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Redressing the Racial Wealth Divide through Homeownership and Community Equity

By Lori Bamberger, Nadia Sesay, Roberta Achtenberg, and Bruce Katz 

November 11, 2021

Executive Summary 

The economic recovery especially for families and communities of color will need more than just relief from a year of a pandemic; the recovery calls for community equity.

The pandemic amplified many of the racial inequalities festering in our country for decades. Today’s median Black family has just thirteen cents for every dollar of wealth held by White families. Thirteen cents. In 2018 dollars, that’s a median Black family net worth of $24,100 for every white family’s median wealth of $188,200. The consequences of this gap are stark, and they implicate families of color, whole neighborhoods, regional economies, and the nation’s ability to heal from the pandemic’s economic ravages. While the reasons for this racial wealth gap are manifold, and include historic, pervasive housing and lending discrimination and redlining, the solutions are more pointed. Namely, to redress intergenerational racial wealth inequality, we must re-prioritize homeownership, asset-building, and business ownership for families and communities of color.

On the centennial anniversary of the Tulsa Race Massacre, which resulted in the obliteration of a thriving Black community, the Biden Administration committed to a series of reforms and transformational funding to grow Black wealth through ownership. In addition, the Biden Administration and Congress will soon – hopefully --  approve the infrastructure, social and climate bills that appropriate trillions of dollars in a once-in-a-generation transformational level of federal investment, including sources to transform American cities and to redress racial wealth inequality. We applaud these important acknowledgements that wealth depends on an intentional focus on cultivating homeownership and business ownership, and especially on transformational levels of federal investment. Yet, we’d go one step farther.

A focus on wealth-building through homeownership at scale cannot succeed as an isolated effort disconnected from other investments in a neighborhood. An owned home in a disinvested community with significant out-commuting and limited focus on job and economic growth will be a home whose value stagnates or declines. We contend, instead, that ownership capable of transforming communities into thriving places for families, businesses, and economic activity depends on coordinated and integrated opportunities to cultivate community wealth -- assets grown by and for residents and the whole community at large. In particular, our bold, ambitious vision asks that we build whole community wealth using a scaled, focused, and synergistic three-part approach we refer to as a “Community Equity District”, which consists of the following:

  1. A scaled, accessible homeownership effort must be immersed in a planned, whole-neighborhood, public/private “district economic redevelopment” initiative in order to successfully grow value appreciation (equity).  This includes creating a neighborhood “district,” comprised of hundreds of units of newly built and revitalized high-quality owned homes for low- and moderate-income families (to stabilize and grow neighborhoods). The district also features mixed-use and mixed-income development for a broad array of economic activity, and community amenities such as parks, sustainable infrastructure, and neighborhood-serving retail. This whole neighborhood approach – “district economic redevelopment” – effectively comprises a neighborhood-wide land parcel assembly and economic reinvestment strategy necessary to uplift whole neighborhoods and grow community and family assets, including forming businesses and providing pathways to the innovation economy, job-creation and worker upskilling, and equity-building via homeownership.
  2. Scaled homeownership depends on sharing the community’s growing wealth from district economic redevelopment, aligning resident interests with those of investors.  Ownership capable of transforming communities depends on a new, ultimately liquid, security product we refer to as “community equity” – akin to shares of stock – that enables all community residents, whether owners or renters, to participate in the financial upside and value appreciation of a whole neighborhood. How this works: over the life of the district economic redevelopment, and at build-out, assessed value would appreciate within the district and in surrounding areas. Similar to structures used in tax increment financing, a portion of that appreciation will be set aside for community benefit, but here, deployed to residents as “community equity” in the neighborhood district area, eligible for liquidity after a certain appreciation or timing threshold is achieved.  Community equity retains local ownership of local assets, while also providing a new incentive to stay and plant roots, joining the long-game of community growth. 
  3. An accessible pathway to homeownership, especially suited for certain older industrial cities deploying district economic redevelopment and community equity, is a scaled lease-purchase model. A scaled, accessible homeownership strategy requires a credible, safe and market-specific approach to growing homeownership. While we support several approaches to accessible homeownership, only a lease-purchase pathway offers solutions to the homeownership gap in older industrial communities by offering a long-enough runway to enable financial qualification and provide time to re-build resident belief in a neighborhood's potential for upward revaluation. During the leasing period, community equity can accumulate to be used toward the home purchase. In our district economic redevelopment, in particular, a certain percentage of the homes would be designated as part of an inclusive, wealth building lease-purchase and community equity homeownership program. 

Our synergistic Community Equity District solution recognizes that home equity will only appreciate if communities grow. And that communities will only grow if their value proposition for businesses grows. The integration of these three elements –district economic redevelopment, community equity, and homeownership -- builds on the Biden Administration’s path-breaking agenda to drive community transformation capable of redressing the racial wealth gap and rebuilding equity for families and communities of color. 

This paper is organized as follows:

Section II: Barriers to Homeownership for families and communities of color. This section includes a discussion of “second generation redlining,” market barriers, buyer skepticism, the inadequacy of public resources, and structural impediments to transformational whole-neighborhood economic redevelopment solutions that include accessible homeownership.

Section III: Our Solution: A Community Equity District with Accessible Homeownership. This section includes further discussion of each of the three parts of our solution introduced above, as well as the interactions between each part of the solution.

Section IV: Policy Implications and Recommendations. This section includes a discussion of the federal impediments to accessible homeownership and policy solutions designed to enable district development, community equity, and a scaled lease-purchase accessible homeownership approach for older industrial communities. 

Section V: Conclusion

Section VI: About the Authors and Appendix