the housing crisis, foreclosure and race: impacts and challenges
TRANSCRIPT
Department of City and Regional Planning, The Ohio State University
Columbus, OH, December 5th 2008
THE HOUSING CRISIS, FORECLOSURE AND RACE:IMPACTS AND CHALLENGES
Jason Reece, AICP
Senior Researcher
Kirwan Institute for the Study of Race & Ethnicity
The Ohio State University
Race and the Credit, Housing, Foreclosure Crisis
Race, community development and the crisis, where are we now? Trends, numbers and impacts
How did we get here? From redlining to reverse redlining Global phenomena and disparate outcomes
What’s next? Systemic problem, requires complex solutions Deflecting attacks on equitable policies From crisis to opportunity?
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Housing and Neighborhood Revitalization: What are the Challenges?
Housing Challenges
Challenges Pre-existing
Affordability Concentration
Subsidized Housing Affordability Steering & Discrimination
Lending From Redlining to Reverse Redlining
New Foreclosure Epidemic
More to Come The Future: A New Wave of Redlining
Neighborhood Revitalization Challenges
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o General Issues/Concerns in all Projectso Common challenges
o Concentrated poverty, limited opportunity, disinvestmento Larger market forces are critical
o Movement back to the city; gas prices and urban living (+)o Housing market trends & foreclosures (-)
o Geographic context is criticalo Both within the city and when thinking about the region
o Language, Framing and Definitions are Importanto Avoid the terminology-concept of gentrificationo We still need to define successful (and equitable)
revitalization
Neighborhood Revitalization Challenges
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o General Issues/Concerns (continued)o Limited public resources
o Must be strategically usedo Must catalyze private investment/individual
actiono Social/Organizational/Human capital critical
o Neighborhood leadership and technical capability
o Issues outside of the direct influence of neighborhood planning are criticalo Public safety (crime) and educational
opportunity
Neighborhood Revitalization:Challengs and Opportunities
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o General Issues/Concerns (continued)o A
combination of elements provide the best opportunity for revitalization
Neighborhood
Revitalization
Housing Stock
Public Investme
nt
Geography (Local; Regional)
Larger Market Forces
Neighborhood
Leadership
Institutional
Partners
Anchor Institutio
ns
Emerging Challenges
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The escalation of the national housing/foreclosure crisis is going to create new challenges in many of these neighborhoods. Hitting “on the
fence” neighborhoods
Undermining re-investment/spurring vacancy
Undermining community organization/capacity
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Foreclosure Trends
Foreclosures in U.S. by Loan Type: 2006 – 2008
0
2
4
6
8
10
12
1Q06 2Q06 3Q06 4Q06 1Q07 2Q07 3Q07 4Q07 1Q08
% o
f Loan
s in
Fore
clo
su
re
Subprime FHA VA All Loans Prime
Source: Mortgage Bankers Association, National Delinquency Survey, First Quarter 2008.
Institutionalized Disinvestment: Redlining Map of Philadelphia
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From Redlining to Reverse Redlining:A historical view of redlining zones in
Philadelphia and areas of foreclosure in minority
communities.
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0.0%
10.0%
20.0%
30.0%
40.0%
50.0%
60.0%
70.0%
80.0%
Hamtramck Eastpointe HarperWoods
Melvindale Pontiac Ecorse RiverRouge
Inkster Detroit HighlandPark
Foreclosure Rate Vacant Residence Rate High Cost Loan Rate
High Cost Loans & Vacant Residences for Cities with the Highest Foreclosure Rates in the Detroit MSASource: HUD
The Result
Surge in foreclosures Nearly 900,000 homes repossessed by banks in just the last
12 months; more than 80,000 in September 2008 More than 265,000 foreclosure notice filings in September
2008 alone At least 7 million homeowners now owe more than their homes
value A global crisis with racially disparate impacts
Nearly half of all subprime loans went to African American and Latino borrowers
“Equity Rich, Cash Poor” – less than 10% of subprime went to first time homebuyers and half of subprime loans were for refinancing
People of color were 30% more likely to receive subprime 30% of subprime borrowers qualified for prime loans
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Baltimore: Foreclosure & Race/Income
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Cleveland: Foreclosure and Race - Same Trends
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Maps: Produced and adapted from Charles Bromley, SAGES Presidential Fellow, Case Western University
Connecticut
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Columbus
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The Impact of Concentrated Foreclosures in a neighborhood
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Foreclosures pull wealth/equity and assets out of the neighborhood
Widespread displacement of renters, homeowners which rips the neighborhood’s social fabric and creates instability for school age children
The growth of vacant property encourages crime, disinvestment and public safety risks
Challenges which eventually ensnare all residents (even those who were never foreclosed upon)
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The High Cost of Foreclosure
Source: “Sheltering Neighborhoods from the Subprime Foreclosure Storm.” Special Report from the Joint Economic Committee. April 2007.
Slide Adapted from Presentation by: Solomon Greene, Open Society Institute, Neighborhood Stabilization Initiative
Impacts
Communities of color further inundated with vacant properties
Mortgage applications for African Americans and Latinos dropped approximately 40% from 06 to 08 Compared to 19% for White’s
African American and Latino homeowners are expected to lose more than $250 trillion in assets due to the crisis Compounding the existing 900% racial wealth gap Research in Boston has identified additional “asset stripping”
for borrowers of color who are drawing down 401K accounts and other savings to avoid foreclosure
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More than Just Foreclosures and a
Few Bad Borrowers:
Understanding the Credit Crisis Impact in Communities of
Color
Why Were Subprime Loans Concentrated in
These Neighborhoods?
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Why is the growing foreclosure problem causing problem in communities of color?
-Lenders targeted communities of color with subprime loans
-Lack of load information or understanding for consumers in many of these communities
-Communities were historically starved of credit
-Mortgage securitization and the growth of the subprime industry created incentives to target new markets with mortgages
Institutionalized Disinvestment: Redlining Map of Philadelphia
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Foreclosure Outlook: Rate Resets
Source: Credit Suisse
Monthly Mortgage Rate Resets (in billions of dollars)
Slide Adapted from Presentation by: Solomon
Greene, Open Society Institute,
Neighborhood Stabilization Initiative
The Credit and Foreclosure Crisis
The current global credit and national foreclosure crisis is a powerful example of our interconnected world Securitization and the growth of global
investment capital fueled poor lending behavior Which caused a surge in foreclosures, an
unstable housing market Producing negative impacts on the local,
national and global scale A two way relationship – global economic
activity impacts us; we impact the rest of the world
A paradigm shift Risk becomes a public burden Profit is distributed privately (and globally) How do we do community development in a
global economy? Where forces outside of our control may impact our communities?
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Opportunities Amid Crisis
What is the response? Crisis – danger and opportunity The Housing market and neighborhoods
will be reshaped Are neighborhood interests/urban interests
taking part in that reshaping (have a seat at the table)?
Are we planning for the future are acting in “triage” mode?
Small Scale and Big Picture Issues Many Important Issues
Strategically using HUD money? Still need for foreclosure prevention
But we also need to think big picture How can we reshape neighborhoods? How can we use this crisis to address future
affordable housing challenges? What are strategies for assuring sustainable credit
and credit providing institutions are offered and active in these communities (prevent another era of redlining)
Look for strategic action points, leverage actions and resources
What’s Next? (Big Picture)
Systemic problem, requires complex solutions Need more than just changing Wall Street, we also must provide
funds for communities, while changing the rules which produce disparate lending outcomes
Deflecting attacks on equitable policies Attacks on CRA and first time homebuyer programs are misguided
and inaccurate A response should not starve communities of color of sustainable
credit options From crisis to opportunity?
Can the federal government utilize its new leverage over Fannie and Freddie to provide more sustainable credit (expanding scope of the Fair Housing Act)
New federal resources to confront the long term vacant property challenge facing urban communities?
Can the challenge open new affordable housing opportunities (in the long term)
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Questions or Comments: [email protected]
For more information about the racial impacts of the foreclosure crisis, visit our convening web site at:
http://www.kirwaninstitute.org/events/archive/subprime-convening/index.php
To Learn More about the Kirwan Institute: www.kirwaninstitute.org