Ninety-three percent of Black families that have the credit score and income to qualify for a home loan do not move on to purchase a home because they lack the cash needed for their down payment, according to a Colorado nonprofit working to reverse that trend.
Gary Community Ventures is offering up to $40,000 in down payment assistance to at least 500 Black families in metro Denver, over the next 10 years, through its new Dearfield Fund for Black Wealth. The new program will operate with help from FirstBank and Elevations Credit Union, the first lenders that have signed up to offer the Dearfield Fund to their own mortgage clients.
The funding helped close the gap for Shamae and LeVar Williams, who were scrambling to buy a home after their landlord decided not to renew the lease on their three-bedroom rental in Thornton.
They had three months to move out, so their search was frantic and frustrating as they were outbid on multiple homes.
“We were looking with our Realtor and nothing was coming up that would meet our needs in the range that we were in, and just having the Dearfield plus the PATH, that took us to a whole other level,” LeVar Williams said.
A FirstBank loan officer helped the Williamses secure a $20,000 PATH grant, the bank’s program for Black first-time homeowners. In that same meeting, the couple learned about the down payment assistance available from the Dearfield Fund.
The Williams family qualified for both programs and were able to purchase a six-bedroom house in Aurora for $465,000 and moved in with their three kids in August.
Owning a home would create stability by removing the possibility of becoming displaced again by a landlord. Mortgage payments would likely remain the same, unlike rents, and the couple’s wealth will probably grow enough to help support their childrens’ college education in the coming years, the Williamses said.
“My parents bought the house that I grew up in, in Park Hill, when I was like 2, and my dad still lives there today, and it’s paid off,” Shamae Williams said. “My dad had always instilled in us: Make sure you own property and make sure you don’t sell it … Have something that is yours.”’
Dearfield Fund becomes a missing ally
Homeownership has long been one of the most important tools to helping people build and accumulate wealth. Families who have historically had easier access to cash savings and other benefits, such as loans from banks to help purchase a home or start a new business, have had more opportunity to build and pass on their wealth. But discriminatory policies by banking and housing institutions have excluded Black Americans for decades, and have prevented them from acquiring and passing on that same level of intergenerational wealth.
“Many white families have stories … where someone made a bet on them, where a local bank or a local ally invested some dollars in them to start a business or buy a home, and they were able to build that into something,” said Mike Johnston, president and CEO of Gary Community Ventures. “We have explicitly denied Black families a chance to do that for centuries, and so we saw this as a chance to see if we could make sure that we were betting on Black families the same way that this country has for centuries bet on white families.”
The median wealth for a white family in America is just over $170,000 compared with almost $18,000 for a Black family in the U.S., according to The Brookings Institution.
The largest gaps exist between Black and white households with children. Black families with young kids have often accumulated just $1 of wealth for every $100 that white families with children have amassed, according to 2016 data from the American Sociological Association, the most recent data available.
Black families are the least likely, compared to any other racial group, to own a home, FirstBank CEO Jim Reuter said.
In Colorado, Black families are 62% less likely to own a home compared to white Coloradans. Latino families are 43% less likely to own a home compared to their white counterparts, Native American families are 38% less likely, and Asian families are 36% less likely to own a home compared to white Coloradans, according to the Bell Policy Center.
Dearfield Fund leaders estimate that there are more than 7,000 Black families in metro Denver who are mortgage ready and will be able to purchase a home if they have down payment support. The Dearfield Fund has helped 45 Black families become first-time homeowners in the metro Denver area since a soft launch of the program in September.
The fund currently focuses on serving families in the six-county metro area, because the region contains the largest number of Black residents in the state and is home to half of all kids living in poverty in Colorado, Johnston said.
“We’d love to try to be the first to say that any Black family who wants to buy a home in Colorado would be able to do it, and so that’s our long-term goal,” Johnston said. “We’d love to grow statewide. We’d love to see other states replicate this structure to make it possible for families all over the county.”
The down payment assistance is available to first-time buyers who have a family income of less than $140,000 per year, and who receive a mortgage loan through participating lenders including FirstBank and Elevations Credit Union. Dearfield Fund participants must contribute at least 3% of the value of the home toward the down payment.
The fund is expected to generate at least $100,000 in wealth within 10 years for each of the families who initially participate, and depending on the home’s appreciation, that number could double. Gary Community Ventures leaders analyzed 30 years of data on Denver’s housing market. The average annual increase on a home’s value is 5%, according to Santhosh Ramdoss, vice president of impact investing at Gary Community Ventures.
The Dearfield Fund money must be paid back, plus 5% of the home’s appreciation, within 15 years or when the house is sold, refinanced or is no longer the family’s primary residence. On an average, a typical homeowner refinances their home in five to seven years, based on national and Colorado level mortgage data. When a down payment is repaid by one family, fund leaders pass it on to another family, Johnston said.
Named after Dearfield, a Weld County community founded in 1910 by the Black businessman Oliver Toussaint Jackson, the Dearfield Fund aims to extend Jackson’s vision, who believed homeownership was key to allowing Black people to own their future.
Dearfield Fund leaders said they have the financial resources to serve the first 500 families who participate in the program. But they’re working with new investors and other bank leaders who want to help grow the fund to serve even more families.
The homeowners Dearfield Fund has already helped have sent videos chronicling their first moments in their new homes. “It’s the most rewarding part of the job, every time we put a family into a home,” Johnston said.
Fund leaders said they do not know of any other program with the same goal and design. Banks are heavily regulated institutions, and focusing on one racial group for a program presents regulatory challenges, said Amber Hills, FirstBank’s president of multicultural banking. FirstBank leaders have worked with attorneys to create what is believed to be the first-of-its-kind Path Grant, (Providing Access Through Homeownership), which works closely with the Dearfield program, Hills said. PATH has about $750,000 to give to Black first-time homeowners.
Khadija Haynes, a lobbyist and community activist who was on the advisory board when the Dearfield Fund was developed, said many systems and historic events have led to the current racial wealth gap.
For example, the term “40 acres and a mule” was used to describe the compensation ordered to be paid to Black people who were enslaved to help them sustain themselves during freedom following the Civil War. But after Abraham Lincoln was assassinated, his successor Andrew Johnson reversed that order and returned the land to its former white owners. The reversal caused significant economic hardship for Black Americans during Reconstruction.
Years later, in 1921, 35 blocks — lined with booming hotels, newspapers, barber shops and restaurants — were burned down by a white mob in the Greenwood District of Tulsa, Oklahoma. The area, known as Black Wall Street, was considered by many to be the wealthiest Black community at the time. In all, 300 people died, 800 were injured and about 10,000 Black community members became homeless.
Redlining, which denied Black people access to a federal mortgage loan because of their race, and many other discriminatory practices still occurring at banks, have also contributed to the racial wealth gap, Haynes and Johnston said.
“It is the bias in banking, and access to loans that helped create the problem,” Haynes said. “So the fact that these folks came forward (to create the Dearfield Fund) and made a decision to make a difference, I would have a call to action for their peers, to not let them stand alone.”
CORRECTION: This story was updated at noon on Feb. 24, 2022, to correct Amber Hills’ title and make other editing changes. She is FirstBank’s president of multicultural banking, which is where the bank’s Providing Access Through Homeownership program originates. The program, which has about $750,000 to give, works closely with the Dearfield Fund for Black Wealth.