Opportunity for All: Inequity, Linked Fate and Social Justice in Michigan Conference

Detroit, MI January 30th 2008

Transforming Communities:The Dynamics of Race, Class and Housing OpportunitiesWorkshop Series 1

Jason Reece, AICP

Senior Researcher

Kirwan Institute for the Study of Race & Ethnicity

The Ohio State University

Reece.35@osu.edu

Transforming Communities:The Dynamics of Race, Class and HousingOverview of today’s workshop: Part 1: Thinking About The Future of

Housing Why focus on housing? What are the challenges? How do we respond?

Part 2: Dialogue What are the priorities? What should the advocacy response be? How do we move these ideas into actions?

Why Focus on Housing?

Why Focus on Housing?

Housing is more than just shelter in our society Housing is the gateway to opportunity

Wealth Neighborhood Stability Access to opportunity

Schools Employment Safety Health Wealth

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Opportunity Matters: Opportunity Matters: Housing, Neighborhoods & Access to Housing, Neighborhoods & Access to OpportunityOpportunity

Five decades of research Five decades of research indicate that your indicate that your environment has a environment has a profound impact on your profound impact on your access to opportunity and access to opportunity and likelihood of successlikelihood of success

High poverty areas with High poverty areas with poor employment, poor employment, underperforming schools, underperforming schools, distressed housing and distressed housing and public health/safety risks public health/safety risks depress life outcomesdepress life outcomes A system of A system of

disadvantagedisadvantage Many manifestationsMany manifestations

Urban, rural, suburbanUrban, rural, suburban

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Which school will children succeed in?Which school will children succeed in?

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Which community has better economic Which community has better economic

prospects?prospects?

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Which community is safer and supports Which community is safer and supports positive health outcomes?positive health outcomes?

Housing and Opportunity

Housing

Childcare Employment

Education

Health

Transportation

Effective Participation

Housing and Social Justice

Because of its significance, housing can be either a gateway to opportunity or barrier to opportunity for people Representing a critical intervention point for those

pursuing civil rights, social justice and equity Housing acting as a gateway

Integration into areas of opportunity, home equity (asset accumulation), stable and health neighborhoods

Housing acting as a barrier Segregation and isolation into neighborhoods of

disadvantage, vacant properties destabilizing neighborhoods, stripping wealth through foreclosure and neighborhood decline

Social Justice and Housing:

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

Subsidized Housing Policies

DiscriminatoryAnd Unfair Lending

A Housing MarketThat Does Not Serve

the Population

Racial SteeringAnd Discrimination

ExclusionaryZoning

Social Justice and Housing: A Web of Challenges

Housing Challenge

s

Racial Steering in Detroit

New Challenges: The Foreclosure Epidemic The foreclosure problem is really a credit

problem From redlining to reverse redlining

Why? The impacts More to come?

Institutionalized Disinvestment: Redlining Map of Philadelphia

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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 49,000 active foreclosures in Wayne County (Source: HUD) More than 80,000 residential addresses vacant for 90 days

or more in Wayne County (Source: HUD) Nationally 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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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 Lo

an

s i

n F

ore

clo

su

re

Subprime FHA VA All Loans Prime

Source: Mortgage Bankers Association, National Delinquency Survey, First Quarter 2008.

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 loan 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

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)

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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8 0 8 16 Miles

N

EW

S

Growth of Vacant Housing in Detroit 1970-2000(% Vacant Housing in 1970 and 2000)

% Vacant 1970

% Vacant 2000

% of Homes Vacant0 - 33 - 1010 - 1515 - 2020 - 57.6

CountiesHighwaysCity of Detroit

Prepared by: Kirwan InstituteSource Data: U.S. Census Bureau

Legend:

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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

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More to Come? (Mortgage 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

Opportunities Amid Crisis: How do we respond?

Opportunities Amid Crisis

What is the response? Crisis – danger and opportunity The Housing Market will be Reshaped

The social justice community must take part in that reshaping (have a seat at the table)

Make housing and housing policy fit your goals of equity and integration with opportunity

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? (National)

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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Part II: Dialogue What are the priorities? What are the goals? What responses are needed to address

these priorities and fulfill these goals? Small scale and big picture Strategic intervention points

Steps to bring these ideas to action? Power analysis – who needs to be brought to

the table? First steps….

Opportunity for All: Inequity, Linked Fate and Social Justice in Michigan Conference

Detroit, MI January 30th 2008

Questions or Comments: Reece.35@osu.edu

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