Twin Cities Habitat for Humanity digs deeper into Black home buying

Across the Twin Cities, rates of Black homeownership rates aren’t just well below that of white residents. They also fall significantly below that of Black Americans in other parts of the country.

Even municipal and nonprofit programs aimed at opening doors for low-to-moderate income homebuyers in the seven-country metro suffer from steep racial disparities.

Those disparities have moved Twin Cities Habitat for Humanity and the Minnesota Homeownership Center to launch a new homebuying program geared specifically, for the time being, toward some 200 existing Black clients. Officials with both nonprofit organizations said “Advancing Black Homeownership” enrollment, still in an early experimental phase, could open to the public this summer.

Habitat, a St. Paul-based home lender and one of the largest nonprofit housing developers in the Twin Cities metro, began its special credit program three months ago as a pilot project offering added financial assistance compared to its traditional products, as well as more flexible underwriting and a more intensive pre-purchase coaching program.

“We have one of the largest discrepancies for homeownership between white families and Black families … and a lot of that relates to ways we shut out Black families historically in the Twin Cities,” said Chris Coleman, president and chief executive officer of Twin Cities Habitat, on Tuesday.

‘Fixing the problem’

Coleman, a former St. Paul mayor, noted how redlining, or discriminatory housing and lending practices, prevented Black soldiers returning from World War II from buying homes in white neighborhoods, even when they had access to the federal GI Bill, which funded housing acquisition.

For decades, it was legal to add racial covenants, or discriminatory language, to housing deeds, shaping which races could purchase specific properties.

In the modern era, FICO credit scoring has kept many of the same families who did not have access to inherited wealth from buying property, he said.

“We have to be as intentional about fixing the problem as we were about creating the problem in the first place,” Coleman said. “All of the challenges and inequalities we see in the community are tied to the lack of housing — educational outcomes, job attainment, wealth generation. We have to make sure we’re providing pathways to home ownership for our families.”

According to APM Research Lab, Black homeownership rates in the Twin Cities were 19% in 2019, compared to 77% for whites. That gap — 58 percentage points — is one of the largest in the nation, and it’s compounded by the fact that Black homeownership in the Twin Cities is well below the national average for Black households of about 43%.

Fannie Mae awards $1 million for proof of concept

The goal of the “Advancing Black Homeownership” program is to open doors for “foundational Black” residents — those who can trace their bloodline to slavery and the nation’s founding century — throughout the metro, including prospective homeowners who have been previously denied credit.

The concept already has found some federal backing. Fannie Mae, the government-sponsored mortgage financer, recently awarded $1 million to Twin Cities Habitat and the Minnesota Homeownership Center to support the development of a regional approach toward Black homebuying as part of its national competition, the Sustainable Communities Innovation Challenge. The program was one of five selected nationally for the award.

The two nonprofits hope to fundraise an additional $8 million to support their efforts and then expand them, effectively exporting the same model to other agencies that support first-time homebuyers. Among the funding sources, said Coleman, his nonprofit will dip into a $13.5 million gift awarded last year from philanthropist MacKenzie Scott.

“The challenges that our families are facing have just been exacerbated with rising interest rates,” Coleman said. “Certainly, their incomes have not kept up with the rising cost of living. You get a 1% increase in interest rates, and that’s the equivalent of all the money we received from the MacKenzie Scott gift.”

Julie Gugin, president and chief executive officer of the Minnesota Homeownership Center, called the “Advancing Black Homeownership” program both a catalyst and “proof of concept” for a regional approach that will be refined based on the feedback of Black homebuyers. The goal is to have three community development institutions administer the program and up to 10 regional mortgage lenders pair the product with their affordable mortgages.

How it works

The special purpose credit program revolves around three key components. The first, according to Habitat materials, is peer-to-peer coaching using a specialized curriculum that focuses on developing financial resilience, referrals for debt consolidation and “healing from financial trauma.”

The second step involves increasing access to mortgages through a more flexible approach toward underwriting criteria and student loan debt, including alternative credit requirements.

And the final step is boosting financial assistance, which clients can use toward their savings requirement or as down payment assistance. Gugin said the goal is to support Black homebuyers by finding ways to cover about 10% of housing cost through down payment.

The city of St. Paul’s downpayment assistance program offers qualifying homebuyers some $40,000, or $50,000 for first-generation homebuyers whose parents never owned a home.

“Traditionally, downpayment providers would be pretty proud if they were offering $5,000,” said Julie Gugin, president and chief executive officer of the Minnesota Homeownership Center. “That doesn’t do anything. Every little bit helps, I guess, but we’re happy when we see programs like the city of St. Paul offer down payment assistance in ways that are breaking barriers.”

Shereese Turner, chief program officer for Twin Cities Habitat, noted that even looking at Habitat for Humanity’s own services, too many Black families were not able to complete enrollment and close on home purchases.

“The truth is the racial disparities in our region were replicated within our own programs. Foundational Black homebuyers were experiencing the lowest rates of success in reaching the closing table,” said Turner, in a written statement. “We’re listening to community feedback, unpacking the data, and adapting our program to work better for Black families — and we know that will have a positive ripple effect for everyone we serve.”

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