The Dividends Paid by Homeownership


Washington. -- The federal government's new homeownership initiative, kicked off by President Clinton at a White House ceremony Monday, is a Washington exception.

It's not a piece of legislation or an executive order, not a regulation, not a new office, not even an appropriation.

Instead, it's a shared commitment to add 8 million new homeowners, to boost homeownership to an all-time high of 67.5 percent of American families, by the year 2000.

And while the Department of Housing and Urban Development is the initiator, the new National Partnership for Homeownership includes more than 50 partners, public and private, federal, state and local.

They range from Fannie Mae and Freddie Mac to the Neighborhood Reinvestment Corp. and its "NeighborWorks" network, from the Federal Housing Administration to Habitat for Humanity, from the American Bankers Association to the National Council of La Raza.

The pledge to reach 67.5 percent -- up from today's 64.2 percent, exceeding the past peak of 65.6 percent set in 1980 -- lacks the force of law. But its remarkably broad support base means it might just work. And if it does, the dividends could be remarkable.

Study after study is documenting the growing income inequalities in America. In 1993, the share of national income going to the richest fifth of households -- 48.2 percent -- was the highest ever recorded, the Center on Budget and Policy Priorities reports.

At the same time, the shares of income going to the middle class and the poorest fifth dropped to the lowest levels on record. The bedrock of American social stability and economic strength -- a strong, secure middle class, with all Americans seeing realistic prospect to better their lot -- is in real peril.

One healthy sign is that the financial-services industry itself is starting to recognize that it will face shrunken markets and opportunities unless ways can be found to sell mortgages to the millions now locked out. Eighty-five percent of American households earning over $50,000 a year already own their own homes -- but only 50 percent of those with $15,000-$25,000 incomes. Sixty-eight percent of whites own their own homes, but only 43 percent of blacks, 39 percent of Hispanics.

So while the market for selling still more mortgages to well-off families of Dad, Mom, Dick, Jane and a well-manicured Airedale is clearly limited, success may come to bankers who find ways to lend successfully to immigrants, people of color and many customers who lack perfect credit histories.

The Neighborhood Reinvestment Corp. has been showing it can be done. Among the 10,000 low-to-moderate-income working families it's helped become homeowners in the last two years, 57 percent are minorities, 43 percent are households headed by women, 94 percent are first-time buyers.

Specialized counseling, loan packaging and partnerships with local bankers have been necessary to make it work. And the initiatives just announced at the White House and subscribed to by the new partnership could help a lot. Examples:

* Reduce the down-payment hurdle through financing collaborations that trim the amount of cash a prospective homeowner needs up front.

* Streamline the loan-settlement process by computerizing to reduce paperwork and cutting burdensome cash settlement costs by as much as $1,000.

* Make homeownership counseling available in every community, with a special eye to residents' languages and cultures.

The National Partnership for Homeownership will also encourage construction of small starter homes -- now a tiny percentage of what the homebuilding industry turns out.

And it will urge local governments to check out building codes, zoning and regulatory barriers for ways to trim costs and speed the homeownership process.

Hundreds of programs already are operating to expand homeownership, many of them special local loan programs by banks responding to the federal Community Reinvestment Act.

The Clinton administration had already begun to revitalize the Federal Housing Administration as an insurer of single-family mortgages. Fannie Mae has an ambitious homeowners' education program, operating in multiple cities. The American Homeowners Foundation is distributing a self-test to help renters decide if they're ready for homeownership.

If all this does add millions of homeowners, we'll all be winners. Homeownership is most Americans' biggest single investment, their first step in the quest for financial stability. It means a more stable, economically successful country.

But homeownership also means a lot for day-to-day life in communities coast to coast. In the words of HUD Secretary Henry Cisneros:

"People who become homeowners build equity. They build financial leveraging power that they can use then to convert for such purposes as sending their children to college or starting a small business or embarking on a second career. Homeownership gives people a tremendous stake in their communities. It spurs them to become more involved in community life, strengthening the social fabric of America's neighborhoods."

Dividends from the new homeownership initiative should accrue where we all live.

Neal R. Peirce writes a column on state and urban affairs.

Copyright © 2019, The Baltimore Sun, a Baltimore Sun Media Group publication | Place an Ad