BEYOND DOLLARS AND CENTS: NON-FINANCIAL IMPACTS AND IMPLICATIONS OF

THE FORECLOSURE CRISIS FOR LOW-INCOME MINORITY COMMUNITIES

Daniel Cooper Dissertation ProjectVanderbilt University

Do the efforts of community-based organizations (CBOs) produce more stable low-income homeowners?

What are the psycho-social impacts of neighborhood foreclosures for non-homeowner populations?

How might neighborhood foreclosures affect the decisions of aspiring low-income homeowners?

Exploring “Community of Choice”

What is the future viability of hardest hit urban communities?

Structure of Presentation

Context: Disparate impacts of the foreclosure crisis

Research questions

Examining past CBO homeownership efforts

The next generation of low-income homeowners

Conclusion and Implications

Disparate Impacts of the Foreclosure Crisis Chicago foreclosure rate in 2007 was 5 times greater for

predominantly minority areas (Smith & Duda 2008)

Racial segregation has also been shown to be a large contributor to the foreclosure crisis (Rugh & Massey, 2010).

African Americans more likely to be in subprime market (Gerardi & Willen, 2009; Gruenstein-Bocian, Ernst, & Li, 2008).

Negative home price impacts are greatest in areas with higher proportion of minority populations (Sumell, 2009)

Disparate Impacts of the Foreclosure Crisis Much longer absorption time of foreclosures in

minority areas (Immergluck & Smith, 2006).

The longer property sits vacant, more deterioration (Mallach, 2006; 2010).

Areas with high foreclosure experience greater crime (Immergluck & Smith, 2006).

Aside from crime, stigma effect at work (Apgar &Calder, 2005) .

Homeownership as means of stabilization

Social Benefits of Homeownership

Homeowners more active, invested, engaged (Rohe et al., 2002)

Low-income home owners have larger networks, satisfaction (Manturuk et al., 2010).

Possibility of improved neighborhood quality (Santiago, Galster, Kaiser, Santiago-San Roman, Grace, & Linn, 2010

Homeownership and Neighborhood Confidence

Neighborhood confidence thought to be a key component of stabilization and revitalization (Varady, 1986)

Linked to:

Quality of the built environment (Taylor, Shumaker, & Gottfredson, 1985)

Perceptions of safety and incivilities (Brown, Brown, & Perkins, 2004)

Decisions to stay versus move out of a neighborhood (Taylor et al., 1985).

CBOs and Pathways to Stable Low-Income Homeownership

Pre-purchase counseling associated with lower default rate (Hirad & Zorn, 2001)

Community Land Trusts (Thaden & Rosenberg, 2010)

Individual Development Account (IDA) programs (Rademacher, Wiedrich, McKernan, Ratcliffe, & Gallagher 2010)

Longitudinally, IDA participants no more likely to still be in their home (Grinstein-Weiss, Sherraden, Gale, Rohe, Schreiner, & Key, 2011).

Non-Financial Impacts

Well-Being

Experiencing a foreclosure is known to cause severe psychological distress (Pollack & Lynch, 2009)

Impacts ripple out to social networks (Saegert et al., 2011)

Less research on non-homeowner populations, particularly low-income renters

Low-quality housing and neighborhood linked to depression and anxiety (Macintyre, Ellaway, Hiscock, Kearns, Der, & McKay, 2003)

Housing and health linked in a bi-directional manner (Easterlow, Smith, & Mallison, 2010)

Psycho-Social Constructs: Sense of Community

Sense of Community (McMillan & Chavis, 1986) Membership Influence Integration and Fulfillment of Needs Shared Emotional Connection

Linked to:

Neighborhood and political participation (Perkins & Long, 2002; Speer & Hughey, 1999)

Mental well-being, psychological empowerment (Peterson, Speer, & McMillan, 2008)

Perceptions of neighborhood problems can reduce SOC (Bogat, 1999)

Social Capital/Social Networks

Sense of community and social networks inextricably linked (Bothwell, Gindroz, & Lang, 1998).

Linked with neighborhood stability and revitalization (Temkin & Rohe, 1998; Saegert & Winkel, 1998)

Neighborhood bonding is thought to be a precursor to successful low-income homeownership (Brisson & Usher, 2007)

Low-income homeowners have larger social networks (Manturuk, Linblad, & Quercia, 2010).

Study Model and Questions

Research Question 1: Past CBO efforts

Do place-based CBO homeownership efforts contribute to stability and homeowner resilience, even in the presence of high foreclosure rates?

Research Question 2: Aspiring Low-Income Owners

How do surrounding neighborhood foreclosures impact neighborhood confidence? Do psycho-social processes mediate the relationship between neighborhood foreclosures and neighborhood confidence?

Social networks; Sense of

community

Neighborhood confidence

Neighborhood problems

Question 1: Examining Past CBO Low-Income Homeownership Efforts

Setting: Chicago’s West Garfield Park

Disparate Impacts of the Foreclosure Crisis in Chicago

Data and Methods

Longitudinal examination of CBO low-income homeownership efforts 1996-2008

Property and loan history of buyers (N=99) compared with a random matched community sample on following:

Usage of “likely subprime or non-traditional” purchase loan

Leveraged refinancing Subprime refinancing Foreclosure filing Foreclosure filing with ownership exit Still in home through 2011

Results of CBO homeowners vs. random sample

Results of CBO homeowners vs. random sample

Results of CBO homeowners vs. random sample

Results of CBO homeowners vs. random sample

Results of CBO homeowners vs. random sample

Question 2: Aspiring Low-income homeowners, psycho-social processes, and neighborhood confidence

Research Question 2: Aspiring Low-Income Owners

How do surrounding neighborhood foreclosures impact neighborhood confidence? Do psycho-social processes mediate the relationship between neighborhood foreclosures and neighborhood confidence?

Social networks; Sense of

community

Neighborhood confidence

Neighborhood problems

The Next Generation of Low-Income Homeowners

How important are neighborhood foreclosures to aspiring homeowners?

How do perceptions of neighborhood foreclosures, crime impact neighborhood confidence?

Are these perceptions mediated by psycho-social processes?

Do perceptions of foreclosures / crime match actual neighborhood conditions?

The Next Generation of Low-Income Homeowners

Surveys collected in 2011 (N=200) at homebuyer workshops in Chicago

Response rate of 68%

73% African American; 21% Latino

88% renter

67% female

82% Household Income <$60,000

Median number of vacant homes (2009-2011) within 1/10 mile = 5

Survey Locations

Respondent Locations

Results: Should I stay or should I go?

53% would like to purchase a home in their current neighborhood

Reasons:

Generally like or identify with the community = 38% Social/Family ties = 26% General Location / Proximity to amenities = 20% Quiet / Peaceful = 16% Transportation = 13% Proximity to work = 11% Neighborhood environment = 10% Crime/Safety = 10%

Results: Should I stay or should I go?

47% would like to purchase a home elsewhere

Reasons:

Crime / Safety = 25% Desire better neighborhood / Complaints about current

environment = 24% Affordability / Value / Feasible homeownership elsewhere = 13% Proximity to work = 12% Desire a location with more amenities / resources / space = 11% Just desire a change = 9% Identify with different type of neighborhood/community = 8% School quality = 8% Too noisy = 7%

Mediation: Multiple OLS Regressions

Multiple OLS Regression: Neighborhood Confidence

Predicting Neighborhood confidence: Step 1: Demographics Step 2: Perceptions about neighborhood

foreclosures Step 3: Perceptions about neighborhood crime Step 4: Sense of community and neighborhood

satisfaction

Social networks; Sense of

community

Neighborhood confidence

Neighborhood problems

Multiple OLS Regression: Neighborhood Confidence

Perception that foreclosures are getting worse important, but…

Perception that crime is getting worse is actually the stronger explanatory variable

Sense of community and neighborhood satisfaction strongest predictors

Multiple OLS Regression: Sense of Community

Step 1: Demographics Step 2: Perceptions of neighborhood foreclosures Step 3: Perceptions about neighborhood crime

Social networks; Sense of

community

Neighborhood problems

Multiple OLS Regression: Sense of Community

African Americans report less SOC Perceptions of neighborhood crime = reduced

SOC Perception foreclosures are getting worse =

reduced SOC

Partial Mediation Effect: Sense of Community

1) perceptions that foreclosures have gotten worse in past two years (negatively) predicts sense of community,

2) sense of community predicts neighborhood confidence, and

3) the effect of foreclosure perceptions on neighborhood confidence is reduced when including sense of community in the model.

Sense of Community: Spatial Differences

Hierarchical Linear Models to test Geographic Variation

Hierarchical Linear Models to test Geographic Variation

Neighborhood Confidence does not vary across geographies:

Sense of community does (12% of variance found across geographies)

Hierarchical Linear Models to test Geographic Variation

Main effect: Percent of vacant homes negative predictor of sense of community

Discussion and Conclusion

Key Findings

CBO homeownership efforts can make a difference in producing more stable homeowners

Examining foreclosure outcomes longitudinally exposes just how insidious the crisis is for low-income minority communities. 18% of the CBO sample and 47% of the random sample eventually experienced a foreclosure

How aspiring homeowners perceive neighborhood foreclosures is important, but how they perceive neighborhood crime is even more important.

People evaluate their neighborhoods dynamically—perceptions that crime and foreclosures are getting worse is most important

Actual neighborhood foreclosure rate and perceptions that they are worsening are associated with a decrease in sense of community, which partially mediates neighborhood confidence

Key Findings

However…

Foreclosures are not mentioned as one of the most important factors in prospective homebuyer location choice. Sense of community and social ties within a neighborhood are noted to be important in open ended items.

Only 24% of aspiring homeowners who expressed a desire to move mentioned foreclosures as a reason

Sense of community is the strongest predictor of neighborhood confidence, suggesting that community-building strategies could be just as important as bricks and mortar development for stabilization efforts

Strengths

Multi-faceted examination of hard-hit areas that incorporates both the supply side of affordable housing (CBOs) and demand side (aspiring homeowners), as well as very low-income renters

Mixed-methods approach

Limitations

Small sample size in each of the studies

Inability to control for other potential predictors of housing outcomes in CBO inquiry

Small number of level-1 N and level-2 geographies in multi-level models

Looking quantitatively at one disadvantaged neighborhood fails to capture the impact of inequality on general well-being

Implications for Practice: Placemaking Paradigm

Ultimately, the foreclosure crisis is a continuation of policies and market forces that continue to strip the most vulnerable of the right to place

Paradigm shift needed in neighborhood stabilization that directs more resources toward building communities rather than just rehabbing homes.  

Building civic capacity and sense of community not just as a route to individual wellness but as a precursor for resistance to market forces that continually extract wealth from the most vulnerable housing niches

CBOs can play a strong role in establishing a right to place, but it is hard to imagine broad impact without structural changes

Implications: Research

More qualitative studies needed to fully unpack the impacts and meaning of the foreclosure crisis for all populations within hard-hit communities

Further research is needed to examine how CBOs can successfully build cohesion and community in vulnerable communities