College is a time of exploration and discovery for all students. It is a time that often shapes how we view the world. Going through this transition during a moment of turbulence in the world can shape that experience significantly, which is exactly what happened for Assistant Professor of Real Estate, Arthur Acolin. As an undergraduate, international student in the US in 2008, the housing bubble and subsequent recession shaped Acolin’s future as a researcher and professor.
“The subprime crisis and the ensuing effect on millions of households who lost their homes, lost their life savings, was really a leading factor in my focus on the interaction between the financial sector, mortgages, household outcomes, and wealth.” – Arthur Acolin
The 2008 housing crisis, fueled by subprime loans, insufficient government oversight, and predatory lending, caused millions to lose their homes to foreclosure or short sales. First-time homebuyers that purchased towards the end of the expansion cycle, disproportionately minority borrowers, were more likely unable to remain homeowners and lose their homes.
Being in school during this time meant that faculty were doing research on subprime mortgages and credit availability. The mentoring from experts on these topics like Susan Wachter solidified Acolin’s interest in wanting to understand how “financial instruments such as mortgages are not just abstract concepts of how you allocate your money, or how you manage your wealth, but really have an impact on where you’re able to live, what kind of financial and mental health stress you take on and your overall well being as well.”
During this time, it wasn’t just people losing their homes that he saw, but everything else losing your house meant losing as well. It wasn’t just about the “physical structure putting a roof over your head”, but about a person’s overall and comprehensive quality of life. Acolin could see just how much impact housing had on a person’s daily life.
These realizations led Acolin to focus his own research on access to homeownership, and look at the homeownership gap1 and the structural inequities around becoming a homeowner. Acolin’s research looks at the structural and historical reasons these disparities exist and how access to mortgage credit can either exacerbate that gap or support closing it.
A cornerstone of Acolin’s research is his embrace of housing as a platform that he credits his dissertation chair, Raphael Bostic in helping him solidify. From that perspective, housing is the platform from which you live your daily life. The first piece of the platform is the physical structure that’s maintaining a roof over your head. It takes into account whether that physical structure is comfortable, quiet, and in a good environment so that it’s not compounding mental health, health, or environmental issues. But, the physical structure is only one piece. Housing as a platform, as Acolin describes, also forces us to think about housing as a place from which you access your daily life. Is your housing in a place that’s connected to the community, your job, cultural and recreational activities? Simply put, it’s space + environment and each part is as important as the other in affecting your well-being and quality of life.
Acolin grounds his research questions in the foundational and root causes of housing insecurities and barriers to access homeownership.
Access to wealth has proven to be the main barrier to homeownership. Credit score, income, and wealth all play a part in homeownership access, but Acolin says that the wealth constraint has been shown to be the hardest to overcome and the most binding particularly for minority households. Parental wealth, including wealth generated from homeownership, has been found to be an important factor in young households becoming homeowners. The historical homeownership gap has been identified as one of the drivers of the persistent racial-ethnic wealth inequality gap. Generational wealth has historically been denied to people of color. Institutional and systemic racism have contributed to practices like racial restrictive covenants and redlining, keeping generations from access to certain neighborhoods and communities, therefore keeping them from the services and amenities they offer and the ability to accumulate the wealth needed to access homeownership.
Long after the end of institutional barriers that restricted minority access to mortgages, and particular housing developments, minority households continue to experience worse homeownership outcomes, even after controlling for individual characteristics. As of the 4th quarter of 2019, the homeownership rate was 73.7 percent for non-Hispanic white households but 44.0 percent for Black households, 48.1 percent for Hispanic households, and 56.0 percent for households of other race or ethnicity (US Census 2020). The persistence of this extraordinary large homeownership gap has direct implications on the wellbeing of millions of adults and their children.
For Acolin, it starts with the institutional and structural barriers but ultimately ends with the impact these have on how someone goes about their day-to-day life. How does one’s financial barriers lead them to suboptimal housing? That suboptimal housing then has an impact on a child’s mental health, which could then affect how they do in school, then causing stress at home and affect their future employment outcomes. Acolin believes that our built environment is very much an outcome of the society we live in.
“We need to be a lot more active in order to close that gap, including providing ways for households to access homeownership when they don’t have parents who can provide some type of down payment assistance or when they don’t have access to a social network and resources that can help them with obtaining a mortgage.” – Arthur Acolin
As veterans returned home from World War II, Federal Housing Administration loans and the GI Bill gave many (but not all) veterans the ability to buy a home. Homeownership suddenly became possible supported by federal programs. While the federal policies created helped white families gain access, there were still discriminatory policies in place that prevented people of color from having that same level of access and support. The barriers to becoming homeowners that these households faced meant they would be less likely to benefit from the wealth accumulation associated with homeownership through the appreciation of their house and as importantly, the forced saving mechanism embedded in amortizing mortgages.
Even with the passing of the Fair Housing Act2 in 1968, we continue to see the legacy of discriminatory practices. Acolin says we haven’t made much progress in closing that gap and that it has even grown in the post Great Recession era as mortgage underwriting criteria have remained tight. As a result, more than 50 years after the Fair Housing Act was enacted the homeownership rate has not increased for Black households and has even decreased for Latinx households. The persistence of the racial homeownership gap is particularly troubling in a region like Seattle where economic and employment growth has outpaced housing growth. Over the last decade, owning one’s home has allowed households in the Seattle region to accumulate substantial wealth as well as provide a hedge against the increase in housing costs, allowing them to stay in place. However, minority households are substantially less likely to own their home. In King County, as of 2019, 25 percent of Black households and 38 percent of Latinx households owned their home. This compares to 62 percent of white non-Hispanic households. In order to ensure that the sustained economic growth experienced by the region is shared more inclusively, housing strategies need to be part of the conversations.
“There is no magic wand. It takes resources to overcome that barrier.” – Arthur Acolin
Amazon’s recent announcement of an investment of $2 billion to build 20,000 homes, is a welcome intervention, says Acolin. He recognizes the impact that private investments have and that these investments from companies like Amazon and Microsoft are positive steps in the pursuit of affordable housing for all but, in order to solve the issue, says we need to have a public response.
Acolin believes that a range of solutions are needed to deal with the range of housing needs that exist in the region. Some people need full wrap-around services, while others need assistance programs. Some of these actions can be driven by public, nonprofit or private actors at the local and federal levels. Experimenting and implementing a variety of actions will be needed to address both the supply constraints on providing more housing and the demand from households without the income or wealth to access decent and affordable housing.
Researchers at CBE and UW have been working on solutions to the complex housing challenges that the region faces and it is exciting to see the initiatives taken by many students, researchers, practitioners and community groups in that space. Here are some of these solutions:
Community Land Trusts: Homeowners own the home and lease the land through a long-term lease from the community land trust, essentially removing land costs for residents, only paying for the value of the structure. This allows someone to access homeownership without the added cost of land. These types of programs have been around for 40 years all over the U.S. In markets like Seattle and the Bay Area, with rising land prices, CLTs and other Shared Equity Homeownership programs can help provide affordable access to homeownership for generations but require an initial investment to secure the land and develop the property and strong community stewardship.
Zero Interest Loans or Grants and Down Payment Assistance Programs: Private or public funds that provide qualifying households support in the form of a zero-interest loan or grant to cover part of the down payment or the closing costs. Such funds can allow households who qualify based on their income and credit to overcome one of the most difficult aspects of being able to access homeownership — enough wealth or cash on hand to close. Such programs require on-going commitment of resources but are needed to expand the set of households that can get on the first step of the homeownership ladder.
Longer-Term Leases: Move our society towards a more balanced housing system where renters are provided with the option for longer-term leases and certainty around rental payments increasing their stability and making renting a choice rather than a temporary or constrained living situation. Renting can be a desirable option with other means to build wealth through other forms of investment. In addition, universal rental assistance is one aspect that has received considerable attention in recent years that would lower the housing insecurity experienced by too many households.
“There isn’t just one way to deliver housing.” – Arthur Acolin
It can be easy to talk about solving the housing crisis in terms of the number of housing units. It can be easy to boil down homeownership to facts and figures, but at the end of that contract is a name. The pieces of paper reflect not only the house being purchased, but the neighborhood, schools, access to food, commute times, accessible parks, and more. Becoming a homeowner is a decision that affects the entirety of one’s life and one that needs to be thought of holistically.
It’s not just a name on a dotted line.
Note
1. The homeownership gap describes the inequity between homeownership for non-Hispanic white borrowers and borrowers of color.
2. The Fair Housing Act protects people from discrimination when they are renting or buying a home, getting a mortgage, seeking housing assistance, or engaging in other housing-related activities. Additional protections apply to federally-assisted housing. Learn about the of the Fair Housing Act, and read Examples of the many forms of housing discrimination.