By Anthony E. Simpkins, President and CEO, Neighborhood Housing Services of Chicago

Dear Mayor Johnson,

Chicago should be a place where everyone has an equal opportunity to thrive and succeed. Instead, Black families in our city today have just one cent for every dollar that White families have in net worth, and our racial homeownership gap exceeds those of Los Angeles, New York, and Washington, DC.

Homeownership builds family and neighborhood wealth, builds community, supports local businesses, and creates jobs. Homeownership is also an affordable option for many families. A mortgage is a more stable housing cost over time than the ever-rising cost of rent, and in Chicago, a family with a household income at 60% of the area median income will pay up to $1,700 in rent for an “affordable” 3 bedroom Tax Credit apartment, but will pay the same for the mortgage on a home worth up to $250,000, from which that same family will be able to build equity.

The City has historically allocated few resources to homeownership. In 2021, for example, the City Department of Housing (DOH) spent $290.5 million in resources to create or preserve rental units in Chicago, but only 13% of that amount ($37.8 million) for affordable homeownership. As we continue to heavily subsidize critical affordable rental units, we must apply the same thinking and resources to subsidies for creating new low-moderate income homeowners and homeowners of color.

NHS is uniquely positioned to assist your administration with correcting this situation and to support your efforts to pursue a bold agenda of revitalization for Chicago’s low-moderate income neighborhoods and communities of color. Our experience has shown us that there are three (3) critical homeownership strategies that should be part of an effective housing strategy for the City of Chicago to address the racial wealth gap and improve neighborhoods:

• Flexible purchase subsidies for owner-occupant buyers of 1-4 unit homes

• Creative financing tools to support more equitable and affordable mortgages

• Improving City contract procedures to better support community-based organizations

Flexible Purchase Subsidies
Rising interest rates, home values and construction costs have made homeownership harder to access for more and more Chicagoans, especially in formerly redlined neighborhoods. There are many renters who could otherwise become homeowners, but for the rising appraisal and affordability gaps. Current purchase assistance programs don’t go nearly far enough in helping aspiring homebuyers cover these rising costs. Deep, flexible subsidies of up to $100,00 or more per buyer are needed in today’s market to help expand affordable homeownership, especially for residents of color in Chicago.

Creative Financing Tools
Traditional lenders have not equitably provided the mortgages that are needed to expand homeownership in our disinvested communities. Home Mortgage Disclosure Act (HMDA) data shows a persistent disparity in the ability of people of color to get mortgages to buy homes. HMDA data shows that applicants of color are denied loans to buy homes 2x – 3x more than White applicants, regardless of home price, downpayment amount or credit profile.

Nonprofit affordable housing Community Development Financial Institutions (CDFIs) have been providing mortgage and counseling services to Black and Brown homebuyers for decades. Over 90% of our borrowers are people of color. If CDFIs like NHS are provided with loan loss reserves and other flexible and creative financing tools for lending, we can leverage millions of dollars in private capital to provide fairly-priced mortgage loans to borrowers of color and low-moderate income borrowers.

City Contracts with Community Organizations
Community organizations like NHS are deeply rooted in the neighborhoods we serve and work to deploy City services, programs, and resources to uplift and respond to residents and their housing needs. NHS is a delegate agency and program administrator for a number of important City programs that assist existing and aspiring homeowners. Currently, organizations like ours are required to cover the costs of City contracts upfront, including all grants that are disbursed to Chicago residents and our own operating costs for administering and deploying the programs. This adds up to millions of dollars of our own funds that we must spend each year, while we await the City’s lengthy contracting and reimbursement process, which can take 6 months or more. In addition, the organizational funding received through these city contracts doesn’t even reimburse delegate agencies for interest costs we incur to front-fund these programs. A re-examination and overhaul of the systems by which the City leverages, contracts with, and supports community-based organizations is definitely in order, and something we are hoping your administration will address.

Mayor Johnson, we appreciate the opportunity to share our expertise and recommendations. We have a shared goal of addressing the racial wealth and homeownership gaps, and we believe these are the most effective ways to make our city a place where everyone can thrive and succeed. NHS stands ready to partner with you and your administration to build thriving neighborhoods and opportunity for all Chicagoans.

(Anthony Simpkins is the President and Chief Executive Officer at Neighborhood Housing Services of Chicago. Visit them online at nhschicago.org.)