More than 100,000 renter households currently unable to afford to buy a home could do so with down payment assistance of $10,500 or less.

As part of our ongoing efforts to reduce our state’s racial homeownership gap, the Minnesota Homeownership Center partnered with Minnesota Realtors®, a statewide trade group, to commission a research study on the potential impacts of various amounts of down payment assistance (DPA) on household ability to purchase a home. Funding for the study was provided by the National Association of Realtors®. Although low and moderate income households and communities of color face numerous obstacles to achieving homeownership, a lack of capital for down payment is arguably the most significant financial barrier as many households have sufficient income to support a mortgage, but not the upfront capital for the down payment.

The report’s findings were encouraging. After accounting for renter households already able to afford a home purchase, access to down payment assistance could enable more than 200,000 additional households to purchase a home. More than 100,000 of these could do so with less than $10,500 in assistance. With regard to the racial homeownership gap, transitioning just 11,600 Black renter households to homeownership would increase the Black homeownership rate by ten percent – a significant gap reduction.

The study concludes: In all, well-designed and implemented DPA programs could significantly improve access to homeownership and, ultimately, increase homeownership levels in Minnesota. However, with the growing cost burden of housing, and the limited availability of homes for sale, DPA alone may not be sufficient for many households. Instead, complementary programs targeting credit accessibility, as well as policies to promote housing affordability more broadly, and increased housing supply in particular, will likely also be necessary to comprehensively tackle all three of the major roadblocks to homeownership in Minnesota [lack of sufficient down payment capital; limited supply of affordable housing; access to adequate capital].

A press release on the report is accessible here, with the full report linked here. We look forward to sharing these findings broadly with policymakers and others.