Building Equity in Small Multifamily Ownership

Homeownership is one of the most effective ways for a family to build wealth; the typical homeowner has 36 times more wealth than a renter. Discriminatory policies and practices – such as redlining, racial covenants, restrictive zoning, and predatory lending– have made it difficult for people of color, and especially Black and Indigenous families, to build wealth as homeowners. Nationally, white households have ten times the wealth of Black households. In Minnesota, 40% of households of color and just 25% of Black Minnesotans own their homes, compared to 75% of white households. This 50-point difference between Black and white households in Minnesota is one of the worst homeownership gaps in the country.

Small multifamily (duplex, triplex, and fourplex) ownership offers a meaningful opportunity to close our racial disparities in wealth. Since they use the same conventional mortgage lending as single-family homes, these properties represent an affordable entry to real estate investment. When a first-time buyer purchases a 2-4 unit building, they can earn additional income from rent, additional mortgage paydown, and additional appreciation. They also have the option to provide housing to their family, friends, and community if they so choose.

But the limited supply of these buildings, frequent repair needs, lack of support for new landlords, and historic wealth gaps make it difficult for low-income households of color to take advantage of this wealth building opportunity. That is why we are piloting a comprehensive strategy to address these barriers, creating a regional model that can inform national practices. 

We are realigning systems to help long-time community residents build wealth as owner-occupant landlords of 2-4 unit buildings in their communities with a two-pronged approach:

1. Address the constrained supply and high competition for 2-4 unit properties.

• Provide acquisition and construction loans to increase the supply of affordable 2-4 unit homes, building a pipeline of properties available for local owner-occupants to purchase. Prioritize loans to local developers of color to help them build their businesses.
• Provide rehab loans to local developers of color to ensure the existing stock of 2-4 unit housing is in good repair before new homeowners purchase/move in.
• Facilitate sales to homebuyers with the help of community partners.

2. Ensure homebuyers have access to capital and training so they can become successful homeowners and responsible landlords.

• Ensure access to owner-occupant landlord training alongside homeownership education. Work with community partners to deliver training and build a pipeline of homebuyers.
• Expand access to home purchase loans, using credit enhancement.
• Provide forgivable down payment assistance.
• Provide 0% interest post-purchase loans for repairs in the early years of ownership.
• Develop a new mortgage product that includes an escrow for future repairs.

By focusing our efforts in neighborhoods of color with low homeownership rates and by partnering with community-based organizations, this program is serving Black, Indigenous, and People of Color homebuyers with low to moderate incomes. We recognize that many of these neighborhoods in Minneapolis and Saint Paul experienced significant damage during the unrest that followed George Floyd’s murder; our goal is to complement rebuilding efforts by expanding access to affordable homeownership and wealth building opportunities in these neighborhoods.

We are grateful to have an amazing core group of partners who have worked with us to develop this concept and are critical to implementing this collaborative strategy: Hope Community, Build Wealth Minnesota, Model Cities, Land Bank Twin Cities, Greater Minnesota Housing Fund, Minnesota Home Ownership Center, and HousingLink. We look forward to building partnerships with more community organizations, local developers, lenders, financial educators, and municipal partners to advance this strategy and help us scale this work. Please contact Sarah Berke to learn more about partnering with us!

In 2020, the Building Equity in Small Multifamily Ownership initiative received a $4 million, three-year grant from the JPMorgan Chase AdvancingCities Challenge to pilot this work in Minneapolis. In 2021, the Bush Foundation generously matched this with another $4 million grant to expand this work to Saint Paul and suburban communities in the Twin Cities metro region. The initiative also receives support from the F.R. Bigelow Foundation, Minneapolis Foundation, Saint Paul & Minnesota Foundation, and individual donors. We are immensely grateful for this generous support.

This program in the news

• Building equity in small multifamily housing (Finance & Commerce, 6/08/22)
• Minneapolis group awarded $4M for equity efforts (Finance & Commerce, 9/22/20)
• Chase Bank’s journey from Wall Street to Ventura Village (Twin Cities Business, 9/22/20)
• JPMorgan Chase celebrates new community branch, $4 million grant for affordable housing (Star Tribune, 9/21/2020)
• Minneapolis receives $4 Million in JPMorgan Chase’s AdvancingCities Challenge as bank showcases new, innovative branch in Ventura Village (JPMorgan Chase, 9/21/20)
• Chase Bank opens branch aimed at helping south Minneapolis community (FOX9, 9/21/20)
• Join the conversation with #BuildEquityMSP and help us create a more equitable Twin Cities region!

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