Commercial Real Estate
Addressing Affordable Housing Inequities
A discussion on racial equity in housing and an inclusive economy
A discussion on racial equity in housing and an inclusive economy
One in three households — nearly 100 million people across the U.S. — struggle with housing costs that jeopardize their financial security, according to the Aspen Institute. As one of the biggest determinants of financial and physical health, housing can influence a person’s access to education, health care and job opportunities, and has the ability to transform entire communities and strengthen the economy. And yet, while the notion of owning a home is firmly part of the American dream, structural barriers continue to prevent many people from being able to afford to buy or rent a safe place to live in economically thriving communities.
These financial barriers are experienced most often in our nation’s most underserved communities, which are disproportionately represented by Black and Latinx families. According to the Urban Institute, home ownership rates are 25 percent lower for Black and Latinx families, and according to Harvard University’s Joint Center for Housing Studies, nearly 55 percent of Black and Latinx renter households are cost burdened, spending nearly one-third to one-half of their income on rent. The populations most affected have also been disproportionately hit by COVID-19. Government, community and business leaders need to work together to provide equitable access to secure safe and affordable homes in all communities.
In October, JPMorgan Chase announced a business commitment of $30 billion over the next five years to help reduce systemic racism and advance racial equity by helping to close the racial wealth divide and provide economic opportunity for Black and Latinx people in the U.S. The firm will provide loans, equity and direct funding to promote and expand affordable rental housing and homeownership for underserved communities, as well as support opportunities to improve financial health and access to credit and banking.
“Racial equity is at the forefront of JPMorgan Chase’s approach to serving our clients and communities,” says Alice Carr, head of community development banking with JPMorgan Chase. “Our firm continues to prioritize increasing access to affordable housing for underserved communities. The importance of these efforts has been further underscored by the pandemic and social protest, which is disproportionately affecting those who are Black and Latinx.”
Carr adds that through this commitment, JPMorgan Chase seeks to lead by example. “It's good business to invest in the communities where our employees and customers live and work,” she says. “There needs to be a joint effort across government, business and nonprofit industry players to come up with creative, collaborative solutions and invest substantial resources in solving these ongoing complex issues.”
Through the Business Roundtable Racial Equity and Justice Committee, JPMorgan Chase and some of the country’s largest employers have committed to doing just that. The initiative seeks to re-evaluate business practices and advance a private sector engagement and policy agenda that removes barriers and increases access to homeownership and to affordable housing for Black and Latinx households.
To get a deeper understanding of the affordable housing challenges facing Black and Latinx communities, what’s working and what’s at stake, we sat down with Carr and other experts in community development and affordable housing. Here’s what they said.
Meet the Experts
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Kathy Payton, Fifth Ward Community Redevelopment Corporation
“In Houston’s Fifth Ward, we’ve had educators come out of the classroom to become administrators. We’ve had line workers and cashiers who went on to become store managers and supervisors. In every instance that I can name, homeownership was the starting point for their desire to achieve more, do more, become better. It encourages people, and once they make that first step, they continue to grow.”
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Alice Carr, Head of Community Development Banking, JPMorgan Chase
“Affordable housing is crucial to addressing the broader social inequities in our society. Wellness and prosperity are linked to having a safe place to live. It also ties into building a social network and being a part of a community. Affordable housing with access to education and opportunity, levels the playing field for all to thrive.”
Michael McAfee, President and CEO, PolicyLink
“There has to be systemic change. If you want things to get better, you've got to go to the root cause, and the root cause is structural in this nation, by design. We're in a moment now where we're awakening and we're exploring the answers to these questions, and we're doing it as multi-sectoral leaders.”
Let’s start by talking about the impact of equitable housing. What’s at stake if we don’t improve affordable housing for Black and Latinx communities and what impact can housing have on people and communities?
ALICE CARR: We cannot thrive as a country if we have inequitable treatment of people within our society. A child living out of a car and going to school is going to have a very different educational outcome than a child living with safe and stable housing. There is a real ripple effect of not having stable housing through all areas of people’s lives, and thus the communities they live in. Housing is crucial to addressing the broader social inequities in our society. It also ties into building a social network and being a part of a community. Affordable housing with access to education and opportunity levels the playing field for all to thrive.
MICHAEL MCAFEE: Think about the next generation. Think about what happens at the house that's full of lead, and how that will have generational effects. Think about the house that is situated in a neighborhood that isn’t connected to opportunity. Research shows that your zip code can be either a path to prosperity or a death sentence for you. And that's why housing stability and affordability are really at the core of having a thriving, prosperous economy, a thriving, prosperous democracy and a population that is doing really well on all these social determinants of health. If you think about a return on investment, and you think about the wise use of taxpayer dollars, charitable dollars and private sector dollars, there's no better place to start than decent, safe and affordable housing.
KATHY PAYTON: In Houston’s Fifth Ward, we’ve had educators come out of the classroom to become administrators. We’ve had line workers and cashiers who went on to become store managers and supervisors. In every instance that I can name, homeownership was the starting point for their desire to achieve more, do more, become better. It encourages people, and once they make that first step, they continue to grow. Many of them often returned back to school for a higher education. Many of them continued to build assets, like purchasing new cars versus used cars. Because they had achieved the American dream as it has been defined by society, it made them feel like they were now also able to be competitive and enjoy some of the pleasures that they'd only seen from afar.
What are some of the obstacles that communities of color face when it comes to obtaining housing, either to rent or purchase?
KATHY PAYTON: It's a systemic problem that has been built over time, starting from when there were not opportunities for Black and Latinx people to even own land or to build and accumulate assets for themselves. There’s been a lack of communication and a lack of opportunity because of all of the issues that people were plagued with relative to red lining, racial prejudices and the high number of denials for Black and Latinx people in obtaining a mortgage. Even today, people are intimidated by the process.
MICHAEL MCAFEE: There's something called a Black tax. It is a tax for being Black and owning property in America. Usually, if a particular neighborhood is majority black, we see property values decreasing — that is a huge problem. Access to credit is another one. We know the nature of work is becoming highly unstable for certain segments of the population, which can make it difficult to get a mortgage. For folks who may have had to change jobs two or three times in a year, they may not be the traditional credit profile a lender is looking for, even if they’ve still been paying their rent on time.
CONFRONTING A HOUSING AFFORDABILITY CRISIS
Black and Latinx households are facing a housing affordability crisis when it comes to both homeownership and rental opportunities. As one of the biggest determinants of financial and physical health, these housing disparities can influence a person’s access to education, health care and job opportunities. In fact, according to the Urban Institute, home ownership rates are 25 percent lower for Black and Latinx families, and nearly 55 percent of Black and Latinx renter households are cost burdened, spending nearly one-third to one-half of their income on rent. Source: Urban Institute
What are proven solutions to address persistent housing market disparities, including increasing availability of affordable housing and access to homeownership for Black and Latinx families?
MICHAEL MCAFEE: First, it’s really a matter of the consciousness and the heart of the nation wanting to change. I'll offer my own personal example. My parents took me out of school in the 1970s because of busing, but when they did that, they didn't really realize what they were giving up. They were just thinking, I want my baby to have a good education, but in reality, we ceded public education in the 1970s. Why? Because there were groups of folks who didn't want to be educated next to Black folks and housing patterns. Our whole development of our cities is organized that way and that must change before anything else does.
From there, we can get into some very practical solutions, such as having a different relationship with housing. We consider social housing — housing where rent is federally subsidized to remain affordable for low, moderate and middle-income households — to be bad, but in many cases, if you look at our history, social housing really built the white middle class. It was a springboard into mobility. We also need to protect renters and mortgage holders from displacement. And we need to have some creative and unconventional ways to look at credit. Right now, we use credit scores, and a lot of community members have difficulty meeting those standards.
KATHY PAYTON: When you look at the models for affordable housing, we’ve learned that we need integrated housing, which allows for different types of housing, whether it's for rental, sale or cooperative. In the Fifth Ward community, for example, we offer multifamily affordable housing through tax credit projects, we offer single family rental, single family for-sale housing and we just introduced the duplex model, where multi-generational families live together in a duplex. And all of these options, when combined strategically, work. And because it’s mixed income housing, people have an opportunity to strive for better, as they see living examples of people doing better, accomplishing more, and being empowered to take advantage of not just one home, but multiple home opportunities.
Along the way, we’ve really had to educate and increase people's comfort level, because there was this misnomer that affordable home ownership was a more expensive lifestyle as opposed to a more affordable lifestyle. And people felt like if they lost their house to foreclosure, it was the end of the world. But in the thousands of homes that we built here in Fifth Ward, we've had very little resale and we've had only three foreclosures for the homes that we've developed.
ALICE CARR: We need to provide support for first-time homeowners, in addition to credit, to make sure that there’s financial advisory services and home ownership education available to them. Some people received this guidance from their parents when they bought their first home. Some people got it from classes or education. Others don’t know where to get it. We know that preparation is important, regardless of where it comes from. Additionally, some of the biggest deterrents to homeownership are the upfront costs. JPMorgan Chase is helping people overcome this hurdle by improving our key home lending products and offerings, such as increasing access to the Chase Homebuyer Grant in underserved communities.
While homeownership does build wealth, we have to be cognizant of the fact that affordable rental housing can be a great stepping stone to better economic conditions. The vast majority of affordable homes restricted to serving low-income tenants has been created and preserved in this country by government policy through the Low-Income Housing Tax Credit Program. These projects serve people earning 60 percent area medium income, such as hospital workers, fire fighters, nurses, bus drivers and teachers, among others. JPMorgan Chase brings financial solutions to the table in the form of construction loans and long-term permanent financing to support projects that serve essential workers.
ALICE CARR, Head of Community Development Banking, JPMorgan Chase
As we head into increasingly uncertain times, the need for affordable housing will be even more critical. Who needs to come to the table to make changes happen?
ALICE CARR: Since the Great Depression, federal housing assistance programs have been necessary to help address a growing shortage of affordable housing. There needs to be a joint effort across government, business and nonprofit industry players to come up with creative, collaborative solutions and invest substantial resources in solving these ongoing, complex issues. While affordable housing development is driven by government policy, these projects require conventional investors and lenders to bring them to fruition, and JPMorgan Chase recognizes the important role we play. On the homeownership front, we are working with the Federal Housing Administration to modernize servicing and origination of loans to improve loss mitigation options that keep people in their homes through economic shocks. And to increase access and affordability of safe and secure rental housing in high opportunity communities, we are joining the Business Roundtable in advocating for a doubling of federal funding for programs that are successfully contributing to the housing supply and urging both federal and state incentivization of zoning and land use reform.
MICHAEL MCAFEE: Corporate leaders must play a big role here. You see these leaders come into racial equity in really transformative ways, but more is needed, from both the government and business to achieve sustainable system level change. When you think about it, this is where we're going to have to have a very real conversation around who we want to be as a nation. We do have resources, but they're not allocated for this type of work. So, is there a new rebalancing that needs to occur to advance some of this?
JPMORGAN CHASE'S $30 BILLION COMMITMENT
Structural barriers in the U.S. have created profound racial inequalities, made worse by the COVID-19 pandemic. The existing racial wealth gap puts a strain on families’ economic mobility and restricts the U.S. economy. Housing is at the forefront of this racial wealth divide. As part of a $30 billion commitment to advancing racial equity, JPMorgan Chase will promote and expand affordable housing and homeownership by:
- Originating 40,000 new home purchase loans for Black and Latinx households through an additional $8 billion commitment in mortgages
- Helping an additional 20,000 Black and Latinx households achieve lower mortgage payments through financing loans totaling up to $4 billion
- Financing an additional 100,000 affordable rental units through a $14 billion commitment in new loans, equity investments and other efforts
JPMorgan Chase recently committed $30 billion over the next five years to address racial inequality, specifically for Black and Latinx families. Where did this come from and what does this signal?
ALICE CARR: The $30 billion commitment is a collaborative effort across the firm resulting from the pain we’ve seen from the pandemic that has disproportionately affected Black and Latinx communities. Senior leaders throughout JPMorgan Chase came together to identify the challenges, assess what we were already doing, determine where we can lean in and do more to have the biggest impact. We hope these efforts will drive further collaboration and interest to make a positive difference.
KATHY PAYTON: We view JPMorgan Chase first as a bank and a lending partner, and then secondly as a community partner. I can tell you that our organization was responsible for introducing JPMorgan Chase to the Fifth Ward almost thirty years ago now. And I can assure you from our experience with JPMorgan Chase, they tend to look for ways to be responsive to the community and they engage with the community. As someone who has served on their community advisory committee for a number of years, they have always seemed to get the pulse of the community and the pulse of leaders like myself to understand what our challenges are and seek ways in which they can be part of the solution. We’re excited to see that.
2020 has shined a light on longstanding racial disparities, but it’s also sparked conversations about change. What’s something you’re seeing that gives you hope?
KATHY PAYTON: In light of what we're experiencing with the pandemic and the loss of jobs, I think it's even more concerning for us now because many institutions are in a pens-down mode. Many of the low- and moderate-income families that we serve have lost their jobs or lost incomes. Many will not be able to successfully recover from this endeavor for quite some time. But I think we are seeing a certain amount of sincerity about how people respond to the African American culture that we haven’t seen in quite some time. I’ve been excited to see how philanthropists and private sector partners like JPMorgan Chase have chosen to respond to the needs of underserved communities like Fifth Ward. They are reaching out to better understand the needs, the work that we're doing in and for communities and how they can help play a role in being a part of positive change.
MICHAEL MCAFEE: There has to be systemic change. If you want things to get better, you've got to go to the root cause, and the root cause is structural in this nation, by design. We're in a moment now where we're awakening, we're exploring the answers to these questions and we're doing it as multi-sectoral leaders. That's new, fresh and exciting. With corporations joining us, we're going to be able to compel the federal government to begin to do its job, which is to ensure the health, safety and well-being of all of its citizens. And that's where I have the greatest hope.
ALICE CARR: So many of our employees have been raising their hands to be part of the solution. This sentiment has been strongly shared throughout JPMorgan Chase, and we’ve created various initiatives that are being prioritized around diversity, equity and inclusion. It’s so heartening to see how many of our employees want to be part of this effort. We have the expertise and resources to play a critical role in this change, and I’m hopeful for what’s to come.
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