The Housing Crisis, Foreclosure and Race: Impacts and Challenges
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The Housing Crisis, Foreclosure and Race: Impacts and Challenges The Housing Crisis, Foreclosure and Race: Impacts and Challenges Presentation Transcript

  • THE HOUSINGCRISIS, FORECLOSUREAND RACE:IMPACTS AND CHALLENGESJason Reece, AICPSenior ResearcherKirwan Institute for the Study of Race & EthnicityThe Ohio State University Department of City and Regional Planning, The Ohio State University Columbus, OH, December 5th 2008
  • Race and the Credit, Housing,2 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?
  • Housing andNeighborhoodRevitalization:What are theChallenges?
  • 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 Revitalization5 Challenges o General Issues/Concerns in all Projects o Common challenges o Concentrated poverty, limited opportunity, disinvestment o 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 critical o Both within the city and when thinking about the region o Language, Framing and Definitions are Important o Avoid the terminology-concept of gentrification o We still need to define successful (and equitable) revitalization
  • Neighborhood Revitalization6 Challenges o General Issues/Concerns (continued) o Limited public resources o Must be strategically used o Must catalyze private investment/individual action o Social/Organizational/Human capital critical o Neighborhood leadership and technical capability o Issues outside of the direct influence of neighborhood planning are critical o Public safety (crime) and educational opportunity
  • Neighborhood Revitalization: 7 Challengs and Opportunitieso General Issues/Concer ns (continued) o A combination of elements provide the best opportunity for revitalization
  • Emerging Challenges8 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
  • Foreclosure Trends Foreclosures in U.S. by Loan Type: 2006 – 2008 12 10 % of Loans in Foreclosure 8 6 4 2 0 1Q06 2Q06 3Q06 4Q06 1Q07 2Q07 3Q07 4Q07 1Q08 Subprime FHA VA All Loans PrimeSource: Mortgage Bankers Association, National Delinquency Survey, First Quarter 2008. 9
  • Institutionalized Disinvestment:Redlining Map of Philadelphia 10
  • From Redlining to Reverse Redlining: A historical view of redlining zones in Philadelphia and areas of foreclosure in minority communities.11
  • High Cost Loans & Vacant Residences forCities with the Highest Foreclosure Rates inthe Detroit MSA 80.0%Source: HUD 70.0% 60.0% 50.0% 40.0% 30.0% 20.0% 10.0% 0.0% Hamtramck Eastpointe Harper Melvindale Pontiac Ecorse River Inkster Detroit Highland Woods Rouge Park Foreclosure Rate Vacant Residence Rate High Cost Loan Rate
  • The Result14  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
  • Baltimore: Foreclosure & Race/Income15
  • Cleveland: Foreclosure and Race - Same Trends16 Maps: Produced and adapted from Charles Bromley, SAGES Presidential Fellow, Case Western University
  • Connecticut17
  • Columbus18
  • The Impact of ConcentratedForeclosures in aneighborhood 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 19 eventually ensnare all residents (even those who were never
  • Slide Adapted from Presentation by: Solomon Greene, The High Cost of Foreclosure Open Society Institute, Neighborhood Stabilization Initiative20 Source: “Sheltering Neighborhoods from the Subprime Foreclosure Storm.” Special Report from the Joint Economic Committee. April 2007.
  • Impacts21  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
  • Why is the growing foreclosure problem causing problem in communities of More than Just color? Foreclosures and a -Lenders targeted Few Bad Borrowers: communities of color with subprime Understanding the loansCredit Crisis Impact in -Lack of loadCommunities of Color information or understanding for consumers in manyWhy Were Subprime of these communitiesLoans Concentrated in These -Communities were historically starved Neighborhoods? of credit -Mortgage securitization and the growth of the subprime industry created incentives 22 to target new markets with mortgages
  • Institutionalized Disinvestment:Redlining Map of Philadelphia 23
  • Foreclosure Outlook: RateResets Monthly Mortgage Rate Resets (in billions of dollars)Source: Credit Suisse Slide Adapted from Presentation by: Solomon Greene, 24Open Society Institute, Neighborhood
  • The Credit and Foreclosure25 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?
  • 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 PictureIssues 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)28  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)
  • To Learn More about the Kirwan Institute: www.kirwaninstitute.orgFor more informationabout the racial impactsof the foreclosurecrisis, visit our http://www.kirwaninstitute.org/events/archivconvening web site at: e/subprime-convening/index.php Questions or Comments: Reece.35@osu.edu