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