TITLE
Recommendation to request City Manager to evaluate the feasibility of providing increased pathways to homeownership to low and moderate-income individuals by implementing the following:
• Work with partners such as the Neighborhood Housing Services of Los Angeles County and the Affordable Housing Clearinghouse to establish a HUD Certified Homebuyer Counseling Center in Long Beach;
• Explore the rise of non-bank lenders in Long Beach by establishing a dialogue with the top seven non-bank lenders in Long Beach to develop a path to a community benefits participation plan;
• Retool the City's soft second mortgage programs by leveraging and partnering with private sector institutions;
• Evaluate the feasibility of alternative forms of homeownership supply such as community land trusts, and other cooperative homeownership models.
DISCUSSION
On December 11, 2017, as a part of the 'Everyone In' economic inclusion initiative, Vice Mayor Richardson, in partnership with Los Angeles Local Initiative Support Corporation (LA L1SC), convened a roundtable discussion with a multidisciplinary think tank of experts around the issue of homeownership in Long Beach. Homeownership remains one of the best ways to build intergenerational wealth and close the racial wealth gap. When people own their homes, they tend to be more financially stable, their children perform better in school, and their communities are healthier. Historically, families of color and low-income families have been systemically locked out of the opportunities homeownership provides.
Recently, The Greenlining Institute and the National Reinvestment Coalition analyzed federal home mortgage data for 2015, examining lending patterns in Long Beach, and found some surprising trends.
The Problem
According to The Greenlining Institute's study of Long Beach's home lending practices, researchers found a persistent exclusion of low to moderate income families and people of color from Long Beach's housing market. Although African Americans make up almost 14 percent of Long Beach's population, they received just seven percent of home purchase loans. Latinos make up 41 percent of the population but received only 22 percent of loans, and Asians make almost 13 percent of the population, but received 10 percent of loans.
Furthermore, the home mortgage data shows that, while mortgages are being purchased in low or moderate income areas of town, they are not being purchased by low to moderate income families. More than a quarter of all home purchase loans went to low or moderate income neighborhoods, but only six percent went to low to moderate income people. Put simply, higher income individuals are buying homes in working-class neighborhoods at dramatically higher levels than working-class residents, who are often Black, Latino, or Asian.
In addition, down-payment affordability challenges remain one ofthe top reasons why low to moderate income individuals are not purchasing homes at the rate of their more affluent counterparts. According to Zillow's 2017 Housing Aspiration Report, which surveyed renters in the Greater Los Angeles Region, while mortgage payments are more affordable on average than monthly rent payments, renters are struggling to buy a home due to down-payment barriers. In fact, nearly 70% of renters cited down payment as the greatest barrier to homeownership than debt, job security, and qualifying tor a mortgage.
Finally, one of the most surprising findings is that the largest mortgage lender in Long Beach is not a bank, and seven of the top 10 mortgage lenders in the city are also nonbanks. Non-bank lenders do not adhere to the same regulatory environment that governs banks. For example, non-bank lenders aren't covered by the Community Reinvestment Act, a vitally important law which requires banks to meet the credit and borrowing needs of the communities where they operate.
The Opportunity
At a city level, Long Beach can design policy solutions to expand pathways to homeownership for our most underserved communities. Due to the loss of redevelopment funds, the City of Long Beach does not have the financial resources to assist residents with soft second mortgages the way it did in years past. To bridge the gap, we can work with bank and non-bank lenders to provide more down payment assistance, helping families overcome one of the biggest barriers to buying a home. Financial institutions such as Farmers and Merchants Bank and Wells Fargo offer down payment assistance programs ranging from $10,000-$25,000 to qualifying individuals. As a City, we can leverage and partner with more private sector institutions to package together multiple down payment assistance programs.
In addition to assisting Long Beach residents secure the means necessary for purchasing a home, we must also do more to help people prepare for the responsibilities and challenges of homeownership. Establishing a HUD Certified Homebuyer Counseling & Education Center in Long Beach could provide invaluable benefits to aspiring homeowners including expanded housing choice and options, lower housing costs, improved credit scores, higher savings, and better protection from default and foreclosure.
Finally, to address issues of housing supply, we can explore alternative forms of homeownership like community land trusts, and cooperative homeownership options such as Washington D.C.'s Tenant Opportunity to Purchase Act (TOPA), which gives tenants the right to purchase the property in which they reside, should a landlord choose to sell a rental property.
Increasing pathways to homeownership remains a crucial tool in addressing the racial wealth gap, and is a key element of the Everyone In initiative.
TIMING CONSIDERATIONS
[Timing Considerations]
FISCAL IMPACT
There is no significant fiscal impact in creating the requested report.
SUGGESTED ACTION
Approve recommendation.
Respectfully Submitted,
VICE MAYOR REX RICHARDSON,
NINTH DISTRICT
COUNCILWOMAN STACY MUNGO,
FIFTH DISTRICT
COUNCILMEMBER ROBERTO URANGA,
SEVENTH DISTRICT
COUNCILMAN AL AUSTIN,
EIGHT DISTRICT