While the severe lack of affordable and accessible housing has hurt Californians across the board, communities of color have been the most impacted. Black and Latino households are rent burdened at much higher rates than white households, and own their homes at more than 20% lower rates than Whites.
In many cases, the systemic racial inequities that have contributed to these trends– including historic housing and banking discrimination, and pay inequality–have also prevented diverse business owners from being able to secure construction, design, engineering and other contracts to build affordable housing.
Even as California deploys an unprecedented amount of money into housing development to address our 2.5 million home shortage, businesses owned by people of color do not have equitable opportunities to benefit from this investment.
Barriers to accessing capital stemming from entrenched and historical racism leave diverse businesses at a competitive disadvantage when working to secure funding and bid for contracts. Loan denial rates for diverse firms can be 2-3 times higher than those of White firms, and they often pay higher interest rates and are approved for smaller loans.
In order to improve racial and economic equity in contracting opportunities spurred by state investment, while scaling the volume of firms needed to meet affordable housing development goals, state policies need to intentionally uplift and invest in firms owned and led by people of color.
The lack of diversity in the affordable housing development sector (and generally in the construction industry) hurts more than just the businesses denied contracts. It has also resulted in less affordable housing being built in diverse communities, which in turn reduces opportunity for residents and contributes to lower rates of homeownership among Blacks and Latinos.
Compared to White owned and operated construction and professional services firms, firms led by people of color are more likely to hire locally and employ more diverse staff, allowing the money invested in those firms to turn over several times back into the communities with the greatest need. Diversifying the pipeline of people who share in the revenue from public investment in housing is a critical way to increase wealth in historically disadvantaged communities.
Sidelining diverse firms and contractors also limits our ability to develop the housing our state urgently needs. Nurturing diverse construction and professional services firms and ensuring they have fair access to contracts and opportunities to grow will help increase the volume of available firms needed to address the housing crisis.
Ultimately, uplifting diverse firms and workers will help our state more rapidly increase the annual number of homes built in California, while also financially empowering communities of color that have long been shut out of paths to upward mobility and prosperity.
This year, in partnership with these communities and organizations serving them we have introduced AB 2873, which will promote supplier diversity in the affordable housing industry by requiring developers to share data on supplier demographics. Having accurate and up-to-date data is the first step in making thoughtful, intentional decisions about how to overcome barriers to an equitable economy and sculpting future policy that will increase supplier diversity. These are necessary steps to help ensure businesses and firms led by people of color have equitable access to housing development opportunities.
As we continue to tackle our housing crisis, working towards a more inclusive California will require more than just financial investments–we must intentionally direct a fair share of those resources to the communities that need them most.
This includes working to make sure that diverse firms in the affordable housing industry have fair and equitable access to those contracts and revenues. AB 2873 will blaze a trail for diverse businesses in California to see equal, improved investment, redistributing wealth towards communities most in need.
Assemblymember Reggie Jones-Sawyer represents the 59th Assembly District including the neighborhoods of South Los Angeles, Florence-Firestone, Walnut Park, and a portion of Huntington Park.
Tunua Thrash-Ntuk is CEO & President of The Center By Lendistry, a nonprofit providing business resources for small businesses in underserved communities. She serves as a board member or advisory board member for many entities, including Federal Home Loan Bank San Francisco’s Affordable Housing Council, Housing California, and Greenlining Institute.