Washington’s down-payment assistance program for people who faced racial housing discrimination can stand for now.
A federal judge dismissed a lawsuit against the program Tuesday, marking a win for the state but offering the groups fighting the program two weeks to refile their case and try again.
The legal battle stems from an effort that has helped hundreds of homebuyers of color across Washington in its early months of operation while also drawing conservative scrutiny. The outcome of the lawsuit will decide whether Washington can proceed with the novel program amid a broader pullback from diversity programs.
Washington lawmakers created the Covenant Homeownership Program in 2023, offering zero-interest loans to cover down payments and closing costs for certain first-time homebuyers of color who meet income and other requirements. A fee on recorded real estate documents funds the program, which began issuing loans last summer.
The loans are open to first-time homebuyers who lived in the state before the Fair Housing Act outlawed housing discrimination in 1968 or whose parents, grandparents or great-grandparents lived in the state at the time if the person who lived in the state was Black, Hispanic, Native American, Alaska Native, Native Hawaiian or other Pacific Islander, Korean or Asian Indian.
Starting next month, buyers earning up to 120% of area median income in their county can qualify for the program, up from 100%. To pay for the home itself, buyers must qualify for a primary mortgage under typical lending standards.
The nonprofit Foundation Against Intolerance and Racism sued to block the program last year, arguing it illegally leaves out white homebuyers and others who don’t qualify. The group advocates against diversity, equity and inclusion efforts and reportedly received early funding from Republican donor Harlan Crow.
In legal filings, FAIR said it represents people who would qualify for the assistance if they were a different race, focusing on a white woman the case refers to as “Member A.” The rules amount to an “inability to compete on equal footing for a loan” for her and other would-be buyers, FAIR claims.
The lawsuit named Steve Walker, head of the Washington State Housing Finance Commission, who sought to have the case dismissed.
United States District Judge John Chun sided with Walker Tuesday, finding FAIR had failed to provide enough evidence that the homebuyers it represents would have met all the other qualifications for the program. In particular, the main home shopper referenced in the case did not show she had qualified for one of the mortgages that can be used alongside the down-payment assistance.
The groups challenging the program now have until July 8 to file an updated complaint responding to the judge’s concerns.
A spokesperson for the Housing Finance Commission welcomed the court’s decision.
FAIR and its lawyers are “assessing the court’s opinion and how best to respond,” said Chris Barnewolt, an attorney with the Pacific Legal Foundation, a conservative law firm that often focuses on property rights and is representing FAIR.
“Washington’s assistance to first-time homebuyers should be based on need — not on race,” Barnewolt said in an email. “It is wrong and unconstitutional for the government to give benefits to individuals of some racial backgrounds while denying those benefits to others.”
FAIR will “continue to fight for that in Washington,” he said.
The state defends the racial criteria, pointing to its array of race-neutral down-payment assistance programs.
Lawmakers created the program “to serve the needs of first-time homebuyers whose families were deliberately shut out of homeownership in the name of segregation,” the Housing Finance Commission said after FAIR initially filed its lawsuit.
Discrimination against Black people and other people of color was widespread in housing markets all over the country in the first half of the 20th century. Racially restrictive covenants often said homes could only be sold to white buyers; others banned Black buyers, Jewish people and other racial groups by name.
Today, racial gaps in homeownership persist. While more than two-thirds of white Washingtonians own their homes, that rate is only about one-third for Black residents, half for Hispanic residents and about 63% for Asian residents. And the lack of homeownership contributes to broader economic disparities: Households of color in the state have a median net worth of about $68,000, compared to $286,000 for white households.
A state-commissioned study last year analyzed which racial groups continue to show notable gaps in homeownership or “are still being impacted most deeply” by the covenants and other forms of discrimination. That analysis shaped the program, including which racial groups qualify.
