COVID-19 has illuminated a historic trajectory of racism in Maine and throughout the United States. This is evidenced by disparity in outcomes in all areas of life, including health, housing, education and criminal justice. Many of these areas intersect; however, one, in particular, represents the American Dream and a foundation of building generational wealth – homeownership.
For decades, the ability of Black Americans to purchase a home has been deliberately undermined by discriminatory housing practices instituted by banks, real estate agents and local and federal governments well into the second half of the last century. Books such as Keeanga-Yamahtta Taylor’s “Race for Profit” and “The Color of Law,” by Richard Rothstein, have documented this collusion. The myth of equal access to the American Dream is debunked in both these books. Building generational wealth through owning property has traditionally helped parents make a better life for their children. Data from the U.S. Census Bureau’s 2018 American Community Survey show Maine is tied for the third lowest rate of Black homeownership in the country, at just 23 percent, behind only Montana and North Dakota.
As two graduate students exploring the homeownership gap, we have looked at data and spoken to lenders, homebuyers and real estate agents to contextualize the problem. Real estate agents have told us that most of the people of color they are working with are new immigrants to Maine, with 50 percent of Maine’s Black population from Africa.
Although real estate agents we met were excited to work with New Mainers, they identified numerous barriers that either delayed or prevented home closings with this population. The most common barrier was language; however, the real estate agents we spoke to were either unaware of interpretation services, had not used them or primarily relied on family members, including an adolescent whose second language was English, to facilitate the process.
Financing was another obstacle. Income for Black Mainers is notably lower than that of their white counterparts. Data from the 2017 Census cite Black incomes in Maine at $28,018, versus $53,585 for white Mainers.
Additionally, many buyers entering the market were accustomed to dealing in an all-cash society in their country of origin and continue to do so after arriving in the United States. This limits their ability to build credit and, in turn, their options for traditional financing.
A viable option for these families is the Rural Development Direct Loan Program, which allows for alternative displays of creditworthiness, such as a year of power bills or a history of rental payments. The program has income and property eligibility requirements designed for low-income families. But these programs also have disadvantages, in that they limit where the home can be purchased based on population. Families often are pushed to buy homes in more rural areas, further from jobs, access to public transportation and cultural community support and connection.
Additionally, even if a buyer using the program offers a higher price than someone with traditional financing, real estate agents are less inclined to encourage sellers to accept the offer, because they have a fiduciary duty to accept quicker-closing traditional loans. These obstacles can exclude people from taking advantage of low-income loan programs and getting an important leg up to advance economically and socially. This is particularly critical in the current hot market, where some buyers are prepared to offer all-cash deals, higher offers, quick closes and limited inspections.
Real estate agents, lenders and local and state government agencies need to work together. The following steps could address some of the barriers with real estate agents, lenders and local and state agencies working with potential buyers to increase homeownership as one way to secure housing and build generational wealth.
• Real estate agents and lenders should be educated in cultural competency and interpretation services.
• New Mainers should have increased opportunities for financial literacy and homebuying education opportunities in their native languages.
• Home loan programs should be analyzed and adjusted to allow buyers the opportunity to buy in areas that make the most sense for them financially and logistically, perhaps via incentives to the seller and or real estate agent to close loans such as those financed by the Rural Development Direct Loan Program.
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