Knocking Down Barriers
In April 1968, President Lyndon B. Johnson signed the Fair Housing Act, which guaranteed equal access to housing for all. At the signing ceremony, Johnson told the packed White House East Room, "We have come some of the way, not near all of it. There is much yet to do."
LBJ's note of hope, tempered by frustration, still resonates today.
The Fair Housing Act sought to end legal discrimination in housing. But more than 50 years later, the vast gap in homeownership rates between Black and white people remains, as do many disparities in economic and social well-being that are tied to homeownership.
In fact, in many ways that gap has widened. The Black homeownership rate today is stuck at around 42%, the same as in 1970. Meanwhile, the white homeownership rate was at 66% in 1970 and rose to 72% by 2019. We estimate that if this racial gap were closed, our country would have about 4.7 million more Black homeowners.
Other indicators of Black economic well-being tell a similar story. From 1989 to 2019, the median net worth of Black households grew from $15,500 to $24,100. But during that same time period, white household median net worth rose more than $45,000, to $189,100.
Throughout much of our nation's history, Black people were denied full access to housing and homeownership because of their skin color and ancestry. One example is legalized redlining that effectively closed the regulated and subsidized housing finance system to whole swaths of the Black community during the post-World War II era. Black people were free to want the American Dream, but largely denied the means to have it.
We at Fannie Mae believe this racist legacy is one of the root causes of economic disparity in our country. The gap in generational wealth between white and Black populations today is rooted in this discriminatory past. To ignore this – to pretend that our history does not affect our country's present and future – is not only wrong, it's also economically destructive. Our country is less affluent, and our economy less vibrant, because of this past. Our future will be brighter if we take real steps to recognize and redress it.
For Fannie Mae, which plays a large role in a mortgage market that is the bedrock of our housing system, our choice is clear: We must begin to knock down barriers to homeownership and the wealth it can build in order to repair the harm done to generations of Black families.
To do this, Fannie Mae sought to create a new roadmap to greater housing equity, one drawn not from a corporate perch but from the ground up, rooted in an understanding of the lived realities of Black renters and homeowners today.
The Black Housing Journey
To build this roadmap, Fannie Mae developed a consumer-centered, research-based body of work that we call the Black Housing Journey, which catalogs housing experiences at each of life's stages. That journey is filled with promise and opportunity, but also enormous obstacles. Here are just a few examples that throw these obstacles into sharp relief:
- 53% of Black renters aged 25 – 44 were "housing cost burdened" in 2019, meaning they spent at least a third of their monthly income on housing costs; 35% of white renters were similarly burdened.
- The median cash-on-hand (or liquid assets) of Black renters between the ages of 25 and 44 was $880 in 2019; it was $2,400 for white renters.
- Only 40% of Black families reported in 2019 they could get $3,000 from family or friends, say, for a down payment or to help with a short-term financial disruption; 72% of white families said they could.
- About 15% of Black consumers are "credit invisible" — lacking any records in nationwide credit reporting agencies — compared with 9% of white consumers. Limited or nonexistent credit history is a common barrier to qualifying for a loan.
Of course, the experience of Black people in the United States is not monolithic, and any single "journey" can't describe the infinite nuance of lived experiences. Nor are barriers like those I cite above exclusive to Black people. But they are real, and by tackling them, we can begin to make a difference, one renter or homeowner at a time. Importantly, we plan to bring this same consumer-centered approach to help us knock down barriers faced by other underserved communities.
The three-year Equitable Housing Finance Plan we submitted to our regulator, the Federal Housing Finance Agency, details a range of actions that we believe lay the groundwork for meaningfully addressing these barriers, one by one.
We believe the Equitable Housing Finance Plan is a solid step toward a goal that will take years of sustained will and work to achieve. But it's a goal we must pursue, not only as a moral imperative, but as a historic economic opportunity for our country and the people and communities we are chartered and committed to serve.
Fannie Mae's Equitable Housing Finance Plan is just one piece of a much larger and evolving strategy for Fannie Mae to make housing more equitable. Our goals include:
Empowering consumers through a robust program of financial and housing education. Fannie Mae's Here to Help education campaign helped millions of homeowners and renters access housing and mortgage assistance during the COVID-19 pandemic. Its success demonstrates the dire need for more financial and housing education as a vital tool not only in attaining homeownership but maintaining it. It's a need we can help fulfill. This year, Fannie Mae launched HomeView™, a comprehensive and free education resource designed to support consumers at every stage of the homeownership journey.
Pushing our company and the housing industry at large to better reflect the true diversity of the nation and communities we serve. We're growing a more-inclusive housing sector for consumers, lenders, and our employees. Our Future Housing Leaders® program and Appraiser Diversity Initiative have set ambitious goals to place more people of color in positions across the mortgage and housing industries. And we know that racial equity starts at home. Just as we are listening to Black consumers about their housing journey, we're including diverse voices to shape the future of Fannie Mae and help us live up to our mission.
Changing the way homeowners and renters are served. We're investing in innovations that eliminate barriers to first-time homeownership, and working to finance more affordable, quality rentals. That means expanding access to quality affordable rental housing in more high-opportunity neighborhoods, including for renters who rely on Housing Choice Vouchers. It also means a more inclusive credit eligibility system. For example, we recently helped lenders consider the history of timely rental payments as a factor when assessing mortgage applications. Our RefiNow™ option provides an easier mortgage refinance process and lower upfront costs. Together, these innovations help knock down some of the barriers to stable homeownership that Black families have historically faced, and do it in a way that is safe, sustainable, and fair.
As with so much of Fannie Mae's work, collaboration and partnership is the key. To make progress, we are willing to put our intellectual and financial capital to work, but we need the housing, mortgage, and financial service industries to do the same. That means partnerships of substance, which we are ready to lead or join wherever they arise.
In that spirit, and with eyes clear on the challenges to come, we urge everyone with a stake in housing's future to join us in making that future fundamentally fair, once and for all.
Jeffery Hayward is Fannie Mae's Executive Vice President and Chief Administrative Officer, responsible for all of the company's mission-critical work on affordable housing and Environmental, Social, and Governance, and leads the Human Resources and Enterprise Workplace functions.