State's Covenant Homeownership program aims to close wealth gaps; presenters cite early results and legal risks

The Seattle City Council's Housing, Arts and Civil Rights Committee heard a briefing March 25 on Washington State's Covenant Homeownership program, a race-conscious special-purpose credit program designed to remedy harms from historic racially restrictive covenants and other state policies.

The program, run by the Washington State Housing Finance Commission, was created under legislation signed in May 2023 and funded by new real-estate recording fees first collected in January 2024. Lisa DeBROCK, the commission's homeownership director, told the committee the program provides a zero-interest down-payment assistance loan of up to 20% of a home's purchase price, capped at $150,000 plus customary closing costs, repayable on sale. She said the program launched in July 2024 and "has thus far helped 1,259 families throughout the state with their purchase of their first home," adding that 76 of those closings were in the City of Seattle with an average loan amount "just over $130,000." (Lisa DeBROCK)

Committee members sought context on how the program works in high-cost markets. Councilmember Lin asked how households "make it pencil" in Seattle; DeBROCK said multiple layers of assistance are typically required in expensive areas and encouraged pairing the state program with local counseling and other aid.

Morgan Williams, senior counsel for the firm that prepared the study the legislation required, summarized the research and legal framework that underpins a narrowly tailored, race-conscious Special Purpose Credit Program (SPCP). Williams said the study documents the state's historic role in discrimination, analyzes persistent disparities in homeownership and lending, models alternative program designs, and recommends a targeted SPCP to more efficiently remediate wealth and credit gaps.

Williams also cautioned that the program operates in a legally fraught context: "That is a kind of nuanced analysis that the courts have essentially established as needing to be undertaken in instances where a public entity would engage in a race-conscious activity," Williams said, and noted a lawsuit challenging the program remains pending; a request for a temporary restraining order to freeze the program was denied and the program continues to operate.

The presenters highlighted program features beyond eligibility and design: the study recommended customized DPA amounts adjusted by county housing prices and household income, and the commission adopted provisions allowing loan forgiveness after five years for borrowers at or below 80% of area median income under specified criteria. DeBROCK said the commission tracks participant race per lender reporting and warned that that reporting reflects the primary borrower recorded by lenders and does not necessarily enumerate every household member.

Councilmembers pressed for more granular evidence on several points. Councilmember Rinck asked about appraisal disparities; presenters pointed committee members to the published study (they cited charts beginning at page 71) and offered to follow up with the requested data.

The briefing closed with Chair Dionne Foster encouraging Seattle colleagues to study the state process as an example of research-to-policy translation and thanking the presenters for their work.

Next steps: Councilmembers and staff signaled interest in follow-up details on appraisal analyses and on how local programs can layer assistance to improve access in high-cost neighborhoods.

Sources: Presentation by Lisa DeBROCK, Washington State Housing Finance Commission; remarks by Morgan Williams, study counsel; Covenant Homeownership Act and the study commissioned under that Act (presenters' slides and remarks).