The large gap in wealth and income between Black and White households is at the root of some of the most significant barriers to homeownership for Black New Yorkers. White households are more likely to inherit wealth than Black households, which can help fast-track homebuyers toward putting together a down payment.
Developing adequate savings is especially difficult for low- and moderate-income New Yorkers who can suffer from a feedback loop in which a lack of access to safe and affordable financing pushes them towards predatory or extractive financial products, such as pay-day lending, which in turn damages their credit and puts prime financing further out of reach. In the New York City metro area, 11% of Black households and 12.2% of Hispanic households do not have a bank account, compared to 2% of White households.1
Black homeowners face barriers to remaining in place, too. Among homeowners the Center serves, lack of funds for home maintenance and home repairs was identified as one of the biggest challenges. Homeowners with unmet repair needs may forego other expenses to pay for needed repairs, lose rental income for units in disrepair, or even seek out predatory or high-cost financing that can further destabilize their finances.1
Source: 2019 FDIC Survey of Household Use of Banking and Financial Services.Matched savings have been shown to incentivize and amplify saving behaviors. Our analysis of matched savings programs suggests that a well-calibrated initiative can be a critical support for renters and homeowners alike. Matched savings programs generally incentivize individuals to save money by matching funds they deposit in a savings account within a certain time frame.
We propose a matched savings program that would serve both aspiring homebuyers and existing homeowners, and provide a generous match (3:1) on funds to help them develop a savings habit as well as make progress towards their goals. The fund matching would be contingent on aspiring homebuyers and homeowners participating in pre- or post-purchase housing counseling, so that enrolled households receive financial guidance along with the matched funds. The intervention will depend on strategic outreach partnerships with community and culturally-specific organizations to reach Black homeowners and residents.
This program will aim to increase the financial resiliency of Black homeowners, help aspiring homeowners build the savings for a down payment, and connect underbanked individuals with banking services.
Low - and moderate - income homeowners are more susceptible to financial shocks. Oregon's Individual Development Account initiative, a matched savings program, listed drops in income as a common reason for participant drop-out of the program. Oregon's IDA program has addressed this by being flexible with homeowners who have faced loss of income.
The Oregon IDA program cited above provides a 3:1 match of funds, creating up to $9,000 in matched funds. While high-match ratios help savers achieve their goals, these programs are expensive — Oregon's is funded through a legislative allocation of $7.5 million per year, and helps clients open roughly 1,500 accounts annually.
