6 minute read
Introduction
The New Jersey Housing Mortgage and Finance Agency is an independent state agency responsible for promoting affordable rental and homeownership opportunities for low-and-moderate-income New Jersey families.4 To meet this important mission, NJHMFA gives financial assistance and partners with mortgage lenders and community development stakeholders to fund mortgages for first-time home buyers, prevent foreclosures, and support housing construction.5
The NJHMFA Down Payment Assistance (“DPA”) Program is a statewide housing finance program that provides qualified firsttime home buyers with $10,000 to use toward down payment and closing costs.6 DPA is designed to encourage homeownership and promote neighborhood stability by providing an interest-free, five-year forgivable second loan with no monthly payment.7 The program must be paired with a loan from the First-Time Homebuyer Mortgage Program.8 In recent years, the Agency has provided 1,300–1,400 DPA loans annually, and it expects to provide around 2,000 loans per year in future years. In March 2021, New Jersey Governor Phil Murphy signed into law the New Jersey Foreclosure Prevention Act. The Act created the Residential Foreclosure Prevention Program, which allows the Agency to purchase defaulted mortgage loans from banks and other financial institutions.9
FIGURE 1. NEW JERSEY HOMEOWNERSHIP RATE BY RACE AND ETHNICITY, 2019
Source: “2019 American Community Survey 1-Year Estimates,” Table S2502, U.S. Census Bureau, figure generated on November 15, 2021. Note: The households of color homeownership rate was calculated by dividing the sum of all nonwhite owner-occupied units by the sum of all non-white occupied units. “HH” stands for households. Each bar and demographic group is in units of households.
Source: “American Community Survey 1-Year Estimates,” Table S2502, U.S Census Bureau, 2010-2019, figure generated on November 15, 2021. Note: Projections of the homeownership rate were calculated using a depreciation rate of 0.32 percent per year, the average percentage point change in the racial homeownership gap between 2010 and 2019. Population projections after 2019 were calculated using the average percentage point change in number of households for each demographic group between 2009 and 2019.
The gap in homeownership between white households and households of color is 33 percentage points, as of 2019. These disparities exist in the context of a state with a history of anti-Black racism that includes slavery, racially restrictive covenants, redlining, and predatory financial practices.10 And they contribute to the state’s staggering Black–white wealth gap. The median household wealth among white families in the state is $352,000; for Black families, it is $6,100—a disparity of 58-to-1.
The state’s racial wealth gap is also driven, in part, by disparities in property values. In cities with large Black populations such as Camden and Newark, median home values are substantially lower than in predominantly white towns such as Cherry Hill and Millburn.11 In addition, predatory lending practices targeted Black and brown communities in the lead-up to the Great Recession, further suppressing home values and causing disproportionate rates of foreclosure in communities of color throughout the state.12
New Jersey’s racial homeownership gap has not significantly narrowed in 10 years despite the number of households of color growing by 18 percent within the same period. If these patterns persist, New Jersey’s racial homeownership gap will remain 24 percentage points in 100 years (see Figure
FIGURE 3. INCREASING THE HOUSEHOLD OF COLOR HOMEOWNERSHIP RATE TO 50 PERCENT BY 2030
Source: “American Community Survey 1-Year Estimates,” Tables S2502, U.S Census Bureau, 2010-2019, figure generated on November 15, 2021. Note: Projections of the homeownership rate were calculated using a depreciation rate of 0.32 percent per year, the average percentage point change in the racial homeownership gap between 2009 and 2019. Projections adjusted for population growth.
2). By 2030 the gap would narrow by only 1 percentage point while households of color grow by 22 percent.13 Notably, New Jersey will be a majority-minority state by 2030—households of color will outnumber white households.14 These trends suggest that an increasingly racially diverse New Jersey will not significantly narrow the racial homeownership gap.
To reduce the gap by 7 percentage points by 2030 and achieve a 50 percent homeownership rate among households of color, roughly 100,000 additional households of color—net of secular trends in population growth—would need to become homeowners (see Figure 3).
In response to these wealth disparities, NJHMFA seeks to use DPA, the First-Time Homebuyer Mortgage Program, and the Residential Foreclosure Prevention Program to advance several critical goals: (1) promote wealth creation, (2) target neighborhoods for stabilization, (3) support anti-gentrification efforts, and (4) narrow the state’s racial wealth gap.
To make progress towards these goals, NJHMFA should use an extensive network of partners, including housing advocacy groups, nonprofits, and community-based organizations. These stakeholders are vital because they have familiarity and trust with communities that have encountered barriers to homeownership and wealth accumulation.
The policy workshop’s assignment was to analyze how NJHMFA should structure and target these programs to achieve these goals. In doing so, we analyzed the Agency’s programs and data. We also met with other Housing Finance Agencies (HFAs), nonprofits, lenders, community land trusts, and stakeholders from across the country to learn from their programs, best practices, innovations, and challenges. In total, we
interviewed more than 30 stakeholders.These entities are named in the acknowledgement section at the end of this report. We are grateful to everyone who provided their time, talent, and expertise.
The topics covered in our meetings included outreach, partnerships, and community engagements; DPA; foreclosure prevention; HFA strategies and processes; and new and innovative programs. NJHMFA already approaches many of these areas in ways similar to other housing stakeholders, and we developed recommendations on how the Agency can improve its programs and processes to achieve its goals more successfully.
Our report will make, and discuss, recommendations in the following categories: 1) Outreach, Partnerships, and Community Collaboration, 2) Down Payment Assistance, 3) Foreclosure Prevention, 4) New Programs and Innovations, and 5) Agency Strategy and Process Improvement. Recommendations with significant anticipated costs include cost estimates. While the total cost of all recommendations included here would require a significant financial commitment, we mean to provide a comprehensive set of options for NJHMFA to review and prioritize.
Throughout the report, we acknowledge and address how our recommendations would advance racial equity. Our recommendations also address both the “supply side” and “demand side” of affordable homeownership. For example, we propose homeowner rehabilitation assistance to increase the state’s supply of affordable homeownership opportunities. Meanwhile, our recommendations concerning outreach and community collaboration aim to increase demand for NJHMFA products among underrepresented groups. TERMINOLOGY
Throughout the report, we use “low income” to refer to households with incomes below 50 percent of the area median income and “moderate income” for households with incomes between 50 and 80 percent of the area median income.15
The term “first-time home buyer” generally refers to someone who has never owned a home. In this report, we use the term in accordance with NJHMFA’s definition of a first-time home buyer, which is someone who has not had an ownership interest in their primary residence during the previous three years.16 We use “first-generation home buyer” for first-time home buyers whose parents do not currently own a home. In other contexts, we use the term “first-generation” to refer to individuals belonging to a category (e.g., professional, graduate) to which their parents do not belong.
The term “Latino” is used throughout this report to refer to persons of Mexican, Puerto Rican, Cuban, Central American, Dominican, Spanish, and other Hispanic descent; they may be of any race.
The analyses and recommendations offered in this report are the collective efforts of the student policy workshop, and do not necessarily reflect the views of the New Jersey Housing and Mortgage Finance Agency.
We intend for NJHMFA to apply our recommendations in a manner that is in full accordance with all relevant federal and state laws and regulations. The policy workshop is committed to the full compliance of all federal, state, and local fair housing laws, which makes it illegal to advertise any preference, limitation, or discrimination based on a protected characteristic. This report and our recommendations should not be construed to suggest that NJHMFA either directly or indirectly discriminate against any prospective purchaser or lessee on the basis of race, color, religion, sex, disability, familial status, national origin, or other protected characteristic.
