Abstract

Excerpted From: Henry Korman, Race, Homeownership, Special Purpose Credit Programs, and Affirmatively Furthering Fair Housing, 32 Journal of Affordable Housing & Community Development Law 349 (2024) (131 Footnotes) (Full Document Requested)

Shirley Chisholm, the civil rights leader, congresswoman, and presidential candidate, once wrote, “Racism is so universal in this country, so widespread, and deep-seated, that it is invisible because it is so normal.” Periodically, there are efforts to illuminate persistent racial disparities, the individual harms that are the ongoing consequence of racialized public policies, and the resulting social and economic structures established by those policies, and then to do something about them. The racial wealth gap is one form of inequality that is the subject of current attention. “In the United States, the average Black and Hispanic or Latino households earn about half as much as the average White household and own only about 15 to 20 percent as much net wealth.... [T]his wealth gap has widened notably over the past few decades.” Racial disparities in wealth are the product of the way segregation and other discriminatory practices “blocked access to education, decent jobs, and livable wages among the grandparents and parents of Blacks... effectively preventing them from building up much wealth.” The inequities persist to the present day in part because “wealth is built primarily by the transfer of resources across generations, locking-in the deep divides we observe across racial groups.”

One of the more significant components of the racial wealth gap is the large disparities among the races in rates of homeownership, “with White home ownership at 73.7 percent at the end of 2019 compared to 44 percent for Black households and 48.1 percent for Hispanic households.” The link between wealth and homeownership disparities is principally (but not exclusively) rooted in the decades of public policy that subsidized the purchase of homes by white households in white segregated suburbs, through discriminatory Federal Housing Administration (FHA) mortgage insurance programs and racially exclusive home mortgage appraisal standards promoted by the Federal Home Loan Bank (FHLB). It also lies in the systemic exclusion of Blacks and other racial groups from the same benefits and, perhaps more insidiously, by actively extracting assets from families of color and the segregated places where they live. The subsidy provided to white households and denied to people of color seeded a wealth gap that persists across generations.

In contrast to the historic pattern of leveraging public resources to enable white households to build wealth through homeownership, most modern affordable homeownership programs subsidize the purchase of a home, but also limit the amount of assets that the buyer can amass by imposing resale restrictions or other mechanisms that either recoup the public investment or are designed to keep a home affordable for subsequent purchasers. The present attention to the racial wealth gap and its connection to homeownership has sparked an interest in affordable homeownership initiatives that mitigate or remove limits on equity accumulation or use other approaches to allow for the accumulation of assets. Many of these programs are deliberately targeted at homebuyers of color as a means of addressing racial disparities in wealth. Some are carried out under the provisions of the Equal Credit Opportunity Act (ECOA), which permits consideration of protected characteristics such as race through federal, state, local governmental, non-profit, and for-profit “special purpose credit programs” (SPCP).

Race-based SPCP naturally raise questions about the viability of racial classifications in housing and home mortgage lending as a matter of civil rights. The idea of race conscious affirmative action is a contentious legal, political, and social topic. The volatile nature of the issue is most recently evidenced by the Supreme Court decision in Students for Fair Admissions, Inc. v. President and Fellows of Harvard College (Students for Fair Admissions), which held unlawful the use of race as one among other criteria in college admissions. The Court's ruling has caused some stakeholders to ask whether race-conscious affirmative action lending under ECOA is viable. Under prevailing legal principles that are intact after Students for Fair Admissions, it remains the law that, in the right circumstances, race may be relied on to remedy conditions of discrimination, including in the context of programs that promote fair access to credit.

This article explores the legal justification of race conscious affordable homeownership programs as a remedy for systemic discrimination. In part, it is a case study of an initiative in Boston, Massachusetts known as Homes for Equity (HFE). The analysis that follows examines the civil rights principles under which HFE and similar programs must operate, through the lens of ECOA's SPCP provisions, the Court's decision in Students for Fair Admissions, and the duty imposed by the Fair Housing Act (enacted as Title VIII of the 1968 Civil Rights Act and known as “Title VIII”) for federal housing and community development programs to affirmatively further fair housing. It concludes that race conscious housing initiatives that follow the substantive and procedural requirements imposed on SPCP should be lawful.

[. . .]

Whether carried out under the provisions of ECOA, as part of a HUD grantee's obligation to affirmatively further fair housing or otherwise, the civil rights framework for affirmative action as it presently exists supports the idea that properly designed, race-conscious restorative justice programs intended to reverse the ongoing conditions of discrimination evidenced by racial disparities in homeownership and the intergenerational accumulation of family assets rest on well-established statutory and regulatory foundations. They should remain lawful, even in light of the Supreme Court's decision in Students for Fair Admissions.

Taking Homes for Equity as an example, in Boston, a well-documented legacy of racialized housing and community development activities carried out by local, state, and federal agencies in full partnership with private financial and real estate interests is directly connected to local conditions of disparity. That link and the persistence of the conditions despite other race-neutral approaches to affordable homeownership demonstrate the compelling and substantial need for an effort that is based on race. The eligibility requirements for HFE participants are crafted with some precision, in order to align the remedy with the injury. The practices in Boston were (and are) directed primarily at Blacks because they are Black. Program participants will have a current or ancestral connection to Roxbury, the epicenter of many of the worst practices. HFE will not be over-inclusive because it will be focused on low-income homebuyers who “would otherwise be denied credit or would receive it on less favorable terms.” It is time-limited because it will be piloted for a limited number of homes. The efficacy and need for additional HFE projects are expected to be evaluated as each future project is conceived.

Whether HFE and similar initiatives can be brought to a scale that will truly close racial gaps in wealth and homeownership remains to be seen. At minimum, scaling up restorative justice requires an acknowledgment by governments and private interests of their involvement in practices that established a racialized housing and mortgage lending structure that is yet to be dismantled. The fraught political, social, and economic debates over affirmative action suggest that any such acknowledgment will be hard won. The arguments are most recently crystalized in the competing opinions in judicial decisions like Students for Fair Admissions, where the dissenting opinions' depiction of systemic racial barriers to educational opportunity are dismissed by the majority as mere “societal discrimination.” For now, the law continues to support the notion that public and private actors can legitimately take responsibility for racial injuries that have a present-day effect on real people. To do otherwise neutralizes “remedies designed to advance the cause of social justice” by transforming persistent “private and personal” racial disenfranchisement into somehow untouchable societal “structural and institutional” racism. It would sustain, as Shirley Chisholm put it, the universality of racism because it is made normal.

Of counsel, Klein Hornig LLP.