Addressing Appraisal Gaps and Expanding Access to Small Dollar Mortgages

Homeownership holds substantial promise as a strategy to promote health and racial equity. Owning a home can provide individuals and families with residential stability and the opportunity to build wealth. However, despite its potential benefits, homeownership has remained out of reach for many low- and moderate-income families and people of color. 

 Abt’s recent project, Using Homeownership to Advance Health and Racial Equity, explores a wide range of policies, programs, and actions that can expand access to affordable, sustainable homeownership opportunities for these communities.  The project produced four policy briefs as well as a landscape analysis and summary of recommendations. These materials explore options for making homeownership more accessible and beneficial, which can help policymakers, advocates, researchers, and other stakeholders better understand the barriers to homeownership in their communities and identify action steps for addressing them.

This brief focuses on strategies for addressing the appraisal gap and expanding access to small-dollar mortgages---two barriers to home purchase in neighborhoods with lower-cost homes. Homes that cost less than $100,000 are an important source of unsubsidized affordable housing, especially in legacy cities and rural areas with soft housing markets. These homes offer an opportunity for low-income buyers to enter the market, and can help catalyze investment in economically distressed neighborhoods. However, opportunities to purchase lower-cost homes are limited by challenges to accessing financing for small-dollar mortgages, and by a gap between the costs of purchasing and renovating an older home and the appraised value of the renovated home. The brief discusses how innovative financing tools can overcome these barriers to facilitate the purchase and rehabilitation of lower-cost homes.