The Future of Small-Dollar Mortgages Under the New Administration
As the new Presidential Administration settles into Washington, DC, many are asking: what comes next? A critical topic is examining and improving the landscape of “small-dollar mortgages.”
A recent opinion piece in The New York Times explains that small-dollar mortgages—generally loans under $100,000—make up a significant portion of the housing market but remain underserved by traditional mortgage lenders. In fact, a substantial percentage of homes in certain areas fall within this category, yet these homes are often inaccessible to prospective buyers due to financing challenges. Addressing the policies that impact these properties could unlock substantial opportunities for increasing homeownership.
The Importance of Small-Dollar Mortgages
As the article suggests: “One in five owner-occupied homes nationwide is valued at less than $150,000. These “small-dollar homes” have long served as a first rung on the economic mobility ladder for millions of American families. But over the past 15 years, the availability of mortgages for small-dollar homes — the mortgages overwhelmingly relied on to buy these homes — has shrunk dramatically. Pew Charitable Trusts estimates that from 2004 to 2021, small-mortgage lending fell by nearly 70 percent. The withering of the small-dollar mortgage is largely an unintended consequence of regulations passed after the financial crisis that were intended to help low-income households.”
Innovative Solutions Filling the Gap
Absent large-scale policy reform, however, innovators in the housing space have stepped up with creative solutions. Notable examples from our Ivory Prize for Housing Affordability network include:
Acts Housing (IP ’20 finalist) helps families purchase, rehab, and own homes at highly attainable prices by revitalizing distressed properties in Milwaukee, WI.
Blackstar Stability (IP ’22 winner) is dedicated to improving the financial outcomes of homeowners who hold “contracts for deed”, an alternative financing arrangement often used for small-dollar mortgages given the unavailability of traditional financial products.
Rocket Community Fund: Make It Home Program (IP ’22 finalist) is designed to transition renters into homeowners, particularly in areas with high concentrations of tax-foreclosed properties in Detroit, MI.
ROC USA (IP ’19 finalist) is a network that helps residents of manufactured home communities purchase their communities, turning them into resident-owned cooperatives.
Alone, these organizations are making a clear impact and supporting families across the country. By focusing on unserved or underserved properties and populations, they pave the way for sustainable homeownership, neighborhood stability, and economic mobility.
The Path Forward for Expanding Homeownership
Yet we could achieve so much more to support such families by unlocking financial access for homes that already exist at deeply affordable prices – they simply need the right kind of financial products to become owners. A multi-faceted approach—one that combines policy reforms with innovative practices—is essential to help more Americans achieve the dream of homeownership.
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