You can’t trickle down housing

The Partnership for Housing Affordability says the Richmond area needs to build 20,000 affordable homes to meet current demand. (Parker Michels-Boyce/Virginia Mercury)

Supply and demand: We often hear that this is the fundamental issue when it comes to affordable housing. If only we built more homes, meeting demand, then prices would fall. But like many simple stories, it’s more fiction than truth.

Recently I was reminded of this when hearing about one of our clients at Housing Opportunities Made Equal of Virginia (HOME of VA). She was struggling to find a home she could afford. We work with first-time buyers to make homeownership possible, and this client hoped we could help unravel a problem that seemed to have no solution.

Our client had worked as a nurse for 31 years at a Richmond-area hospital. Her wages made it challenging to get by while raising four children, and she never could save for a down payment. When disability suddenly forced her into retirement, her diminished income seemed to put homeownership out of reach — especially in the current market.

The high cost of housing today is news to no one. In Richmond, 52% of renters spend more than 30% of their incomes on rent — a level economists call “cost-burdened” — making rent here more expensive relative to income than in New York or San Francisco. The average sale price of a home in Richmond is 60% higher today than it was just five years ago. And over the last generation, home prices locally have risen at nearly twice the rate of incomes .

Even without these statistics at hand, we all see and feel these realities — in conversations with friends and family, in difficult decisions about how to make ends meet while ensuring access to good jobs and schools. But some of us feel the pinch more than others.

In Virginia, Black women workers like our client make 32% less than white men — a gap that means they will make nearly $1 million less over their lifetimes. At the same time, the average Black family in the United States holds 15% of the wealth of the average white family. This has major ramifications for homeownership, because family wealth is the source of down payments for more than a third of first mortgages. And even when credit scores and debt-to-income ratios are equal, Black Americans are twice as likely to be denied a mortgage as white applicants.

The unavailability of affordable housing was one major factor troubling our client’s finances — and those of many others. The Partnership for Housing Affordability, a local nonprofit, has found that the Richmond region needs to build 20,000 affordable homes just to meet current demand. When we work with first-time home buyers or renters seeking to move to higher-opportunity neighborhoods, the scarcity of options is an all-too-familiar barrier. Boosting the supply of housing would serve many families in need.

But supply alone will not solve a key problem with demand: Too few Black and Latino Virginians can buy a home or maintain stable renting because of generations of unfairness in the housing market. Redlining, government policy until 1968, walled off communities of color from investment. Today, individuals living in these areas still have lower incomes, reduced life expectancy, and less access to services. These disparities worsen the impacts of income inequality and lack of access to credit. Boosting supply without addressing the inequity issues of demand will only reinforce race-based exclusion.

We have tools to break with the unfairness of years past and create a housing market with more opportunity for everyone. For example, U.S. Sens. Tim Kaine and Mark Warner have co-sponsored a bill that would provide down payment assistance to first-time homebuyers . And already, a little-used federal law empowers banks to create special-purpose credit programs for historically marginalized communities.

Both strategies — down payment assistance and a deeply discounted interest rate accessed through a special program — proved the solution for our client, who closed on her new house last month. She told us she’s grateful for the chance to “build generational wealth,” and appreciating a simpler pleasure, no less special — “just to enjoy a piece of earth that is my own.”

But this happy ending isn’t yet possible at scale. Federal support for down payment assistance, one possible outcome of November’s elections, would help. And banks could dramatically expand special-purpose credit programs. In the meantime, even if scores of new homes are built, long-standing barriers to homeownership and affordable renting will remain the reality for far too many Black and Latino Virginians.

That’s because you can’t trickle down housing. Expanding supply is a one-size-fits-all solution to a problem with many dimensions. As we tackle the crisis of housing affordability, we must be targeted in our approach, nuanced in our thinking, intentional in our actions. And we should put fairness first.