Lee Davenport
By: Lee Davenport, PhD
In many parts of the nation, unaffordability is bringing the housing market to a stalemate. As real estate pros, we may not be able to directly alter interest rates (outside of our lobbying efforts) but we can impact how much money people have in their pockets in order to have the financial wherewithal to buy, sell and lease real estate. How? By using our voices and our leverage as industry professionals to make change is how we make homeownership possible for all.
It’s important to understand that for many, barriers still exist. Sometimes, it’s a matter of not having all of the information. Other times, it’s about unfair, unethical or illegal business practices still happening in our realm. No matter what’s happening though, if we’re committed to fair housing, we as real estate professionals have a duty to ensure we’re doing our part to speak out, speak up, hold other professionals and adjacent industries accountable and advocate for equity in real estate.
Below is a sampling of the issues still affecting housing affordability in 2023. As we close out this year and move into a new one, I encourage all real estate practitioners to have these issues on their radar and commit to advocating for change in 2024.
Redlining is Still Happening
Redlining—a historically racist practice in which governments identified predominantly Black and brown neighborhoods as risky for investing and deemed them less valuable—has long kept underserved communities from the wealth-building opportunities of homeownership. The practice was thought to be eradicated, and it is illegal. And yes, since 2021, 10 lenders have settled redlining allegations, leading to over $107 Million in relief for redlined areas. What is worse is that there are currently over 20 open investigations into illegal redlining practices.
You may wonder, “How can ‘redlining’ still be an issue when we have had laws on the books since the 1960s?” First, it’s important to know that the definition of redlining has expanded in recent years, according to The New York Times, to refer to, “discrimination of any kind in housing.” It is true that redlining in its original iteration was made illegal, but as I always share at the various REALTOR® conferences, laws do not magically stop violations. There is no bibbidi-bobbidi-boo moment from a fairy godmother like in Cinderella. For those of us that are true crime podcast fans, we know murder is illegal but it happens… a lot. Similarly, fair housing and lending laws put safeguards in place so that when, inevitably, violations occur, there may be a penalty and remedy of some sort. In other words, we have work to do!
How you can advocate for fair housing in this arena: Become an “options broker.” No, I am not referring to the New York Stock Exchange but rather being a professional who is well-versed in the options available. How?
Connect. Subscribe to the complimentary newsletters, attend webinars and conferences, etc., of non-profit organizations devoted to fair lending like the National Community Reinvestment Coalition and the National Association of Affordable Housing Lenders. Take note of the lenders that support such efforts and update your preferred lender list accordingly. Also, take note of the lenders that have settlements and pending investigations – work with them cautiously and keep clients informed about their various investigations.
Middle-income Buyers Qualify for Downpayment Funds and Don’t Know It
A recent study found that close to 40% of those who do not own a home struggle to come up with a downpayment. To make matters worse, many are not aware that downpayment assistance exists. In my own unofficial Instagram polls, I have found that although NAR has noted that student loan debt and health care costs account for almost a fifth of the issues “holding (potential) buyers back from saving (for) downpayment”, most (the public and professionals) are not aware of programs that help (including a test program by Blue Cross Blue Shield).
How you can advocate for fair housing in this arena: Make no mistake, the essence of fair housing hinges on affordability. Thus, every action we can collectively take to ensure housing is affordable for all, especially those that have been historically denied, is a step toward fair housing, too. Surprisingly, the biggest misconception I hear among real estate professionals is that downpayment (and closing cost) assistance is only afforded to low-income buyers. This is incorrect. Downpayment and closing cost assistance include grants, forgivable loans, low/no interest loans or tax credits. In many cases, these funds take a huge chunk off of or completely cover the funds needed for a down payment and/or closing costs and they’re offered for reasons like moving to a particular state, holding a particular occupation or being part of a protected class that historically has been excluded.
Advocacy in this space means that we’re aware of the options available to buyers. Thus, we should know about each of the programs in our area and provide a list to every single client (note: a big tenet of fair housing is that we have the same process for everyone).
For extra credit, I love that the California Association of REALTORS© went beyond offering a list of what is available (which they do) to offering their own assistance program. Creating our own local assistance programs supports our communities in ways that every local association and realty office can likely offer in some capacity. For example, a realty firm in Wisconsin started Own It, an organization dedicated to providing education and down payment assistance to Black and brown families so that they have equal access to building wealth through homeownership. Let’s get after it!
Inaccuracies That Cloud the Tenant Screening Process
Unsurprisingly, if tenants have a less-than-perfect credit history, landlords may request additional security deposits and higher monthly rents to mitigate risk. But what happens when tenants are unfairly deemed risky? The result is that tenants experience inflated housing costs and disposable income that might have gone toward a downpayment for a home or essentials like adequate medical care or educational needs, is depleted. In short, affordability is lost, and the renter suffers.
In 2023, it was surprising to me to learn that trusted credit companies like Transunion have been inaccurate in their scoring, contributing to increasing unaffordability in the rental markets. Even after a 2019 report from the National Consumer Law Center pinpointed the myriad ways consumers are harmed by credit inaccuracies, other companies continue to mix up tenants who have similar names. Additionally, these companies, when screening a potential renter, may consider sealed cases that have been expunged, even though expunged records, by law, should hold no merit in making determinations regarding housing.
How you can advocate for fair housing in this arena: Foremost, if you work with tenants, be sure to have fair housing news alerts set up (such as Google Alerts) to keep up with new developments. Keep a running list of companies that have documented cases of inaccuracies and report to your clients—both landlords and tenants—those lists so that they can steer clear of such services until remedies have been made.
The Moral of the Story
Fair housing is not automatic and needs our commitment and advocacy. The barriers to fair housing reach far and wide and infiltrate many segments of the industry. It requires diligence and steadfast progress to change the systems.
Join me in making this pledge as we approach a new year. Many of the tangible action items in this post come from my Fair Housing DECODER© program, and within the materials, I have a personal commitment pledge as well, which you can find in this complimentary ebook.
Dr. Lee Davenport is an Atlanta-based real estate coach who trains agents, teams, brokerages, and other business organizations on how to use today’s technology to work smarter. Join Lee’s free RE Tech Insider’s Club by visiting LearnWithLee.REALTOR
Comments 9
Fair Housing???? Fair Housing ???? What about all of the e-Brokers who have 10-20 0ffices all over the state as well as hundreds of agent-employees ?? Is that FAIR ? I wonder what shape their files are in ……
Mary, what does this have to do with the article above? If you find a problem with those agents, make complaints. They’re not going to make themselves.
Good article Lee.
MN has one of the worst racial homeowner gaps in the nation.
IMO, if we want to reduce the racial gap in homeownership, we may need our public schools to begin to teach the basics of financial planning, and how valuable it is long term, to become a homeowner.
Mike you are so right! The schools should be educating the students about Math (Financing) Savings accounts, Reality of costs of Homeownership, Taxes, Payments, upkeep and the myriad of other Math founded situations. If you make it real there will be incentive to learn. Same with every skill that will enable them to make a living, not just push a college education. “The why” you need to know something is very powerful.
Mike, Florida is encouraging agents to volunteer to teach classes on what is needed to buy a home. This would cover credit, work history, income, grants, down-payment assistance etc. It would be good for us to consider teaching how to maintain a home for both buyers and tenants. As a Landlord myself, I can tell you horror stories about clogged pipes, and damage to AC units caused by dirty filters.
The two biggest factors that are currently influencing “unaffordability” are:
1. Interest rates
2. Home prices
Anything else is secondary.
So i was surprised to hear there was redlining still going on. I read the article with great interest. I hit the link and read the complaints and settlement statements of each. I noted Old National from Indianapolis was not included. Best i can tell it is that banks are closing in black and brown areas. That fewer loans by a fairly dramatic number are going to black or brown people. That the settlements on these are all generally the same. A little money going to local CDC’s for rehab programs, over a two-year period. Some money to go toward a subsidization program. I presume on the downpayment as the DOJ can’t move the market on rates due to size and lack of legal authority. An opening of offices in Black or Brown census tracts. And to use “commercially reasonable” efforts to originate X millions of home loans in a particular Black or Brown census tract.
My question to you is, what do you expect to happen? They will all open small offices, do advertising in mediums designed to get in front of the black and brown markets. But nowhere in the settlement agreements are they required to get outside of the established underwriting criteria. And nowhere in any complaint is any accusation made that a loan that qualified in a black or brown census tract was denied. It is only alleged, and i think rightfully and fairly so, that there is an element of corporate loan originators abandoning the black and brown markets. In fact, it is stated in settlement agreements. So, after 2 years, what do you expect to have happened? No one was denied a mortgage that was eligible. This was moving away from unprofitable areas. It is the same reason there are food deserts and very very soon it will be the same reason that major retailers and restauranters will be leaving downtowns across the nation.
But i have never seen anyone turned down that was qualified by objective standards we all must meet. Have you? I agree that banks should have offices in black and brown census tracts. But i submit to you that it will not originate any loan that would not have otherwise been originated. This is a democrat shakedown by the DOJ and it makes you think that it is righting some major wrong. You feel better. You get to throw around race baiting words like Redlining to perpetuate a myth and malign an industry, but it won’t change a thing. They left because there was no business or not enough to justify brick and mortar or time. Any loan, black, white, brown, purple, red, pink, or whatever that qualifies under the objective criteria, gets done. What it will do is result in very meticulous files being made and maintained to show as evidence that good faith efforts were made and those who were denied were denied based on objective standards. And I suspect those already exist, but that is not the issue…its the moving away, it the ignoring through lack of advertising. The people in these black and brown census offices will not be paid on commission. if they are they will leave because it is too hard for too little. they won’t be able to keep people in the territory. If they are paid salary to man the desks and process and package the loan apps to underwriting, that will be discriminatory because they weren’t properly incentivized to get out there and pound the pavement as they are in other more lucrative markets. That will be the DOJ’s argument. It’s hard to tell if you get it, or whether you think something has actually been righted that will make a difference. Should be pretty easy right? The settlement agreements should be showing compliance or no compliance. All by the end of 2024. If you haven’t moved on to a different job, why don’t you ask the DOJ attorney’s involved in these settlement agreements what the compliance and or success rate is? Or have your congressman do it.
If they are successful, the DOJ’s will cheerfully give you the information. if they have not succeeded then they should be back in court with allegations of contempt, and bad faith, and a motion to show cause. In that hearing, the lenders get to provide evidence and the DOJ does as well. If the lenders have taken X number of mortgage apps from black or brown people in black and brown census tracts, and they provide all the standard underwriting documentation which supports denial of credit or justifies a higher interest rate, then nothing happens. Except that the cost of doing business goes up and gets passed on to you and me. But the most interesting part, and that which will justify the DOJ’s actions as being not a shakedown is if black or brown loans are originated in these area in demonstrably higher numbers. Not percentage increases….number of new under written loan sold on the secondary market. I think there will be some, but not very many. Objective standards are objective. let’s see if the DOJ’s definition of redlining by not being proximate or not advertising to the black and brown crowd moves the needle. See you in a year. I would be pleased to be wrong. The deeper i think about it…they will probably be making smaller loans that are less profitable on the yield spread premium and whatever profit is made will be outweighed by the expense to generate and service them by a lot…again part of the reason they left. I hope i am wrong.
well written, easy to read and understand, not to long concise and to the point.. it is always helpful to be reminded of certain issues in our industry.. thanks for publishing this article
The link you put for down payment resource is a big scam!
1st it takes going through 3-4 articles and links to get to it then you have to pay a monthly membership to get the info?
This is a shame that Realtor.com promotes scams like this.
A total waste of my time today!