How HUD is Helping More African Americans Get Into a Home

African American family looks at their new home.

In June 2021, Housing and Urban Development (HUD) Secretary Marcia Fudge remarked that student loan debt can be a reason why there are fewer Black homeowners in the United States. In an effort to alleviate some of that burden, HUD has released a plan to help those who are struggling with debt become homeowners. 

“Who has student debt? Poor people, Black people, brown people. We’re the people who carry [the] most debt. And so the system’s already skewed toward us not being creditworthy,” Fudge said in an interview with Axios that aired on HBO this summer. 

“Part of our problem is that we’ve never totally enforced the Fair Housing Act,” Fudge continued. “That is why we’re doing things like home ownership assistance, why we’re addressing the student loan issue, why we’re looking at how credit is distributed. For people of color, especially Black people, homeownership is wealth. It is not only wealth to us, but it’s generational wealth.”

Per the HUD statement on the new changes, first-time homebuyers constitute over 80% of FHA-insured mortgages each year. They estimate that more than 45% of those applicants also carry student loan debt, with most of those debtors being people of color. 

Why Homeownership Matters to African Americans

Lacking generational wealth compared to their white counterparts, many Black people in this country are forced to take on more debt when it comes to getting a degree. More student loans means that repayment can last for decades after graduation, and can impact where a person is able to live, work and even if they’re able to stay in the career they trained for.

A recent Brookings Institution study showed the dramatic truths surrounding the racial wealth gap in this country. 

“At $171,000, the net worth of a typical white family is nearly ten times greater than that of a Black family ($17,150) in 2016,” the research team wrote in 2020. “Gaps in wealth between Black and white households reveal the effects of accumulated inequality and discrimination, as well as differences in power and opportunity that can be traced back to this nation’s inception. The Black-white wealth gap reflects a society that has not and does not afford equality of opportunity to all its citizens.”

How HUD is Making a Difference in Homeownership Rates

The new HUD changes will change the way that credit scores (key data for approving homeowner assistance and mortgage rates) are calculated for those who carry large amounts of student loan debt. The loan assistance program now bases the monthly payment on the actual student loan payment the applicant makes, instead of calculating based on one percent of the outstanding student loan balance for student loans that are not fully amortizing. This is more aligned with other government-backed mortgage programs, like Fannie Mae and Freddie Mac. 

But with these new changes, those carrying debt from school would likely get approved for federal assistance they would otherwise not qualify for, under previous guidelines. For example, Fudge crunched the numbers on someone making a modest salary of $50,000 per year. “If they want to purchase a home — maybe $200,000 or in that ballpark — [if] they have $75,000 worth of student debt, they don’t qualify,” Fudge said. “Once we make the adjustments we’re going to make, that same person will qualify.”

Fudge also said in this example, the person would also “qualify at a rate that gives them an opportunity to go into a home with some equity, but also be so vested in that home that they can afford to stay in that home.”

Robert F. Smith and the Fight Against Unequitable Student Loan Debt

Robert F. Smith has advocated loudly for more options for students pursuing college degrees. The burden of student loan debt can destroy all the hard work a college graduate has put in, and prevent them from breaking free of a vicious cycle. His notable gift to the 2019 graduating class at Morehouse College, effectively removing all their student loan debt — a gift worth $34 million — was only a drop in the bucket of the nearly $1.59 trillion in student debt currently owed in the U.S.

After his Morehouse donation, Smith worked to develop what became Student Freedom Initiative — a program that launched in fall 2021 at nine HBCUs, and will continue to expand each year. Student Freedom Initiative not only provides career and educational support to students at participating schools, but it also provides an income-based loan alternative to high-interest loans that can otherwise overburden graduates as they struggle to repay loans.

In addition to Student Freedom Initiative, Smith has also been an advocate for The 2% Solution, which focuses on creating paths for corporate investment in communities that have been systematically held back by the racial wealth gap. Its many facets include increasing financial institutions in Black communities, improving digital access to banking in those areas and increasing long-term investment in providers of K-12 education as well as higher education.

Watch the entire Axios interview with HUD Secretary Marcia Fudge on HBO, learn about all HUD programs working to extend the dream of homeownership to more Americans and learn more about the racial gap in homeownership rates and The 2% Solution.