Housing prices in the United States have truly skyrocketed over the past few decades. This has resulted in higher mortgage rates and falling home ownership rates among young people across the board, but the impact has been particularly severe upon Black and Hispanic communities, which collectively account for roughly one-third of the U.S. population.
Minority home ownership rates have always been lower than the national average, and especially the rate for White individuals. According to the 2000 Census data, only 46 % of Black and Latino families possessed a private home, compared to over 71 % of non-Hispanic Whites. Not only has there been barely any change since, but the gap is actually slightly wider today than it was over twenty years ago. There has been little to no public intervention to alleviate these symptoms of systemic discrimination even six decades after the Civil Rights Movement.
This week, the Bank of America launched one of the largest private initiatives aimed specifically at uplifting the underserved communities through cheap home ownership. The new plan, termed ‘Community Affordable Loan Solution’, would act as a supplement to the existing ‘Community Homeownership Commitment’, which was launched in 2019 with an ambitious goal of $15 billion in cheap housing credit.
The Community Affordable Loan Solution forms one part of multiple recent initiatives by Bank of America to increase its presence in historically marginalized communities. It explicitly diverts its focus on the minority communities of Charlotte, Dallas, Detroit, Los Angeles, and Miami. The institution has publicly promised potential expansion after success assessment. The program covers almost the exact same areas as the similar Small Business Down Payment Program, which will also disproportionately benefit women and minority business owners.
The program comes with a low, fixed mortgage rate plan with zero down payment. In fact, previous credit rating is not a requirement of the program, nor is association with any particular social group. Home location and income level, along with special considerations regarding rent and utility history etc., will be the only requirements for eligibility. Borrowers would also have to complete certification course facilitated by Bank of America.
There are legitimate concerns about launching a sweeping credit program with low requirements and supervision. Reckless lending practices were a leading cause of the 2008 financial crash. However, economists predict the current plan is safer, partly because it simply is not large enough to have a national impact. If undertaken carefully, it might genuinely mark a new chapter in American banking practices.