By Charlene Crowell
In the past year, COVID-19 and its variants have ravaged the world, cost human lives and disrupt normal activities in virtually all areas of life. For Black America, already plagued by severe health, income and wealth disparities, dealing with the pandemic has been even more painful.
With lower incomes, higher unemployment and less access to financial resources, both businesses and consumers are struggling to get much-needed help. In many cases, modest financial resources are either used up or almost exhausted, and the patience to deal with them has grown thin.
In response, an unprecedented coalition of more than 100 national, state and local lawyers is urging Congress and the Biden administration to make significant changes to deliver equitable aid to underserved communities. First and foremost, the coalition was concerned with getting money from the Paycheck Protection Program (PPP) to deserving but largely left out companies from previous funding rounds.
“The design of PPP has severely penalized People of Color companies, which generally do not have established banks and face greater barriers to accessing capital,” the coalition wrote. “In addition, the incentive for lenders to fund large loans that incurred higher fees has proven to be a barrier to entry for the vast majority of colored businesses.”
Fortunately, starting February 24th, new PPP approvals will be limited to companies with 20 or fewer employees for two weeks to cater to smaller businesses with relief. The SBA will also implement new rules in the coming days that will break down barriers for small businesses in several areas. These important changes will allow for better access and equitable support: the use of gross income instead of net profit as a measure of eligibility, improved demographic collection practices and the elimination of default / student borrower defaults.
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Despite these changes, however, more needs to be done to support companies that were already underserved by PPP.
“Many black, Latin, Asian, and immigrant business owners are sole proprietorships and independent contractors – vital to their communities,” said Ashley Harrington, director of federal prosecution at the Center for Responsible Lending (CRL). “Congress should retrospectively provide increased credit levels for sole proprietorships and independent contractors, as they did when the rule for smallholders and ranchers was changed. We need to ensure that all companies at risk have equal access to the help they need to weather this crisis. “
Well-known national organizations like the NAACP, the National Action Network and the National Fair Housing Alliance work with black business organizations like US Black Chambers, Inc. and the United States Hispanic Chamber of Commerce along with local partners like Boston Impact Initiative, Chicago Urban League and Pacific Community ventures.
With a united voice before federal officials, this coalition of organizations and companies called on February 12th for racially-explicit solutions for the new PPP aid.
Backing this appeal was data showing that the same companies that previously missed out on PPP funding combined offer 8.7 million jobs, $ 280 billion in annual payrolls, and $ 1.3 trillion in sales.
“This targeted aid should serve as a model for a long-term revitalization program aimed at providing small businesses in these hardest hit areas with the resources to recover faster and grow strong,” said Luke Pardue, an economist at Gusto , a national data company specializing in small business. The company is also a member of the coalition.
“Such a plan could take the form of targeted block grants that Congress gives to needy places, which can then spend the funds on small business development, job training, and job retention programs. Congress could make the neighborhood capital investment program permanent with annual funding of $ 12 billion. “
In its own independent PPP analysis, CRL also noted the profound impact of the pandemic on small businesses.
“At the beginning of the program and during the first funding round from April 3 to 16, 2020, it was clear that structural inequalities were built into the program administration, the application process and the fee structure,” says a CRL policy letter. “These structural inequalities made it extremely difficult for small businesses – and especially those owned by colored people – to qualify for assistance or get it in time to save their businesses and the jobs of their dependents.”
In addition, and according to the CRL, the Small Business Association‘s PPP administration did not require demographics to determine whether lenders were prioritizing underserved markets and businesses, and consequently did not tell lenders to prioritize borrowers in underserved markets.
Just as black businesses have struggled to access capital, an exclusive housing policy has made it nearly impossible for black families to build home ownership on a par with whites and / or convert home equity into the assets needed to start a business. In short, denied access to finance is a major reason many black consumers struggle to become tenants rather than homeowners.
The National Association of Realtors, representing the nation’s largest trade association with 1.4 million members in the residential and commercial real estate, recently released a report analyzing data from the Census Bureau’s American Consumer Survey. From a racial perspective, NAR researched home ownership over the past decade, examining the characteristics of buyers, their reasons, and financial background.
Given that home ownership increases consumer wealth, NAR concluded that a homeowner’s net worth is 40 times that of a renter: $ 255,000 compared to $ 6,300 in 2019. However, according to NAR, not all have families equal access to home ownership, and the home itself does not offer a complete perspective.
White consumers consistently have a home ownership rate of 70% or more. But over the past decade, black home ownership, the only group hardest hit by the Great Recession, fell to 42% from 2009 to 2019, less than Latinos at 48% or Asian Americans at nearly 61%. . Depending on the locale, whites owned home ownership between 49% and 78%, and blacks ranged from a low of 5% in North Dakota to 70% in Puerto Rico. In the continental United States, the highest black homeowners in 2019 were in South Carolina and Maryland, both at 52%.
Lawrence Yun, chief economist at NAR, explained the racial differences: “The strong performance of the residential real estate market during the pandemic helped homeowners achieve significant wealth growth last year through additional home equity of approximately $ 1 trillion. However, as an indication of the K-shaped economic recovery, an increasing number of potential first-time buyers – including many minorities – are feeling discouraged by disproportionate job losses. Essentially, owning a home is being debited from them due to the rapidly rising home prices due to the historically low housing stock. “
“For black Americans,” Yun continued, “generally the greater than the national average likelihood of having student loan debt, combined with lower household incomes and accumulated savings, complements the challenge.”
With the exception of the Asian and Pacific islanders, black heads of household had higher percentages of student debt than Latinos or whites. While 21% of whites held $ 30,000 in student debt, according to the NAR, black student loan debts averaged $ 40,000 and affected 43%. Latino student debt was lowest at $ 20,000, while Asia Pacific islanders’ debt was highest at $ 42,600.
In December 2020, the median price of an existing home was nearly $ 309,800, according to NAR, 13% more expensive than last year and over 40% higher than five years ago. In 2019, the median income of blacks was less than $ 70,000, while the median income of whites was $ 90,000 in the same year.
Groups like the CRL, National Fair Housing Alliance, National Consumer Law Center, and many others are pushing for funding that helps maintain home ownership with a $ 10 billion housing aid fund that makes direct payments to homeowners for mortgages, utilities, property taxes, and property insurance would afford and other related housing costs.
Lawyers are also calling for $ 100 million for housing advice and $ 40 million for the Fair Housing Initiative program to help families disproportionately affected by COVID-19. They point out that previous federal programs, like the Treasury Department’s Hardest Hit Fund, aimed to help troubled homeowners during the 2008 housing crisis, but came too late and brought little relief to colored communities. Black and Latino communities unnecessarily lost $ 1 trillion in wealth during the Great Recession.
Public politics and widespread social discrimination have caused many of today’s economic inequalities. It is now time to correct the evils of systemic discrimination. And it is the government’s duty to ensure that the hardest hit communities receive their fair and equitable share of the aid.
Charlene Crowell is a Senior Fellow of the Center for Responsible Lending. She can be reached at [email protected].