a leg up?” Bolton asked herself.

“Homeownership is one of the best ways to create and build wealth and to build generational wealth,” Kier said. In order to achieve homeownership, MHFA acknowledges the historical barriers that have barred BIPOC individuals from obtaining homeownership in the past and still have impacts today.

“The systemic racism in the housing market and lending [institutions], redlining, and deed restrictions were placed on properties to prevent BIPOC communities from purchasing homes in certain areas,” Kier explained. “The number of BIPOC communities that own homes has not changed since the Fair Housing laws were enacted [in 1968].”

“So we found that even where we have similar credit scores and incomes amongst the White people, in the Black community that same account profile would go to a loan and they would be denied,” said Akinola. “There’s a disparity in the approval between our White communities and our Black communities, so at Minnesota Housing we find that it’s very important that we bridge that gap.”

MHFA partners with lending partners, real estate agents and associations like the National Association of Real Estate Brokers, the Asian Real Estate Association, the Association for Gay and Lesbian Professionals to enhance their community engagement and reach as many marginalized groups as possible.

“It’s such a blessing to have programs like this,” said Bolton.