Equitably increasing access to credit

Credit is critical to buy a home. Yet, it’s difficult for many households to access, and minority and lower-income applicants often do not have access to credit at all or have access only to predatory credit. 

Promising strategies for equitably increasing access to credit for underserved populations:

• Expanding down payment assistance.
• Adopting tax policies that increase access to affordable homeownership for lower-income households.
• Investing in homebuyer counseling and financial education.
• Combatting predatory lending.
• Providing new options for families in debt.
• Boosting working families’ incomes through state earned income tax credits.
• Supporting individual development accounts.

Access to credit is critical to homeownership, and homeownership is the primary source of wealth for most Americans.

Precluding low-wealth and families of color to access the credit for homeownership is deepening existing racial, wealth, health and educational inequities. 

Tackling inequity requires reforming local, state and federal policies and increasing investments that will effectively expand access to credit and help pave the path to homeownership for underserved populations. Expanding homeownership opportunities also indirectly affects the ability and affordability of rentals for others. 

The Cost of Home campaign is successfully supporting advocacy for policies that increase and broaden access to safe and sound credit for underserved populations, including policies that address the homeownership gap for communities of color. 

How inequitable access to credit works 

Generally, institutions that extend credit aim to serve wealthier populations because their business model largely depends on it, says Jesse Van Tol, president and CEO of National Community Reinvestment Coalition, an organization that champions fairness in banking, housing and business development.

Wealth building is intergenerational. If you start out with very little wealth, it makes it harder to build wealth,” he says. “A bank is more likely to want to make a $1 million loan than a $75,000 one because they make more money off the bigger loan. This ongoing discrimination creates impediments for low-wealth families, especially people of color, to access the credit they need to buy a home.”
 

“It’s important that all folks have the opportunity to move into the wealth-building opportunity of homeownership, thereby freeing up a spot a little lower down on the affordability spectrum on the rental side,” says Vilhauer. “We’re all part of the same continuum of housing stability, so making opportunities for stable housing at each level positively impacts us all.”

Our impact

With still one more year of the campaign to go, check out our solutions in action:

• Policy successes mapped by policy focus area and geographies.
• A typology or searchable database of policy changes achieved by Cost of Home.
• Urban Institute brief on searchable database.
• Strategies for advocates to influence home affordability policies. 
• Urban Institute policy assessment report.