In the U.S, only 43 percent of African Americans report living in homes of their own compared to nearly 73 percent of Whites. Homeownership attainment in the U.S. remains deeply stratified by race and ethnicity which reflects the challenges that nonwhite households encounter in their pursuit of ownership.
A study by the Massachusetts Institute of Technology (MIT) found that black people in the U.S. pay more for homeownership than any other group, a disparity that has contributed to nearly half of the $130,000 retirement savings gap between Blacks and Whites.
Black people pay more for mortgage interest, mortgage insurance, and property taxes than any other group, according to the study. Overall, Blacks pay annual mortgage interest of $743, mortgage insurance of $550, and property taxes of about $390. In total, it amounts to $67,320 in lost retirement savings for Black homeowners when invested over 30 years.
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These inequities make it impossible for Black households to build housing wealth at the same rate as White households. Furthermore, the black-white income gap of $25, 8004 is exacerbated by this “black tax” on homeownership.
To bridge the gap on homeownership, a black-owned organization has stepped in with a new funding model to boost black homeownership. Urban League of Greater Madison recently announced a $5 million affordable housing scheme to increase black homeownership in Dane County, Wisconsin.
Under the scheme, Urban League in Madison will buy and renovate up to 17 homes in south Madison and other lower-income communities. It will then resell the homes to low and moderate-income black buyers seeking to become first-time homeowners.
The Wisconsin Housing & Economic Development Authority (WHEDA) will provide $3,500,000 in financing to the project, the City of Madison will invest nearly $200,000 to help further bring down the cost to families, and Wells Fargo Bank will provide the remaining $1,500,000 in financing.
The project will utilize the federal New Markets Tax Credit Program as the financing mechanism. The tax credits are being allocated by National Community Investment Fund (NCIF), a Community Development Financial Institution (CDFI) headquartered in Chicago, but investing in low and moderate-income communities all across the country, said Ruben Anthony Jr., President of Urban League of Greater Madison.
At a press conference to launch the initiative, Anthony said the move is to ensure black people are able to own homes as it is “critical to experiencing and living the American dream.”
“You can see gentrification is happening here on the south side of Madison and we want to make sure that as gentrification is happening, that we can still be affordable – that there will still be some houses around here that regular people can afford,” Anthony said. “That’s what this whole program is about.”
Wisconsin has the nation’s third-lowest rate of black homeownership, a report by the National Association of REALTORS has revealed. According to the report, Wisconsin’s African-American homeownership rate of 23 percent is greater than only Montana and North Dakota. Dane County is one of the largest contributors to the gap in Wisconsin, the report shows, with only 10 percent of homeownership.