Homeownership in Illinois: How will the state budget close the wealth gap?
Home ownership is as uncertain as ever. As the federal government continues to combat high post-Covid inflation with high-interest monetary policy, purchasing a home remains out of reach for many people, especially communities of color. Illinois is no exception. Despite the state’s overall homeownership rate being above the national average, its racial divide is more pronounced. Black Illinoisan’s access to home ownership has been steadily declining since the year 2000, where it was at 42.3%, compared to only 38.2% in 2020 (Urban Institute). Meanwhile, White Illinoisans are twice as likely to own their home, with an ownership rate of 75.3%. The historical socioeconomic inequities that denied communities of color the opportunities to create and pass generational wealth continue to persist.
Why is home ownership so important?
‘American Dream’ aside, homeownership brings with it a host of benefits for both the owner and their community. One of the most apparent benefits homeowners obtain is their home value appreciation [ii]. In the 10-year span between 2013 and 2023, It is estimated that Illinois homes have increased in value by almost 60% [iii].
In the short term, this boosts the home’s equity and provides the owner with economic flexibility to continue investing and building wealth for themselves and their families. In the long-term, the buildup of generational wealth has a profound impact on the homeowner’s children and beyond.
The generational impact of family wealth is well documented, and strongly associated with higher outcomes in education and financial stability, with the effect being amplified across more generations as wealth continues to accumulate (Pfeffer & Killewald, 2018) [iv].
Furthermore, because homeowners have a much higher incentive to contribute to their communities, they stimulate their local economies.
How will Illinois’ FY2024 budget help homeownership?
On the 7th of June 2023, Governor J.B. Pritzker approved four legislative bills for the FY2024 — The primary appropriation bill; a bond authorization bill; the budget’s implementation bill; and a revenue omnibus bill.
Within the FY2024 budget are several programs designed to aid both homebuyers as well as homeowners. Each of these programs are administered by the Illinois Housing Development Authority (IHDA), which, from the FY2024 budget onwards, will transition from receiving administrative support from the Department of Revenue to the Department of Human Services (DHS).
Two of the programs — the Homeowners Assistance Program and ACCESS mortgages, are funded through the Illinois Affordable Housing Trust Fund — a governmental fund that receives the bulk of its revenue from State grants. The FY2024 state budget appropriated about $720 million from the Illinois Affordable Housing Trust Fund, for both homeownership assistance as well as rental assistance and emergency assistance. The Opening Doors program, however, received its revenue from ARPA’s State Coronavirus Urgent Remediation Emergency Fund.
Homeowners Assistance Program
In FY2024, $241 million was appropriated to the Illinois Affordable Housing Trust Fund to fund the Homeowners Assistance program. The Homeowners Assistance Program is housed under the Illinois Homeowner Assistance Fund. The goal of this program is to provide grants to current homeowners for mortgage payments, home insurance, utility assistance, and other administrative costs associated with homeownership. This is part of a larger federal response to the financial hardships brought on by the Covid-19 pandemic and was authorized by the American Rescue Plan Act (ARPA).
The Illinois Homeowner Assistance Fund (ILHAF) targets homeowners who are at risk of mortgage default, foreclosure, or displacement because of the Covid-19 pandemic. The program offers up to $60,000 to qualifying households to avoid such delinquencies.
However, as of the time of this article’s creation, the Illinois Homeowner Assistance Fund (ILHAF) is no longer accepting applications due to limited funds. In IHDA’s 2022 annual report, 66% of the funded applications were for mortgage-related assistance [vi]. It will be interesting to see if additional funds will be reappropriated to the fund in the future.
ACCESS Mortgage
The FY2024 budget appropriated another $100 million from the Illinois Affordable Housing Trust Fund for the purpose of assisting prospective home buyers with interest-free down payments, mortgages, and other things to promote access to home ownership. This program offers the three mortgage options in the diagram below.
Opening Doors
The FY2024 budget reappropriated $20 million from ARPA’s State Coronavirus Urgent Remediation Emergency Fund to this program, with the purpose of providing prospective buyers competitive interest rate loans, with eligibility for forgiveness. This is especially beneficial for those households whose financial resources have been stretched thin due to post-Covid inflation and need stability when accessing home ownership. Opening Doors acts as a low-risk alternative to traditional private bank loans. Like ILHAF, however, this program is no longer taking applications, due to having limited funds.
Where do things stand?
There is more room for Illinois’ fiscal policy to expand programs that help Illinoisans access homeownership. By 2040, the number of homeowners younger than 65 years old is projected to drop significantly. This will especially exacerbate already existing disparities in home ownership amongst low-income communities and communities of color. With pandemic-era ARPA funds depleted and programs like ILHAF and Opening Doors no longer taking applications, the Illinois government must shift its focus to closing these wealth gaps that persist.
Recommendation 1: Reappropriate funds for defunct home ownership programs.
While the ACCESS mortgage options are still available, most of the state’s homeownership assistance programs have run out of funds. Current homeowners are still experiencing post-pandemic financial hardships, especially from inflation-related expenditures, and will still benefit from government assistance to keep themselves from defaulting and to continue contributing to their local economy.
Illinois’ Executive Branch has shown that they can prioritize equitable housing policies when they reappropriated ARPA funds for the Opening Doors program, so allocating new funds to these closed programs is politically salient and should not face any significant legislative resistance.
Recommendation 2: Expand programs to target younger buyers and buyers of color.
Ultimately, even with programs like ILHALF and Opening Doors, addressing the disparities in homeownership access requires more deliberate targeting when designing housing policy. The racial disparities in homeownership, especially, prevent many communities from establishing generational wealth. This is an historical and stubborn problem that requires housing policy design to target specific counties, age groups and zip codes, if Illinois residents are to have equitable access to home ownership and the long-term equity and capital that comes with it.
The data strongly highlights that young people and people of color are the most likely to have difficulty purchasing a home. These are both groups that have the most untapped economic potential as both could generate the most immediate economic activity if they were able to access home ownership. Illinois lawmakers should keep this in mind when designing housing policies, as government programs could target these groups by leveraging direct loans or tax credits against student loan debt repayment and towards historically underserved neighborhoods. There is scope for both government programs that assist the public as well as those that assist specific pockets of society that have been denied economic inclusion and participation.
[i] Illinois. (2021). Urban Institute. https://www.urban.org/policy-centers/housing-finance-policy-center/projects/forecasting-state-and-national-trends-household-formation-and-homeownership/illinois
[ii]Rethinking Homeownership as “the American Dream.” (2023, June 26). Urban Institute. https://www.urban.org/urban-wire/rethinking-homeownership-american-dream#:~:text=Homeownership%20comes%20with%20many%20benefits,supply%20and%20tightening%20mortgage%20credit.
[iii] Dr. Andrew Schiller. (2019, March 29). Illinois Appreciation Rate Trends & Housing Market Data. Neighborhoodscout.com; NeighborhoodScout. https://www.neighborhoodscout.com/il/real-estate
[iv] Pfeffer, F. T., & Killewald, A. (2018). Generations of advantage. Multigenerational correlations in family wealth. Social Forces, 96(4), 1411–1442.
[v] Commission on Government Forecasting and Accountability — Budget Summary. (2023). Ilga.gov. https://cgfa.ilga.gov/Resource.aspx?id=222
[vi] ILHAF 2022 Annual Report Performance Goals Program Design Element Funds Disbursed Provide Data. (n.d.). Retrieved November 22, 2023, from https://assets-global.website-files.com/617033bdd8cf10d9f75baef2/6408bba439bebb27b37830f4_ILHAF_2022%20Annual%20Report%20(1).pdf
