New Law Charges Homebuyers $100 to Help Minorities With Down Payments

Washington state has passed a flurry of laws aimed at expanding access to housing, including one that adds a $100 fee to all real estate transactions to help fund a loan program for minorities hurt by the state’s racially restrictive covenants in the past.

On Monday, Governor Jay Inslee signed House Bill 1474 and nine other housing bills into law. With funding from the $100 homebuyer fee, HB1474 establishes a covenant homeownership account and program that will provide down payment and closing-costs assistance to “first-time homebuyers affected by the state’s discriminatory housing policies.”

Like other states, Washington once had restrictions on property rights that often excluded Black, Asian and Jewish residents from buying or occupying property. Such restrictions were used to segregate communities. Even after the Supreme Court declared the covenants unenforceable in 1948, the practice remained commonplace. It was not until 20 years later that the federal Fair Housing Act made it illegal to write racial covenants into deeds.

Supporters of HB1474 say the legislation will address one of the factors that have contributed to the racial gap in homeownership. In Washington, only 35 percent of Black families own homes, compared with 68 percent of white families, an analysis from the National Association of Realtors found last month.

“We did this, we can undo it,” Lieutenant Governor Denny Heck told legislators in February while speaking about the low rates of homeownership among people of color.

The state expects the new fees to generate an estimated $100 million every year. The fund would grant loans to first-time homebuyers who were either Washington residents before the federal Fair Housing Act or are the descendent of someone who was. Homebuyers will need to make 100 percent of the area median income or less in order to qualify for the loans, which have to be paid back upon the sale of the home. It’s unclear how much each homebuyer could receive.

On Monday, Inslee said, “Historically, these community members couldn’t secure a home because of prejudices and biases against their race, ethnicity or cultural identity without any regard to their individual character. Today’s bill finally takes steps to make that right.”

Now that Inslee has signed the bill into law, the fee will take effect in January and loans will be available beginning next July.

Washington Republicans had sought to block the bill, arguing that because descendants would be eligible for the loans, the funding “could go on for hundreds of years,” state Senator Phil Fortunato said.

GOP legislators introduced an amendment that would have allowed people to apply for the program for only five years, but the measure, and a proposal to reduce the fee to $50, both failed.

Newsweek reached out to the state Senate’s Republican caucus via email for comment.

While HB1474 is the first of its kind in the nation, there has been other legislation at the federal level aimed at closing the homeownership gap.

Earlier this year, the Biden administration announced a new federal rule that would raise the monthly mortgage payments of buyers with good credit scores while reducing fees for riskier borrowers. The rule is designed to assist low-income and minority borrowers by encouraging homeownership.

Under the administration’s affordable housing plan, the Federal Housing Administration in February reduced annual mortgage insurance premiums for an estimated 850,000 households. The fee charged to homebuyers dropped from 0.85 percent to 0.55 percent for FHA-insured mortgages, saving the average homebuyer about $800 a year, the White House said.