Four years ago, Gary Community Ventures, a Denver-based philanthropic organization, committed to a transformative model to address both barriers to homeownership and wealth disparities across Colorado.
In the wake of George Floyd’s murder in 2020 and the widespread reckoning on racial disparities that followed, Gary Community Ventures took a proactive approach to address systemic racial inequities. Engaging directly with the community, they set out to hear from Black residents directly about what they wanted to see change.
From residents’ stories emerged persistent, and all too common, challenges: Black families tend to have a tougher time purchasing homes and often lack the wealth of their white counterparts. These lived experiences mirror research documenting the wealth gap in Colorado, where 70% of white families own their homes, while only 42% of Black families do.
In digging deeper, the team at Gary Community Ventures identified that a significant contributor to this disparity lies in the challenge of securing sufficient cash for down payments. In fact, the community feedback they received revealed that many Black families have the income and credit scores to qualify for a home loan but not enough cash for a down payment, let alone closing costs, to secure the purchase.
To directly address the income and capital constraints many prospective Black homeowners face in purchasing a home, the Dearfield Fund for Black Wealth launched in 2021. By its third year, under Managing Director Aisha T. Weeks’ leadership, Dearfield had unlocked the door to homeownership for more than 200 homebuyers and deployed $8 million in down-payment assistance.
Structured as a Special Purpose Credit Program, the Dearfield Fund provides Black homebuyers up to $40,000 in down-payment assistance in return for a second lien on the property and a percentage of the appreciated house value. At the time of purchase, borrowers put down at least 3% on the property.
This initial equity, which is not factored into underwriting thanks to Dearfield’s partnerships with first mortgage lenders, helps to lower interest rates and the potential cost of mortgage insurance. This arrangement further works to reduce the initial purchase price of the home and post-purchase monthly payments, ensuring its affordability.
The down-payment assistance is like a loan, but homeowners do not make monthly payments or pay interest. Instead, when they sell or refinance, they repay the original down payment amount plus 5% of their home’s appreciation. This model serves as a scalable and replicable investment model attracting private capital to support innovative homeownership financing.
Aisha estimates that 95% of the borrowers would not have been able to purchase a home without Dearfield’s support, since banks would not have been able to offer a first mortgage without that initial equity. Notably, more than half (54%) of recipients are women and nearly three-quarters (70%) are considered low-to-moderate income.
Santhosh Ramdoss, who developed the concept and financing structure of the Dearfield Fund and who remains involved in his role as President and CEO of Gary Community Ventures, charged Aisha with leading Dearfield’s future growth in several critical ways. “Homeownership can close the racial wealth gap,” Aisha says, “But [research shows that] Black families often don’t retain property long enough to fully benefit from homeownership. They miss out on building equity over time and passing that asset to the next generation. We’re taking this insight to heart in our approach.”
Recognizing this key element to long-term wealth building in homeownership, the Dearfield Fund now pairs down-payment assistance with a post-purchase program that engages each borrower to develop a comprehensive financial plan. These plans include home maintenance and other key financial pillars crucial to preserving wealth, such as insurance and estate planning.
“Estate planning, in particular, is often misunderstood as something only for the wealthy,” explains Aisha, “But we’re working to change that narrative. It’s essential for Black individuals and families who own assets and have children to have a plan in place to pass those assets on.”
Aisha notes another key lesson from her team’s work with Black individuals and families: the varied—and sometimes unwelcoming—experiences these homebuyers face when interacting with lenders. In response, Dearfield will launch a certification program in 2025 aimed at training loan officers on a range of factors, including the historical context, that affect people who are eligible for Dearfield’s assistance.
Aisha provides insight into the initiative: “If loan officers have never engaged with or learned about housing discrimination or redlining and the struggle for racial equity, how can they truly empathize with the clients they’re serving?”
To enhance the effectiveness of the program, Dearfield is expanding their certification requirement from the institutional level down to the individual loan officer level. Initially, the certification process was only required on the part of the lending bank to be designated as an official qualified lender. It became clear, however, that not all loan officers were participating in their training sessions.
When the certification program launches in 2025, only individual loan officers who complete the course will be eligible to offer Dearfield’s down-payment assistance to homebuyers. This shift also benefits institutions, as those that partner with Dearfield are seeing an increase in loans, driving their motivation to ensure their loan officers are certified and fully engaged.
To enable uptake of their model in other cities, the Dearfield team has been building a “Black Wealth through Homeownership” toolkit, including lessons around the fund’s legal structure, partnerships, and stakeholder engagement, which they plan to share more widely at the end of 2024. The Dearfield Fund is exploring other options for expansion, such as franchising the model or scaling by raising a larger, nationally focused fund.
“Whether we’re partnering with others in different cities or deploying capital through a national fund, strong partnerships will be crucial,” Aisha explains, “Real estate and housing markets are highly localized, and our wraparound support services, essential for long-term client success, require local expertise and relationships.”
Valuing Homes in Black Communities
Homes in Black majority neighborhoods are undervalued by 23% on average compared to similar homes in other neighborhoods. Structural innovations that redesign our markets could create a more equitable housing market. To support new ideas, Economic Architecture and Brookings are mapping innovations across the US and will soon invite innovators to step forward and apply to the Valuing Homes in Black Communities Challenge.