Week 221 in Detroit. This week flew by. Get it. Cooper’s Hawk. Flew by. No, seriously, though, I cannot believe the week is over. I think talking about the subjective experience of time is kinda like talking about the weather. It’s a shared experience that is relatively safe ground for polite conversation. So, it’s probably not that interesting or surprising to learn how fast this week seems to have gone.
One of the things I’ve been working on all Summer is affordable housing, specifically black homeownership in America.
My team has the responsibility for strategy & innovation of new mortgage & credit products. This includes buying a home, especially first-time home buyers, and barriers to homeownership. Black homeownership had been steadily falling to the point where the overall percentage of black homeowners in America was the same as the rate in 1965. White homeownership is about 73% and Black homeownership is 44%.
Eligibility for a mortgage, meaning being able to afford a home, is the largest component to homeownership. Finding a home you can afford, once you can afford it, is the next step. These days neither step is particularly easy. Increasing cost of education and the use of debt, like student debt, has made it more difficult to qualify relative to incomes which have remained flat, making it hard to save for a down payment. The two-headed challenge of debt and down payment is in addition to the requirements of a certain FICO score.
FICO is tough because even if your score is highly enough to qualify — 580 and above for FHA or 620 and above for Conventional loans — the cost on the lower qualifying FICOs is significant. This is supposed to make up for the increased risk of those with lower FICO scores in paying back debts. The unfortunate part is the models have struggled to keep up with changing consumer trends and behavior, at least in the mortgage industry, and the catch-22 of FICO is that you must have credit/debt in order to get a score but as soon as you have it, the slightest misstep in how much or how it’s repaid and the score is impacted (sometimes quite a lot).
This is all before you can go shopping or put an offer in on a new house.
Once a potential homeowner is shopping, good luck. Seller’s in most markets are finding that homes are receiving dozens of offers in the first few days many at or above asking and many for cash. Contingent offers are not viewed as reliable despite the actual transaction not being that much faster with a cash buyer. One crucial aspect of the financing, however, is the appraisal. Appraisals always pose additional uncertainty in the mortgage process and financed offers suffer.
Now, these things — debt, income, FICO, home shopping — are difficult for all new and first-time homebuyers. What has had an outsized effect on black renters and potential home owners in this country are the additional structural issues that have continued to segregate neighborhoods and opportunities.
There remains a large group of white Americans (voters) who do not see place as determinative of equal opportunity. The sense seems to be — this is America, you can be anything you want to be. The sentiment, while inspiring, is an illusion. Because it is true or has been true for a small group of people, we apply the rule to everyone.
My Dad and I have saying we picked from sharing some podcast along the way. I’m not sure if it was Tim Ferriss or one of his guests, but once we heard this idea, we kept it and made it our own. We like to say that my goal for my career is to increase the surface area by which luck can stick.
If you apply that concept to economic opportunity, consider it for black America.
Is it possible to imagine a narrow path to overcoming the structural barriers and achieving extraordinary career and economic success?
But what do the patterns and statistics tell us about the likelihood.
The data shows that education funded by property taxes disproportionately hurts urban communities because the resources per student are dramatically different.
The data shows that high school educational experience naturally limits or opens opportunities for higher education.
We know that for-profit educational experiences — technical, trade, associate’s degrees — open to everyone — tend to require more debt and the type of debt that’s harder to repay as it does not result in as high income. Access to higher educational opportunities determine both short-term and lifetime income potential.
The data shows that homeownership is a goal and seen as attainable if someone had parents who owned a home.
Navigate that and there are hiring challenges. Bias is real.
Even if you haven’t experienced it personally or don’t want to believe it, look at the data — patterns and statistics. Based on hiring and, most importantly, retention in corporate America, the surface area for some to get lucky (or have multiple chances at an opportunity) is different for others. That is clear.
Secure the job, manage the debt, save some money, and there are still a bunch of unknowns to accessing financial services like an affordable home.
Now, this is the struggle every young person.
Imagine having to do everything on that list perfectly or in such a way that you cannot afford a second chance. It’s a single elimination tournament for some Americans, black and brown Americans, and not others, mainly white guys.
You may read this as white guilt but that’s not how I see it at all.
I see it as a recognition of the size of the surface area by which luck can stick to me versus a 37-year old black man born and raised in Detroit.
What was the size difference in the surface area of opportunity?
Calls for equal opportunity have actually been drown out by calls for public safety. Black Lives Matter is not even asking for equal economic opportunity which we all recognize as complex and difficult. BLM is starting with equal opportunity to avoid physical barriers, literal barriers to advancement. Physical safety. Even that, apparently, is controversial.
The reality is that it’s not that controversial.
It’s a step-by-step approach to increase the surface area by which luck or opportunity can stick.
Step 1 — be alive. Step 2 — avoid harassment, avoid false or petty accusation that sees black America as criminal. Step 3 — recognize structural and economic issues as relevant to productivity of ALL in our society.
I’m oversimplifying, of course.
But when the President tweets that white America should continue to be afraid and blind to the reality of low income housing challenges in this country and instead celebrate segregation — both racial and economic — it demands a response. Even if that response is a stupid little commentary from one guy in Detroit, I could not let it go.
I have been so lucky, so privileged, so fortunate that the feeling I have as I write this is not guilt — it’s love.
I am grateful and thankful for so many people in my life. My parents built a foundation that I could use as a launching pad. My high school advisors — Mr. Anderson and Mrs. Livermore — held me to a higher standard. My boss — Megan Guy (Gamse) — showed me what it meant to overachieve in my first job. Phil DeFronzo, the CEO of Norcom Mortgage & Insurance hired me out of law school and trusted me to represent his life’s work.
I am not guilty. I am loved. I am lucky.
I want as many people to experience this as possible.
How do we continue to increase the surface area by which luck can stick for the most number of people?
How can more people get more chances, more opportunity?
Is that too unreasonable a goal?
I say no.
This week I evaluated a number of ideas my team has created to address affordable housing opportunities. All new things are tough. Affordable housing is no different.
The status quo is powerful. (Just ask black America.)
My goal this coming week is being realistic about which ideas are most likely to actually happen, practically, but ensuring that whatever we select is based on increasing the potential for opportunity for the people most discriminated against by the status quo — black and brown Americans.
This DOESN’T mean there’s less opportunity for anyone else.
Increasing the surface area for one does not shrink it for someone else. That is actually the potential of America. But it only works if it’s intentional and we actually do it.
Without the intention, without the focus, our natural inclination is to hoard opportunity. It doesn’t even feel like limiting opportunity for others; it feels like protecting our own family or providing for our families.
But the reality is it is natural to try to grab as much safety and stability during normal times not to mention times of uncertainty.
The New Republic published an essay called “The Problem of the Not-Quite-One-Percent” addressing this. The idea is that while it’s true the 1% continues to amass incredible wealth (cite to Jeff Bezos increasing his wealth by $13B on a single day) that many wealthy Americans are walling off their economic interactions from the larger system as well.
And it’s “probably futile to insist that individual well-off families refuse to use the resources available to them — particularly at a time when the country feels as though it’s on the brink of free fall into deeper disaster.” The article goes on to say, “to a certain extent, the conditions that compel the upper middle class to double down on their comforts are the result of the ‘workings of a large machine,’ namely, an exploitative economy that necessitates winners and losers and a government that’s abandoned almost all of its obligations to help people.”
I’m sure many people reading this will immediately react to this as an affront to capitalism and from there we could quickly devolve into name calling — socialist! fascist! — and we’re off.
I see it differently.
I see it as a problem of choice. Capitalism is about creation of increasing choices. The market should maximize choice. At its most basic level, when choice is artificially or unfairly constrained, like in the case of monopolies, the government may step in to return choice-opportunity to the system. Yes, this is simplistic given how complex our system has become and how intertwined the government is with it.
Yet, I still believe that underlying our once Capitalist system is the ideal that we can have it all. That the result mentioned above does not need to be an exploitative economy.
I believe people actually do want to secure a safe future for their families without exploiting each other. If given the opportunity, if made a little bit easier, people will choose positive economic outcomes that also reinforce fairness and equality.
We struggle with the tools. We struggle, as a system, to make it easy to do that. It’s much easier to rationalize the status quo.
This week I came across 2 different lists of innovators — FastCompany’s list of 100 best places to work for innovators and VisualCapitalist’s top 50 most innovative companies of 2020.
I wonder how many are innovating on reengineering systems. On creating pathways and journeys to facilitate growth AND fair economic outcomes.
Innovation, not as a new product or service, but a new way of problem solving altogether.
This blog post on HelloFuture.co summed it up perfectly — why aren’t banks working to serve solutions instead of complete tasks? In the post, the author argues that banks should be more concerned with creating opportunities and solutions than scrambling to react once a client raises their hand. I could not agree more.
Making it just a little bit easier for people to the right thing, the fair thing, the beneficial thing.
For all of us.
Now for a small distraction: Here’s Thrillist.com’s top 50 Movie Soundtracks.
Quote: “I am happy to inform all of the people living their Suburban Lifestyle Dream that you will no longer be bothered or financially hurt by having low income housing built in your neighborhood…Your housing prices will go up based on the market, and crime will go down. I have rescinded the Obama-Biden AFFH Rule. Enjoy!” — President Donald Trump, July 29, 2020.
Continued success and continue to answer well,