What California Lawmakers Could Do To Boost Homeownership For Black Families

By Manuela Tobias, CalMatters

May 17, 2021

In summary

Legislators are talking a lot about equity in housing, and could help more Black families buy their own homes. But advocates say lawmakers are failing to confront racial equity in many other ways.

When she was in grad school to become a therapist, Merika Reagan sketched out her future with a friend. They would each start their own practice, buy homes and raise their families in Oakland.

Her classmate, who could count on her family’s financial support, achieved the dream.

But Reagan struggled to find a job that checked her school’s internship requirements and still paid the rent. Her parents, who stayed in senior housing and later passed away, left no savings. She never finished her degree, bought a home or started a family — and she has a clear explanation for why their paths diverged.

“The difference is, she is white and I am Black,” said Reagan, now 46. “That did not happen for me because of generational poverty. Because of being Black, because of being a descendant of slavery, because of stolen wealth.”

California is in a deep housing crisis that has made it nearly impossible for many to afford rent, let alone buy a house. That crisis is, in part, the result of a decade of housing supply not keeping up with demand. But for communities of color, and especially Black people, housing is less an emergency than a chronic illness compounded by centuries of discriminatory, if not outright racist, policies.

“A housing crisis implies it hasn’t been happening this whole time,” said Roderick Hall, a project manager at Pacific Urbanism and a steering committee member of Our Future Los Angeles, both housing groups.

And housing inequality worsened during most of the COVID-19 pandemic, with Blacks and Hispanics more likely than whites to be at risk of eviction and foreclosure, according to a study by the Brookings Institution, a Washington, D.C., think tank. While inequality has lessened from its peak, that’s because more whites are facing housing instability, the study says.

“People have always had issues with housing, but now it’s hit the white middle class,” Hall said. “And now that it’s not working for them, it’s becoming an issue.”

Following the growth of the Black Lives Matter movement and a growing recognition of America’s racist past, “equity” has become one of the hottest buzzwords at the state Capitol. But equity is a loaded term, and it means different things to different people.

By law, the state can’t favor any one racial group over another. So racial equity often gets addressed through measures that aim to level the economic playing field.

Housing groups and lawmakers all say they want to narrow the racial wealth and homeownership gap, but not everyone agrees on how. And as with many issues, the people who are most affected are least likely to have a seat at the table.

Black wealth and homeownership gaps

Homeownership has long been the primary way that families build wealth in the United States. That’s especially true in California, where home prices have skyrocketed. And over the years, many Black families have been deliberately excluded.

Redlining systematically denied loans on homes in predominantly Black neighborhoods. New highways bulldozed through thriving Black communities, while urban renewal destroyed struggling areas. Changes in zoning from multifamily to single family homes allowed white neighborhoods to exclude Black residents from moving in. During the 2008 housing crisis, lenders pushed risky subprime loans more aggressively to Black people, who lost their homes in hundreds of thousands of foreclosures, according to a recent report by the Terner Center for Housing Innovation at UC Berkeley.

In California today, about 63% of non-Hispanic white families own their homes. Only around 36% of Black households can say the same, a gap that has actually widened since housing discrimination was officially outlawed with the Fair Housing Act of 1968.

Even when Black families own their homes, they are typically worth less. A recent study by Brookings found that on average, owner-occupied homes in Black neighborhoods are undervalued by $48,000, adding up to $156 billion in cumulative losses.

The median white family in the United States now has more than eight times the wealth of the median Black family. In Los Angeles, one study found Black and Mexican households hold only 1% of the wealth of whites households.

One significant way to narrow this gap, many California lawmakers agree, is by making it easier for people to buy a home. The challenge: Research by the California Association of Realtors shows that less than a fifth of Black Californians could afford to buy a median-priced home last year, compared with about two-fifths of white households.

A recent study by California Forward, a nonprofit advocacy group, found a gap totaling $61.8 billion between the home prices that low- to moderate income California households can afford and the typical home prices where they live. Latino, Black and Native American Californians were disproportionately represented in that gap.

A few programs boost homeownership through help with down payments — one of the biggest barriers to buying a home for people who don’t have savings or wealthy parents. The largest state program is through the California Housing Finance Agency, which provides as much as $11,000 of down payment assistance to qualifying first-time homebuyers.

The program served more than 9,000 families last year using $165 million from state appropriations, interest and loan repayments. But due to California’s exorbitant home prices, the assistance doesn’t go too far in places like the Bay Area, said Ashley Garner, the agency’s community outreach coordinator. About half of last year’s aid went to buying homes in San Bernardino, Riverside, Sacramento, Kern and Los Angeles counties.

While this program is designed to help low- and middle-income Californians of all races, Hispanic and Black borrowers are overrepresented. About 8% of last year’s borrowers who took advantage of this state aid were Black, which is more than the 5.5% Black share of the state population. More than half of borrowers identified as Hispanic, compared with their 39% share of the state population.

If California hopes to close the racial homeownership gap, however, those numbers need to be far higher.

Garner, who also leads the agency’s Building Black Wealth initiative, hopes to double Black participation through outreach that includes videos to educate people on housing discrimination and encourage Black homeownership.

“If it wasn’t so important, why did they lock you out of it? I need the Black community to understand,” Garner said. “It’s a better lifestyle for our children. It’s employment opportunities. Owning a home is more than just building wealth.”

Still, she said the program’s biggest obstacle has been getting the word out and securing trust. She recalled sitting at an informational booth in a predominantly Black community. A long line formed to speak with Garner, a Black woman, while her white colleague sat idle.

“How can you solve an issue in a community you never set foot in?” she asked. “For us to get somewhere in housing you have to bring these voices to the table.”

“It’s a better lifestyle for our children. It’s employment opportunities. Owning a home is more than just building wealth.”
Ashley Garner, community outreach coordinator for california housing finance agency

Aside from the need for down payment assistance, Black people disproportionately suffer from poor debt-to-credit ratios, which make it difficult to buy a house through any program. That’s because people of color have long been flooded with predatory loans and excluded from the lending system, said Maeve Elise Brown, executive director of Housing and Economic Rights Advocates in Oakland.

“There are scored differentials based on race in our country, which are inextricably tied to a historic lack of access to credit or being force-fed onerous credit,” she said. “This is the lingering aftermath of that damage. Those are lost years.”

Several banks have acknowledged the role of past structural racism in the financial system. But there’s little consensus on how to move forward. Shareholders recently urged the nation’s biggest banks to take a closer look at how their practices affect communities of color. The banks largely responded that it was unnecessary because of internal initiatives and investments in the issue. JP Morgan, for example, committed $30 billion over the next five years toward Black and Latino homeownership and affordable rental financing programs.

Where’s the money going?

Flush with a historic budget windfall of more than $100 billion, state lawmakers have a chance to put their money where their mouths are on housing. Assembly and Senate budget leaders alike have identified homeownership as key, but must still agree on the details.

The Assembly has made it a priority to increase investment in the finance agency’s down payment assistance program. By how much, or the source for that funding, is yet to be hammered out.

In his revised budget that he submitted to the Legislature on Friday, Gov. Gavin Newsom proposed a $100 million state and federal investment in the same program. Newsom also proposed $100 million to finance “granny flats” and other accessory dwelling units for low- and middle-income families.

Senate Democrats have a more radical idea. Under their pandemic recovery budget blueprint released last month, the state would partner with first-time homebuyers to buy through what they’re dubbing “California Dream for All.” The state would pay, and own, up to 45% of the home, cutting the purchase price for people by nearly half. For example, a family could buy a $400,000 home for $220,000 under the program.

The money would come from a yet-unspecified revolving fund set up by the state, with shares sold to investors. As home values increase, so would the value of the shares.

The Democrats have proposed commissioning the state treasurer to hash out the program in greater detail and present it back to the Legislature for approval in 2022.

The expansion in homeowner aid would disproportionately favor low-income communities of color who most need the help, allowing the state to “circle around” the constitutional provisions that bar the state from considering race in programs, said Muhammad Alameldin, economic equity fellow at the Greenlining Institute in Oakland.

Are legislators ready to tackle equity?

When it comes to policy bills, however, advocates say the Legislature has repeatedly failed to tackle racial equity head-on.

“We say things like ‘Black lives matter,’ we say we care about homelesseness, but until we confront the systemic inequalities that create these things, we’re never going to solve these issues,” said Assemblymember Alex Lee, a 25-year-old Democratic Socialist from San Jose.

Lee introduced a number of bills to redistribute wealth and protect tenants, but most did not make it out of the housing or revenue and tax committees.

A prime example: Assembly Bill 946, which Alameldin helped craft. That bill, too, would have dramatically increased funding to the finance agency’s homebuyer program — but by ending a mortgage interest deduction on second homes.

“Democrats are choosing to go through the budget process because the policy committees have not taken the housing crisis seriously,” Alameldin said.

“We say things like ‘Black lives matter,’ we say we care about homelesseness, but until we confront the systemic inequalities that create these things, we’re never going to solve these issues.”
ASSEMBLYMEMBER ALEX LEE OF SAN JOSE

Lee also re-introduced a bill that would have sharply curtailed displacement under the Ellis Act, which gives landlords a path to evict tenants when leaving the rental business. Tenants rights advocates have long argued that speculators use that law to flip the state’s waning supply of affordable rental units. He said the bill would have been a boon to people of color, who are vastly overrepresented in homelessness. About a third of people who accessed homeless services last year were Black — five-fold their share of California’s population.

But opposition from Realtors doomed the bill, said Sarah Abdeshahian, campaign manager at Tenderloin Housing Clinic in San Francisco, which co-sponsored the legislation.

“Even legislators who are also people of color, we tell them, we are seeing people left with no choice but to be homeless because there’s no way for them to find another rent-controlled unit within San Francisco,” she said. “They’ll understand, but they refuse to take the bold step of supporting us because it would mean losing the money from Realtors.”

California’s Realtors spent roughly $2.3 million in last year’s legislative races alone.

Sanjay Wagle, senior vice president of governmental affairs at the California Association of Realtors, countered that advocacy groups such as the AIDS Healthcare Foundation have poured millions into supporting tenant protections.

“From our perspective, we see these housing committees and think, ‘Oh boy, look how pro-tenant they are,” Wagle said.

The burden of low-income tenants shouldn’t fall on real estate interests, Wagle argues. “If it’s a social good, then shouldn’t society be helping through a more aggressive voucher system?” he asked. “It’s a social cost. That cost should be spread.”

Abdeshahian also blamed the composition of housing committees for inaction on bills. A CalMatters analysis last year found that at least 30 legislators are landlords, themselves, a big majority are homeowners and only one who was a tenant — who has since bought a condo.

“There is a class divide here that we don’t talk about enough,” Abdeshahian added.

“From our perspective, we see these housing committees and think, ‘Oh boy, look how pro-tenant they are.”
Sanjay Wagle, senior vice president of governmental affairs at the California Association of Realtors

Until those power imbalances are addressed within the Legislature, equity will remain but a buzzword outside the Capitol, too, said Lee.

“Who traditionally has more say and more influence? The people with a lot of money and a lot of power,” he said. “It’s not going to be those people in rent control units. That’s the unfortunate dilemma.”

Which are the best solutions?

Many of this session’s big Democratic housing bills target restrictive zoning — a tool experts say has been used to keep Black, brown and low-income people out of mostly white neighborhoods.

• Senate Bill 9, by Senate leader Toni Atkins of San Diego, would allow homeowners to put a duplex on single-family lots or split the lots;
• SB 10, by Sen. Scott Wiener of San Francisco, would allow cities to rezone transit centers and job hubs to allow as many as 10 units per parcel;
• And SB 478, also by Wiener, would close loopholes that limit multi-family units in places already zoned for it.

These measures could improve equity by adding more units to the housing stock. In their Roadmap Home 2030 plan, Housing California, the California Housing Partnership and a broad coalition of partners across the state identified the need for 1.2 million affordable homes.

“You can’t get anywhere close to a solution without addressing the supply,” said Matthew Lewis, director of communications for California YIMBY, a housing advocacy group. “You need years of building. The starting point is you have to make it legal.”

“The fact is the housing crisis has extremely racialized effects,” added Darrell Owens, policy and data analyst at California YIMBY. “Anything that expands the availability of housing is an equity bill. Anything that curtails that, I would consider to be not rooted in housing equity.”

The YIMBY movement believes in increasing that market-rate supply along with subsidized affordable housing. But other advocates don’t believe growing the real estate market is the answer.

“No matter how much you up-zone, housing is not going to be affordable,” said Isaiah Madison, a board member of Livable California, an anti-gentrification group, and a neighborhood council member in South Los Angeles. “I just don’t think real estate development is an equity tool.”

Oakland, for instance, has seen a recent glut in housing production. But it’s concentrated on the higher end of the market, creating few units for low-income families and in fact, pushing many out, said Brown, from Housing and Economic Rights Advocates.

The market, Madison argued, will never make room for people suffering from intergenerational poverty without government intervention. Plus, he said, “A lot of the people using equity as a talking point come from white communities … and to me seem more upset about the racial segregation that exists today than I do or people that I organize do.”

The idea behind allowing more dense housing in historically white communities is partly to expand access to their resources: better-funded schools, better infrastructure, healthier water and air — in short, opportunity.

But some advocates wonder why Black and brown people have to uproot to access the same opportunities. “As people of color, we’re not chess pieces,” said Hall, from Our Future Los Angeles. “You can’t just move us around your board and tell us to go live here and there.”

These advocates say housing alone can’t fix California’s massive inequality. It’s going to take investment in every part of neglected communities of color to even the playing field.

“Anything that expands the availability of housing is an equity bill. Anything that curtails that, I would consider to be not rooted in housing equity.”
Darrell Owens, policy and data analyst at California YIMBY

Madison says another measure, also introduced by Wiener, would help. It would repeal Article 34 in the state’s constitution, which has made it nearly impossible to build public housing by requiring voter approval of every project. The attempt to repeal the law has failed repeatedly.

The ballot initiative has support from the California Association of Realtors, which helped cement Article 34 into law. The main opponent: NIMBYs who want a say in what gets built.

But there’s also opposition to the singular focus on building affordable rental housing from some equity-focused groups. Sylvia Aguilar, from the Berkeley-based nonprofit California Community Builders, says the state has not invested enough in affordable homes for sale. Her organization proposes building more “missing middle” income housing, such as condos and “granny flats” on single-family lots.

“We see a gap between this idea of keeping people housed and in rentals off the street, but not really creating opportunities to build wealth,” Aguilar said. “Homeownership was the key to creating the great middle class in the mid-twentieth century, and it can happen again. If the equity talk is real, this is one path to achieving that.”

‘Let’s put our thumb on the scale’

Mary M. Lee, former deputy director for the equity-focused research and advocacy group PolicyLink, says the solution lies in ending the commodification of housing.

“The system isn’t broken, it’s designed to work this way,” said the longtime fair housing advocate in Los Angeles. “Let’s put our thumb on the scale to help low-income people —not just have a roof over their head, but also to build wealth.”

One way to do that, Lee said, is by letting those disadvantaged communities decide for themselves what housing they need. “That’s one of the problems we have with housing,” she said. “We’re trying to let people make mass solutions for problems that aren’t all the same.”

Steve King, executive director of the Oakland Community Land Trust, is working on one such creative public-private hybrid. His nonprofit owns the land a home sits on and leases that land to the homeowner — decreasing the price significantly and protecting the home’s value from market volatility.

“Whenever there’s a disturbance in the market, those are inflection points that without a doubt have caused harm in Oakland’s communities of color,” King said. “We remove land from that equation.”

So far, the land trust covers about 50 properties and 150 residents.

One of them is Merika Reagan, who had never stayed in the same house for more than a couple years growing up around San Francisco as her parents staved off eviction.

Reagan’s two-bedroom house in East Oakland changed ownership three times since she moved there in 2016. Only 30% of the homes in her majority Black and Latino neighborhood were occupied by their owners last year. And each year, she faced rent hikes she feared would make her homeless.

“I was having panic attacks, chest pains. I couldn’t sleep well, but I was still showing up for my clients,” Reagan recalled, when her rent rose by $350 in 2019. That’s when she became involved with the Alliance of Californians for Community Empowerment, a tenant organization that helped her negotiate the rent increase down to $100. When the pandemic hit, and her corporate landlord tried to up the rent again, the group connected her with the land trust, which purchased Reagan’s home.

Her newfound stability has changed her life. When burglars tried to break into her house, her neighbors called the police, providing a sense of community she had never experienced before. When her girlfriend — now fiancee — moved in, she introduced her to the neighbors. Now that the trust owns the land, they can finally grow vegetables in their garden. Reagan is gearing up to take homeownership classes, so that she can eventually buy her house.

“Before this, I never thought ownership was in my horizon at all,” Reagan said. “I thought, ‘I’m going to be a renter until the day I die.’”

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