Wells Fargo Foundation Commits $60M to Combatting Systemic Housing Inequity
The Wells Fargo Foundation has announced a commitment of $60 million toward addressing racial inequity in America's housing markets. The funds will be funneled through public-private partnerships in the form of Wealth Opportunities Restored through Homeownership (WORTH) grants. For organizations to access WORTH grants, they need to be addressing the root causes of race-based discrepancies in homeownership. The grants will run through 2025 and are expected to be sufficient to assist approximately 40,000 homeowners of color in eight of the most affected markets.
The Historical Institutionalization of Housing Inequality
At a National Low Income Housing Coalition webinar in 2020, House Speaker Nancy Pelosi said, "Housing security is a matter of justice, as structural racism puts communities of color unfairly at risk of being rent burdened or homeless.” The webinar was held shortly after George Floyd’s death at the hands of police. Referring to the incident, Pelosi said it had “exploded a tinderbox of injustices to address, and one of them is housing."
Michela Zonta, a senior housing policy analyst with the Center for American Progress, believes a two-tier approach to federal housing policy following the Great Depression promoted enduring residential segregation. First, to stabilize the economy for homeownership, the government established the Home Owners’ Loan Corporation (HOLC), the Federal Housing Administration (FHA), and the secondary mortgage market. The effect increased housing demand, reinvigorated the construction industry, and jumpstarted lending. At the same time, the new Public Works Administration (PWA) Housing Division programs funded public housing and slum clearance to improve low-income neighborhoods and grow trade employment.
Zonte says these actions had the effect of excluding people of color from homeownership. The HOLC’s redlining and the FHA Underwriting Manual institutionalized creditworthiness and property valuation based on a neighborhood's racial makeup. As a result, inner-city areas with high concentrations of Black and Hispanic residents received poor ratings, which deflected investment. And as target areas were cleared, they were replaced with government-sponsored housing that was too expensive for low-income families. This dynamic disproportionately impacted families of colore. Meanwhile, restrictive regulations meant they couldn't move to integrated neighborhoods, so they were forced to relocate to even less desirable areas. As context, the PWA program required housing projects to maintain the racial character of neighborhoods.
Post-war policies further marginalized people of color. The 1937 Housing Act required public housing projects to destroy a slum home for each new home built to protect the private housing market. As a result, projects became further concentrated in the inner cities. Federally funded infrastructure increasingly created physical barriers such as highways between the predominantly white suburbs and areas with high concentrations of ethnic minorities. An amendment to the 1949 Housing Act designed to stimulate downtown areas led to many such areas being bulldozed. Displaced Black residents were shifted to these alternative public housing projects to make way for infrastructure such as hospitals and universities serving white neighborhoods.
The First Legislative Attempts to Address Housing Inequity
Eventually, amid the turbulence of Dr. Martin Luther King Jr.’s assassination, the Fair Housing Act of 1968 sought to address the country’s discriminatory housing practices. It banned racial discrimination in public and private housing transactions and made action to address racial imbalances a requirement for HUD funding. But unfortunately, a rushed process compromised the final legislation, excluding specific properties and residents and lacking necessary enforcement provisions.
Amendments to the act in 1988 made it more inclusive and incorporated redress provisions and more significant penalties. In 2013 the “Implementation of the Fair Housing Act’s Discriminatory Effects Standard” rule made discriminatory practices liable even if their intention was not discriminatory. Then, in 2015, an Affirmatively Fair Housing rule gave HUD program participants a tool to help identify patterns of discrimination.
Wells Fargo Believes Further Solutions Are Necessary
Wells Fargo believes that despite some progress in the area, these systemic inequities excluded too many minority families from owning their homes and building wealth. By being prevented from buying homes in better areas, Black homeowners missed out on the capital growth such areas achieved over time. Additionally, poor housing conditions frequently spill over into other aspects of life, such as access to health resources, education, and job security.
Wells Fargo is the largest bank home mortgage originator and identifies that it has been the largest bank originator of home loans to minorities in the country for the last decade. As such, the organization says it feels a responsibility to develop solutions that help close the racial equity housing gap. In addition to the WORTH grants provided through the Wells Fargo Foundation, the company is creating a Special Purpose Credit Program to help their current minority homeowners refinance their mortgages.
Wells Fargo has specifically committed $150 million to lower interest rates and costs for eligible Black homeowners who stand to benefit from refinancing. The move effectively puts the bank's own money to work in the refinancing. The organization has also committed to making its progress public annually.