This proposal for a national Down Payment Assistance (DPA) program was developed by the Center for Responsible Lending and the National Fair Housing Alliance from the perspective of providing the U.S. Congress with a framework for establishing a Targeted Downpayment Assistance Program to close the wealth and homeownership gaps. However, the elements of this proposal can be adapted for use by state and local governments as well as other entities that wish to establish a program that will advance equitable outcomes.

According to the 2019 American Community Survey, homeownership among Black families is 30 percentage points below that of white families—a larger gap than existed in 1968 when the Fair Housing Act was passed. The disparity in homeownership rates is a large driver of the enormous racial wealth gap, with the median Black family having 13 cents in net worth for every dollar of net worth held by the median white family.

For a Down Payment Assistance (DPA) program to reduce barriers to homeownership in a way that advances the Biden-Harris administration’s commitment to racial equity and puts the nation on a firm trajectory to closing the wealth and homeownership gaps between whites and people of color, we recommend the following:

  1. Eligibility should be limited to first-generation homebuyers whose income is within 120% of the Area Median Income (AMI). This will create an eligible pool of 12.2 million families, 72% of whom will be families of color, including 43% Black families. Estimating “likely” program participants (those with incomes above 40% AMI and first home buying age of 25-54, the pool is approximately 5.0 million families, 71% of whom would be families of color, including 34% Black families.
  2. Half of the funds should be set aside for state Housing Finance Agencies that have adopted Affirmatively Furthering Fair Housing (AFFH) Plans, awarded based on the size of the renter population in each state. The other 50% should be awarded through a competitive bidding process run by the CDFI Fund to select Administrators committed to and capable of delivering funds to socially and economically disadvantaged individuals.
  3. The DPA should be a minimum of $20,000 per applicant (could be increased for high-cost markets) to provide sufficient funds to make homeownership affordable.

In addition, strong reporting and evaluation requirements should be included to ensure transparency and efficacy.

Finally, the Departments of Justice and Housing and Urban Development should be directed to conduct a study to determine whether this program, in conjunction with any other extant efforts, will succeed in remedying the effects of past and present discrimination and closing the racial homeownership gap. If the study finds that more is needed, the Administrators shall be authorized to use race-conscious remedies to overcome discriminatory barriers to serving socially and economically disadvantaged people, using a rebuttable presumption that people of color are socially and economically disadvantaged.

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