Americans disagree on many social issues, but one we’re strongly united on is appreciation for our fellow countrymen and women who have served in our nation’s military – especially today, Veteran’s Day. It’s likely that the greatest expression of gratitude our nation has ever given to those who have worn the uniform is the Servicemen’s Readjustment Act of 1944 (and its successors), popularly known as the G.I. Bill.
This legislation gave educational and home-buying benefits to returning World War II service members, lifting millions of Americans into the middle class. But not everyone got to take advantage of this national thank you gift. More than a million Black veterans were denied the chance to buy a home because of a discriminatory real estate practice known as redlining.
Some members of Congress want to right this wrong for the surviving spouses and direct descendants of these disadvantaged WWII vets, and they proposed a G.I. Bill Restoration Act on 2021’s Veteran’s Day to do just that. House Majority Whip James E. Clyburn (SC-06) and Marine veteran Rep. Seth Moulton (MA-06) introduced the legislation in the House, and Sen. Reverend Raphael Warnock (D-GA) introduced its Senate companion. It hasn’t passed yet on its own, or been attached to any must-pass bills, but Clyburn still wants to ensure its passage, he said in a statement:
“On this Veterans Day, I believe we ought to acknowledge this injustice. We have a responsibility to address the wealth gap exacerbated by the government’s failure to guarantee that the federal benefits earned and deserved by all veterans were accessible to World War II veterans of color. I remain committed to helping our country repair this fault and ensuring the families of these forgotten heroes have a pathway to the middle class.”
That pathway is harder than ever to navigate. With rising home prices and mortgage rates, and a scarcity of affordable and workforce housing, buying a home is challenging to millions of aspiring homeowners, but particularly to Black borrowers. These individuals often have lower credit scores and less money to fund a purchase, adding to their home-buying difficulties. “Discriminatory practices have contributed to the lack of intergenerational wealth for Black families,” notes Lydia Pope, president of the National Association of Real Estate Brokers, a professional organization focused on the needs of minority colleagues, clients and communities.
She cites homeownership being “44.6% for Blacks and 74.2% for Whites, a 29.6% gap,” strongly contributing to Black households having a median net worth of $24,000 compared to $188,000 for White families. “The cycle can only be broken by improving the major driver of Black wealth – intergenerational homeownership that yields prosperity and family economic security,” she asserts.
NAREB is strongly in support of the Clyburn bill’s passage, Pope shares, but says more is still needed. “Many Black families can afford monthly mortgage payments, but don’t have the funds or savings for the down payments.” VA loans typically don’t require down payments, so this legislation would lower that particular barrier.
Interest Rate Fairness
Another financial issue Pope cites is interest rate inequities. She points to a January 2022 study showing that Black and Hispanic borrowers pay significantly higher rates on various government-insured loans, particularly in minority neighborhoods. “Researchers estimate that these rate differences cost minority borrowers more than $450 million yearly,” she declares. “Loan-Level Price Adjustments (LLPAs) are the culprit. Even if someone qualifies for a loan, lenders are allowed to adjust the interest rate based on credit scores,” she explains. “NAREB seeks an end to LLPAs and establishes that if a family meets the qualifications for a mortgage, they get the loan without additional fees.” That would seem to be doable within the framework of this legislation too.
This issue has started to get more media attention. In one eye-opening CNN segment, a Black couple in the San Francisco Bay Area got an appraisal that was far lower than they expected, given the market and improvements they’d made. So they asked a White friend to show their home, stripped of all artwork and photos that would indicate the race of the owners, and the appraisal came back nearly half a million dollars higher than when they showed it themselves.
This incident — and others like it covered in the New York Times, Washington Post and other national outlets — probably wouldn’t surprise Pope. “A Brookings Institution study shows that homes in Black neighborhoods appraised for 23% less than similar homes in White neighborhoods,” she shares. She also calls the appraisal review process itself “deeply flawed.”
Since the appraised value determines the loan amount, and since less than 3% of appraisals are ever revised, Pope says, the homebuyer faces an insidious new form of discrimination. “NAREB wants a revamped appraisal review process,” Pope says. That may also need to be built into Clyburn’s G.I. Bill Restoration Act for it to fulfill its potential.
Passing this legislation and ensuring that it can achieve its purpose of righting a historic wrong can benefit more than the families of those denied benefits in the 1940s and 50s. It can also benefit our neighborhoods with greater stability and reduced crime, our communities with greater civic engagement, our school systems with greater achievement, and our public health systems with reduced racial health disparities. These social goods are all described in the Minnesota Homeownership Center’s Welcome Home blog.