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The National Association of Realtors’ plan calls for expanding down payment assistance programs, improving FHA loans and alternative credit scoring models

The National Association of Realtors released on Tuesday a five-point plan to increase homeownership rates even as the coronavirus exacerbates the years-long imbalance between supply and demand. Before the pandemic, the U.S. housing market was short by 5 to 6 million homes, NAR said, and they expect the gap to widen unless builders “significantly” ramp up their production over the next three years.

Lawrence Yun | NAR

“Though housing starts in May recovered slightly from the prior month, this marks two consecutive months of depressed levels – down by more than 20 percent” from one year ago – due to the disruption from the economic lockdown,” explained NAR Chief Economist Lawrence Yun in a written statement. “Significant growth in new home construction, however, is required in the upcoming months and possibly even stretching into the next three years.”

“Now, in the middle of 2020, the housing shortage has intensified,” Yun added. “Consequently, home prices will be pushed higher thereby making ownership opportunities for first-time buyers more difficult. More homes need to be built.”

In addition to addressing the housing shortage, Yun said NAR is advocating for increased housing starts in Opportunity Zones, greater access to down payment assistance programs, a strengthened FHA loan program, and expanded alternative credit scoring models to bring more first-time homebuyers into the market.

The plan reads as follows:

  • Build more homes to increase supply: The lack of housing supply makes converting from renting to owning very difficult. The lack of viable purchase options and resulting competition rapidly push up home prices, precluding some potential first-time buyers from entering the market.
  • Build more homes in Opportunity Zones: NAR strongly supports Opportunity Zones as a means by which to invest in the revitalization of economically-distressed areas.
  • Increase access to down payment assistance: Saving for a down payment can be the biggest hurdle for renters wanting to become homeowners. In recent years, a growing number of first-time buyers received help from family members with their down payments.
  • Strengthen FHA’s loan program: FHA loans have been an important source of financing for first-time buyers and minority households. Shifting federal dollars to strengthen the FHA program could lower mortgage insurance premiums and monthly mortgage payments.
  • Expand alternative credit scoring models: Expanding credit scoring models to include rent and utilities payments – and thereby adding more positive payment histories to better demonstrate financial responsibility – can help increase homeownership opportunities for minority and first-time buyers.

In response to recent conversations about racial injustice, Yun noted these measures could also help Black homebuyers overcome financial barriers to homeownership.

“With much of the nation’s attention currently focused on combating racial inequality, particularly as it relates to African-Americans, the following five-point plan would increase the number of African-American homeowners and help close the persistent gap in homeownership rates between whites and African-Americans,” he said.

“…Due to historical gaps in accessing and accumulating wealth, it’s much more difficult for African-Americans to obtain substantial financial assistance from family members,” Yun said regarding increased access to down payment programs. “Therefore, increased access to federal down payment assistance based on a certain income threshold is vital, particularly for African-Americans.”

NAR’s plan comes on the heels of the National Association of Real Estate Brokers’ 11-point Black homeownership plan released on June 2. Both NAR and NAREB’s plans call for greater access to FHA loans and alternative credit scoring models to even the playing field between white and Black homebuyers.

NAREB’s plan includes additional measures such as updating federal and state fair housing laws, eliminating zip code-based insurance rates and credit-based home insurance rates, greater investment in Black-owned banks and credit unions, and increased career and business opportunities for Black residential and commercial real estate professionals.

Email Marian McPherson