We Need to Open Better Pathways to Homeownership for Gig Economy Artists and Freelancers
Millennials live differently than previous generations of Americans. We stay single longer. More of us have student debt and are self-employed, freelancers, and members of the growing gig economy. According to Randstad’s research on the workplace, more than half of Americans will be self-employed by 2025. More than 40% of gig workers will be millennials, a figure that will likely grow given the size of the generation and its youth. Millennials are the largest demographic in American history. We are the future.
Like previous generations though, we still want to own homes to build equity and to close the wealth gap. So you would think that mortgage lenders would be updating their guidelines to reflect this giant shift, developing new ways to support freelancers who want to become homeowners instead of holding them to the same standards of W-2 employees — most notably predictable income levels. In reality, I found the opposite in my recent experience trying to buy a house in Boston, as a gig economy employed millennial. My struggle in trying to obtain a mortgage says we still have a lot of work to do.
I knew Boston was a tough town to buy a place to live when I started looking in late 2017. The average prices for condos and single family homes are between $500k to almost a million, a rate that had more than doubled from when I left Dorchester for college in 2006. It’s hard to save enough for a down payment, at least not without a lot of help from family. But the current market is particularly hard for millennials, Americans aged 23 to 38 this year.
I should know. I knew the odds were not in my favor as a single millennial woman and artist of color, yet I wasn’t easily deterred by roadblocks. I spent most of my 20s getting my finances in shape in order to qualify for a mortgage. I moved back in with my parents in Dorchester, my home community, after finishing graduate school, to keep my expenses low, allowing me to save more. I am a working artist, but I also have a day job to make sure I have a regular income. When I decided to start the home-buying process, I had a credit score of 783, enough saved to put 10% down on a place in my price range, plus money for all the extra incurred costs like insurance and fees. And I was pre-approved for a loan. I was relieved. Most properties in Boston are taken off the market after a week and are usually purchased by cash buyers, investors, and/or individuals with high incomes — none of which apply to me.
Still, it took me six months, more than a dozen bids, and two loans pulled from approval at the last minute. One loan was through a first-time home buyers program that initially miscalculated my income — it turned out I made slightly over the required income to qualify for it — and the other claimed to be uncomfortable about my “work history being an artist and community activist.”
I was fortunate to have a good mortgage lawyer, who told me to appeal to a supervisor at the second bank. After a week of back-and-forth, in which I provided a more detailed work history, and agreed to a higher down payment, my application was approved. I felt vindicated yet also incredibly frustrated at how complicated the whole process was! I felt the loan should have already been approved in the first place. The fact that I had told the loan officer that I would not give up quietly made me wonder whether that was the tipping point to get treated fairly with the bank. Why was it so difficult for me to buy a house?
I questioned whether the results would have been different had I been a White candidate or with a partner with a second income. Around the same time, in February 2018, Reveal from the Center for Investigative Reporting released Kept Out, a special report which demonstrated the common discriminatory practices by financial institutions to prevent people of color from owning homes.1 I couldn’t help but feel a direct connection to their conclusions. Could the bank be denying me because I was a person of color, single, and from a working-class artist community? After all, the rejection rates for Black, Latinx, and Asian people are much higher than that of White people according to reporting by the Washington Post on home loan applications.2
Rebecca Steele, CEO of the National Foundation for Credit Counseling, concurred that my experience reflects a more challenging market for my generation in the traditional banking system than our predecessors. Not only do we stay single longer, more of us have student debt, and we significantly more likely to be self-employed members of the growing gig economy.
Most banks prefer buyers with traditional W-2 salary because it implies a more stable income stream than those who are self-employed or freelancers who may have fluctuating incomes. There are Fannie Mae and Freddie Mac guidelines that recommend taking a two-year work history or average of schedule C income for loan applicants who are self-employed. But, Steele says the two-year measure is challenging for freelancers, because their pay can be irregular. As an artist, I go through periods of time where I do not receive the commissions or grants I am hoping for and some clients haven’t paid me on time.
Steele recommends that lenders adapt to the changing workforce in several ways; they need to create more expansive guidelines to support those who have 1099-MISC incomes, or those who have multiple income streams. She also advocates for families and young people to start building credit and utilizing financial best practices early to prepare for homeownership. The City of Boston could help too — I went through the city’s approved first-time homebuyer course, and while it was helpful, it lacked curriculum and resources for self-employed and freelance workers. The city runs Metrolist that shares housing resources and has some programs in place to help with affordable housing such as a first-time homebuyer mortgage, down payment support, and affordable condo lotteries. These programs are extremely competitive and often do not reach historically disadvantaged communities, nor those who may speak different languages.
I’d like to see the city create specific policies and incentivize financial institutions to encourage homeownership among millennials and freelancers, especially artists and cultural workers. Perhaps designate more housing and workshops specifically for artists, lessen the requirements for stable income documentation, and provide grants plus interest-free insurance to support freelancers with down payments. And, as we know, discrimination still runs rampant in home buying. Governments need to stay vigilant about protecting vulnerable communities — BIPOC folks, immigrants and refugees, people with disabilities, and gig economy workers, to name a few — from such practices. A major investigative report found that in many cities, lenders still discriminate against people based on their skin color, their marital status, occupation, or zip code. Boston was not on the list of cities, but only because of lack of data. As a young Vietnamese American woman, I did beat the odds and fortunately, I was able to get my loan approval in the end. But, I worried that the mortgage process might be stacked against me the entire time.
Boston’s future will be diverse and homeownership should be accessible for those who do not fit the archaic model profile of what lenders consider desirable. In fact, if things don’t change, future homes will be predominantly owned by large companies, White families, or those with immense generational wealth. Thus, financial institutions and home loan providers need to start adjusting to changing demographics. Furthermore, why shouldn’t preference be given to local homebuyers who want to remain in their communities? This would help reduce gentrification and displacement that is rapidly taking place in Boston and beyond.
As many cities and towns in the United States are undergoing rapid development and the housing crisis is growing, more practices need to be in place to support individuals and families who do not fit the typical profile of the “ideal” homebuyer. According to the Creative Count Survey 3 conducted by the New England Foundation for the Arts (NEFA), “Creative workers are much more likely to be self-employed. A quarter of all creative workers and a third of core artist occupations are self-employed compared to only 10% of all workers.” This finding is further supported by the 2018 By Artists, for Artists Report,4 which states that 19.4% have freelance income. Does that mean that many creative and freelance workers will be left out of the home buying process if they do not fit the ideal profile? If so, this is unacceptable when so many cities tout the fact that the creative industry makes cities attractive to residents and visitors and brings in substation revenue.
Buying a house is a major decision but it is intensely more difficult than it needs to be. And it bodes poorly for the future. If a significant percentage of millennials’ employment is within the gig economy — whether freelancers, artists, or otherwise — making us unfit for homeownership based on the characteristics of previous generations, options looking ahead are bleak. What will happen to future housing markets and local communities if residents cannot get loans?
Our economy has been shifting to include more innovation and entrepreneurship, so these loans criteria and programs should be updated to reflect the shift, too. Let’s figure out new ways to support those who participate in the gig economy to becoming homeowners instead of holding them to the limited standards of W-2 employees. For financial institutions and home loan providers, I recommend creating guidelines for those who have 1099-MISC incomes and being more opened to those who fall outside of the traditional 9–5 jobs. For cities and towns, I urge officials to put in place more policies and programs to truly support self-employed and freelance workers.
Homebuyer programs should consider those who make their living in the gig economy as viable homebuyers and home loan providers should update their practices to lend to this client-sector. Otherwise many young entrepreneurs and creatives, including people of color and those from working class communities, will fall through the cracks and not be able to live in places where the cost is continually on the rise.
I am a proud homeowner now, in the neighborhood where I grew up and want to remain. It would not have happened if I hadn’t been able to push back against a system that was not properly set up to support people like me, even as I had meticulously tried to prepare myself for success. I can’t help but think about other people who have been turned down and denied the opportunity of homeownership. If English is not your first language, how would you go about fighting back? If you don’t have advocates, like my loan officer or real estate attorney, who will question and hold the financial institutions accountable in their decisions?
Ultimately, we must open more doors to those who work in the growing gig economy instead of closing them if we, as a country, claim to be truly the land of opportunity.
NOTES
Aaron Glantz and Emmanuel Martinez, “For people of color, banks are shutting the door to homeownership,” in Kept Out from Reveal, from the Center for Investigative Reporting, February 15, 2018. https://revealnews.org/article/for-people-of-color-banks-are-shutting-the-door-to-homeownership/
Kenneth R. Harney, “Large numbers of loan applications get denied. But for blacks, Hispanics and Asians, the rejection rate is even higher.” The Washington Post, May 23, 2018. https://www.washingtonpost.com/realestate/large-numbers-of-loan-applications-get-denied-but-for-blacks-hispanics-and-asians-the-rejection-rate-is-even-higher/2018/05/22/dac19ffc-5d1b-11e8-9ee3-49d6d4814c4c_story.html
THE JOBS IN NEW ENGLAND’S CREATIVE ECONOMY AND WHY THEY MATTER, Produced for the New England Foundation for the Arts By the Economic and Public Policy Research Group of the UMass Donahue Institute, June 2017. https://www.nefa.org/sites/default/files/documents/NECreativeJobsMatter_Web.pdf
By Artists, For Artists Makers & Creative Entrepreneurs: A survey of Massachusetts artists, makers, and creative entrepreneurs, Massachusetts Artists Leaders Coalition and Artmorpheus, 2018.
