By Starlett Quarles
Growing up, many of us were taught that purchasing a home was part of the American dream. But according to HousingWire.com, the U.S. Census Bureau reports that the black homeownership rate fell from 42.2 percent in the first quarter of 2017 to 41.6 percent in the second quarter of 2018.
With such staggering statistics, has the goal of homeownership now become the “dream deferred” for many black Americans? What about my peers of young urban professionals? Are we growing up to be a generation of renters, both within and outside of our communities?
To answer these questions, I wanted to talk to Odest Riley Jr., president of WLM Financial in Inglewood, about our ability to purchase homes in our own communities. Not only is Riley a real estate professional, but he was also appointed by Inglewood Mayor James Butts to the city of Inglewood’s Housing Advisory Commission.
SQ: What is your role as a housing advisory commissioner for the city of Inglewood?
ORJ: My role as a housing advisory commissioner is to look over information regarding mostly Section 8 and affordable housing in the city; as well as over new projects that are thought about being put online, or about to come to fruition.
The city will come up with certain ideas on things that they think might work well for affordable housing. And my goal, along with the rest of the commissioners, is to take a look and give our feedback and advise on ways we think it will be helpful or not.
And when it comes to the Section 8 issue, we look to see how we can address the overall issues of the program as it currently is.
SQ: In our urban communities, what really is considered affordable housing?
ORJ: Affordable housing in L.A. right now is around $400,000 and under- if you’re talking about buying. And if you’re talking about renting, affordable housing would then fall into the category of housing where the price of the unit is adjusted to your income.
SQ: We all know it’s a seller’s market. So who’s actually buying in our communities today?
OR: Right now there’s an influx of investment money after people learned how to crowdfund. Also, big companies have now realized that there’s so much money to be made in inner-city communities all over the country.
Big hedge funds and investors [have] started buying single-family [homes] instead of just apartment buildings or industrial [properties]. So a lot of money is coming in from banks and investors. An example are people who just understand how to crowdfund.
SQ: But how can we employ a crowd-funding strategy when we don’t trust each other enough to invest with each other?
OR: Unfortunately we don’t. And we end up being in the cycle we’re in now. We’re so skeptical with each other that we [don’t] end up investing together. What it’s going to take is a few [black] people saying, “Hey, we’re going to jump in together and do this.” Someone has to set the example.
Because at this point we just don’t trust each other and it’s not changing. You can look at every other culture and [see] they’re able to invest together. We [sometimes] can’t even invest in a house with our brother or sister, but other cultures are doing it with people of the same race or just friends.
SQ: What about young urban professionals? What is our challenge in purchasing a home in our communities?
OR: When it comes to young urban professionals, the biggest issue is the lack of income to buy property. Let’s just say you make $80,000 and you have a car payment of $350 to $450. You [also] have student loan payments of around $300 or $400. Not to mention, you have a lifestyle of travel and eating out regularly.
After that, there’s really no income left to buy a house when the average mortgage payment on a $400,000 to $500,000 house is close to $2,500 to $3,000 a month.
SQ: Elaborate on the impact of student loans.
OR: Student loans are one of the biggest issues to deal with in our communities; specifically when a lot of urban college graduates went to school for careers in social services. They may have taken on a massive amount of loans because their parents couldn’t help them pay for school, or give them money to live off of while they were in school.
And what we don’t realize when we’re in [college] is that you’ll have to count that as negative income on your bottom line when you’re looking to buy a house. So your debt-to-income ratio [gets] messed up. If you have $100,000 worth of student loans, [lenders] look at it as 1 percent of your debt. So you have to be able to pay $1,000 a month on your loan in order to qualify [for a mortgage].
Now that’s just not going to happen if you have a small amount of money after you pay your car note and all those other expenses I spoke of earlier. To a lender, you don’t really have enough income to [prove] that you can pay your monthly [mortgage] payment without any issues.
SQ: So with people who do have student loans, how can they resolve that issue if they want to purchase a home?
OR: One of the biggest things I’ve been working on at WLM Financial is encouraging people to either buy property together or to buy units. One reason buying units is an easier way to bypass the barrier to entry of purchasing, is that you can use the income from the rental units [to qualify].
So if you buy a four-unit property and three of the units are rented out, you can use 75 percent of the income from each unit towards your income. So, if you have a four-unit building and three of them are renting for $1,000 each, you can use $750 per unit towards your income; which will boost it and allow you to be able to afford that property on paper.
Also putting people on a budget and getting them to understand that you have to streamline what you’re going to do with your income. For two years, you may not go on vacation, or be able to buy the car you want. Even though you’re a working professional, you may have to sacrifice a little to have less debt on your bottom line.
Starlett Quarles is a Gen X Advocate, public speaker and host of the internet TV Talk Show, “The Dialogue with Starlett Quarles.” For more, please visit www.TheDialogueLA.com.