MBA’s CONVERGENCE Initiative Expands Into Philadelphia

By Laura Lang

Housing in Philadelphia is increasingly expensive and out-of-reach for many minority homebuyers – but MBA and its partners are working to change that dynamic.

The Black homeownership rate in the U.S. reached its peak in 2004 at 49.7%. Today, more than five decades after the passing of the 1968 Fair Housing Act, that rate has dropped to 45.8%. In contrast, the homeownership rate for non-Hispanic whites is 74.4% – a gap of 28.6%.

For some, the Black-white homeownership gap – and similar gaps between white homeowners and other minority groups – represents an opportunity that’s especially timely in a market where stubbornly high interest rates are slowing the purchase business and have virtually halted refinances.

Seizing the Moment

For lenders who are strategic about reaching into minority communities with an approach, pricing and products that make sense, there’s a lot of opportunity.

Freddie Mac estimates there are 3.4 million Black buyers, 8.3 million Hispanic buyers and 5 million Asian buyers “mortgage ready” out there. (Freddie Mac uses the term mortgage ready to describe future homeownership potential of adults aged 18-45 based on their credit characteristics.)

“We believe this makes a very strong business case for working in diverse communities and taking proactive steps to close the homeownership gap,” said Wendy Penn, Associate Vice President, Affordable Housing Initiatives at the Mortgage Bankers Association. “We see this as a smart business strategy for our members given the U.S. population growth and household formation in the coming decades will predominantly be people of color.”

However, addressing racial homeownership gaps means having to overcome homeownership disparities created through decades of structural inequities, such as practices that have led to minority-owned homes and neighborhoods being undervalued when compared to white neighborhoods.

MBA is spearheading an initiative to address these challenges.

Seizing Opportunity

CONVERGENCE is a place-based initiative to promote affordable housing and increase Black homeownership, as well as homeownership among Hispanic and other minority groups. And while the benefits of homeownership seem obvious, they can’t be overstated. For many families, it is the biggest single investment they will ever make and the primary way of creating and passing along generational wealth.

Now in its third year, CONVERGENCE brings together local stakeholders, including lenders, real estate professionals, housing counselors and others along with national partners such as Fannie Mae, Freddie Mac, iEmergent, and CoreLogic, to create a framework for ongoing collaboration and sustainability. In addition, MBA ensures that the people, processes and funding are in place and then the efforts are managed by local nonprofit organizations.

So far, CONVERGENCE has focused on three cities:

• CONVERGENCE Memphis launched in partnership with Tennessee Housing Development Agency, started in 2020. CONVERGENCE Memphis Inc., a nonprofit, serves as the local host. In Memphis, MBA is working with CoreLogic on a housing supply pilot using a housing development decision support platform that will help streamline the development of affordable housing projects, save time and money, and reduce permitting and approval delays. The target users are Community Development Corporations (CDCs) and smaller minority developers.

• CONVERGENCE Columbus launched in 2021 in partnership with the Ohio Housing Finance Agency and the John Glenn College of Public Affairs at the Ohio State University, and is now hosted by the nonprofit Affordable Housing Alliance of Central Ohio. The coalition has developed a consumer-facing brand for CONVERGENCE and a website that serves as a shared marketing tool for partner organizations and an information portal for homebuyers.

• CONVERGENCE Philadelphia launched in March 2023 with support from Radian, TD Bank and Wells Fargo Home Mortgage and is co-hosted by Local Initiatives Support Coalition (LISC) Philadelphia and the Urban Affairs Coalition (UAC). Members are currently mapping out goals and a long-term strategy to address challenges faced citywide by Philadelphia’s minority homebuyers and homeowners, including Black, Hispanic and other diverse households.

Why These Cities?

Each CONVERGENCE city offers a combination of factors that help meet the initiative’s test-and-learn goals. Noted Penn: “We look for cities where we think a place-based initiative can be impactful as well as give us important insights for new solutions. This process involves looking at market and demographic characteristics, including whether there is a large minority mortgage-ready population based on data from key industry partners.”

“And, perhaps most important, we also look for cities that have a strong housing ecosystem, meaning there are nonprofit organizations, lenders, local governments and others already actively working to address affordable housing challenges.”

Bulldozing Historic Barriers

CONVERGENCE leverages existing resources and programs in each city and brings in additional support and financial resources for creating and testing new, locally driven programs and initiatives to help fill in four “gaps” that MBA identified through research:

• The Information Gap – Combating the myths and misperceptions that lead many
  consumers to self-select out of the market, often when they already qualify for
  homeownership but do not know it.

• The Trust Gap – Addressing the reluctance of many consumers, especially in minority
  communities, to trust financial institutions for fear of being mistreated or victimized.

• The Market Gap – Developing strategies for addressing housing inventory challenges,
  including issues of housing quality and neighborhood amenities.

• The Resource Gap – Maximizing industry and consumer awareness of, and access to,
  financial subsidies and related affordable lending programs/products.

Challenges in Philadelphia

Pew Research conducted a detailed examination of housing data from Philadelphia and found 40% of households are cost-burdened, meaning the household spends 30% or more of its income on housing (rent, mortgage payments, utilities, insurance and property taxes) – and that disproportionately affects Black and other minority homeowners.

In June 2023, the median price for a home in Philadelphia was $270,000. Black homeowners’ median household income stands at $47,141, according to Philadelphia Fed researchers’ analysis of U.S. Census Bureau data, while white Philadelphia homeowners have a median household income of $77,696.

At the same time, home prices in Philadelphia continue to rise faster than incomes. During the last two decades, home values in Philadelphia have risen from 2.5 times the median income of Black households to more than five times their income, said the Philadelphia Fed. That’s one reason Black homeownership has steadily declined over the past 30 years, and the Black-white homeownership gap has expanded, they said.
Because of long-standing inequities in employment and income, it’s relatively more expensive for Black homeowners in Philadelphia to own a home than for white homeowners, according to an October report from the Philadelphia Fed.

Unlike Memphis, which has a strategic focus on five neighborhoods, CONVERGENCE Philadelphia is more geographically and demographically widespread. “Affordable housing is an issue in every section of the city, both from a pricing standpoint and an inventory standpoint,” said Leslie Winder, Director of Community and Economic Development at UAC in Philadelphia.

“We’re seeing a real disconnect between what you might consider, or builders might consider, to be affordable housing. And there are people – Black, Hispanics and other minorities – quite squarely in the middle-income range who historically have been priced out of housing opportunities,” Winder said.

Building Back Trust

A significant barrier to overcome in Philadelphia will be the trust gap, noted MBA’s Penn.
“We are working to dispel myths about what it takes to buy a house and offer products and services to help buyers achieve sustainable homeownership,” she adds. “There is a strong network of housing counselors and other trusted organizations in Philadelphia that we are actively engaging in our education and outreach efforts to potential buyers.”

Homeowner Preservation, Tangled Titles

While the overarching goal of CONVERGENCE is removing barriers to buying homes, it’s also important that buyers can become successful homeowners, pointed out Winder.

Part of that effort in the Philadelphia market will be helping with “tangled titles.” In Philadelphia, this is a serious and widespread issue, especially among Black homeowners. A tangled title occurs when the homeowner doesn’t have a clear title to prove they own a home. For many families that happens when there isn’t a will or the documentation to pass the title to an heir. Often the paperwork has been lost or can’t be traced back. “So they’re not able to refinance and they’re at risk of losing the home because they can’t prove they own it,” says Winder.

“That’s important because when you talk about building generational wealth, it’s not just getting a family in a home; it’s keeping the family in the home and keeping the home in the family,” she adds.

The title/ownership challenges don’t end there. “When we can’t prove a person owns the house, it’s very challenging to help them qualify for services and programs,” Penn said. Because of its aging housing stock, Philadelphia has programs in place to help people maintain their homes through weatherization, retrofitting, putting in ramps and grab bars and more. “But you can’t access those programs if you can’t prove a clear title,” Penn added.

The initiative is also taking note of the various predators in the market making lowball offers to get minority homeowners out of their home, she says. “Our focus is on providing education through housing counselors and connections to reputable lenders if they need to refinance, buy or sell,” she said.

Next Steps

CONVERGENCE is about more than increasing homeownership in Memphis, Columbus and Philadelphia. It is about extracting maximum value from what’s learned in each city and sharing that knowledge broadly. “We are creating templates, toolkits, guides, and other resources that will help MBA members reach more minority homebuyers in their markets and communities. The insights from our current network of cities can help lenders everywhere,” said Steve O’Connor, Senior Vice President, Affordable Housing Initiatives for MBA.

If you’re attending MBA’s Annual Meeting this year, don’t miss our CONVERGENCE Philadelphia panel on the HUB Stage featuring cornerstone partners Radian, TD Bank and Wells Fargo Home Mortgage.
CONVERGENCE complements several of MBA’s other housing initiatives. For three consecutive years, the MBA Chairman has focused on affordability as part of their platform–resulting in the Building Generational Wealth through Homeownership Initiative, the Home for All Pledge and MBA’s first Affordable Rental Housing Strategy. The association also has created two advisory councils on affordable homeownership and affordable rental housing. Both councils unite voices from across the industry to foster progress on housing affordability.

“We’re taking a broad, long-term look at the barriers to minority homeownership and will put action plans in place to close the homeownership gaps and distill the lessons learned to serve new places with newly created partnership coalitions,” said O’Connor. “Given market and demographic trends, this is important and necessary work, and we’re encouraging all of our members to get involved.”

For more information on MBA’s CONVERGENCE initiative, visit our website or email AffordableHousingInitiatives@mba.org.