Biden's big jobs plan will actually hurt low-income and minority Americans' chances of owning a home

— 42.3% of Black families own homes compared with 72.2% of white families. The Biden plan would only widen this gap.

Home buyers can pay as little as 3% of a home purchase price as a down payment. But for those who supply less than 20%, mortgage insurance must be purchased to protect lenders against a borrower defaulting. But private mortgage insurers must have sufficient financial strength to withstand the inevitable peaks and valleys in the cyclical housing market. Since the 2008 financial crisis, new regulations have required insurers to maintain sufficient capital levels to survive another downturn.

Insurers have strengthened their capital base by purchasing reinsurance — insurance for insurance companies. Think of it like a financial shock absorber that spreads risk globally and acts as a bulwark against crippling losses from catastrophic events. Reinsurance is so important for mortgage insurers that in 2020, US insurers shared more than

of their mortgage insurance risk with non-US sources. Bermuda reinsurers alone, for example, accounted for just over 50% of such cessions.This is where the American Jobs Plan enters the picture. First, it wouldfrom 21% to 28%. Second, it would impose a global minimum tax rate that dilutes the benefits of Bermuda reinsurance. For mortgage insurers, this will inevitably lead to higher prices.

These actions seem far upstream from the average home buyer, but the effects will trickle down quickly. A higher corporate tax rate for mortgage insurers will eat into their profits. To recoup these lost dollars, they will raise required mortgage insurance rates for all home buyers who put down less than 20%. Simple financial modeling suggests that rates could rise by approximately 10% overall, a significant increase for borrowers, pushing homeownership further away for those of lesser means.

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