A Strong Rule and Reforms Are Needed to Combat Payday Loans

Posted by Josh Silver on October 20, 2016

Something astonishing happened when the Consumer Financial Protection Bureau (CFPB) asked the public for comments on its proposed rule to curb high-cost and abusive payday loans. The CFPB received 1 million comments, which does not happen too often for regulatory proposals, but the stakes are high. Consumer and community groups mobilized because abusive payday and other small dollar consumer lending create debt traps for modest income borrowers, especially people of color. The payday loan industry mobilized as well because reasonable curbs on small dollar lending threatens to eat into their exorbitant profits earned by high fees and repeat borrowing.

Payday loans are usually for a few hundred dollars and typically cover emergency expenses such as medical or auto repair costs. They are typically due upon the borrower’s next paycheck. The difficulty is that borrowers often cannot repay the entire amount when their next paycheck arrives and thus must borrow more, racking up high fees. The CFPB documents that 75 percent of all payday loan fees are from borrowers who take out more than 10 loans a year. In addition to payday loans, the CFPB proposal covers other small dollar loans such as car title and high-cost installment loans. These loans are also traps: 80 percent of all car title loan revenue comes from borrowers taking out more than 7 loans a year.

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Gramm Wrong, Again, on CRA

Posted by Gregory Squires on October 18, 2016

In an effort to undercut future public investment in the nation’s infrastructure, Phil Gramm, former chair of the Senate Banking Committee and currently with the Swiss bank UBS, once again trots out the long discredited notion that the recent financial crisis was caused by the Community Reinvestment Act and other federal efforts to encourage lending to credit-worthy borrowers in traditionally underserved markets. In making this connection, he claims, “The U.S. and Europe are lowering capital standards for ‘investments’ in public infrastructure-ignoring the lessons from 2007-08.”

Some arguments apparently never die, no matter how much evidence contradicts them.

In his Wall Street Journal op-ed, “The Subprime Superhighway,” Gramm asserts “President Clinton’s financial regulators used the CRA to force banks to make subprime loans.” But, as has frequently been reported, the Federal Reserve found that just 6 percent of high-priced loans (a proxy for subprime loans) were CRA related. The Fed also found that the delinquency rate of CRA related loans was less than half the rate for all loans in lower-income neighborhoods. In other words, it was loans made by lenders not covered by the CRA that created the crisis.

Gramm also claims HUD used CRA “to force Fannie Mae and Freddie Mae and banks to serve government goals” by purchasing loans in underserved communities. But Fannie and Freddie did not start buying subprime loans until 2006, long after the crisis was underway. And, of course, the CRA was enacted in 1977, long before the Great Recession. In fact, as Fed researchers concluded, “the current best evidence suggests that the CRA was not a significant contributor to the financial crisis.”

Hopefully, stronger—and more accurate—evidence than this will be used to determine public infrastructure investment activity.

(Photo credit: FarTripper, via flickr, CC BY-NC-ND 2.0)

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How Could Homelessness Have Barely Budged During the Recession?

Posted by Judy Perlman on October 14, 2016

FACT: Rates of homelessness in the U.S. remained essentially unchanged between 2008-2012. This is surprising indeed, especially against the backdrop of a recession that had its origins in the housing market, and in which tens of thousands of homeowners lost their homes. 

Evan Horowitz made an important contribution to the conversation, “Does poverty drive homeless rates? Not so fast,” in The Boston Globe this past August. He analyzes multiple datasets and suggests that homelessness is not indexed to poverty rates, as one might assume, but rather to housing costs. It turns out that homelessness is actually lowest in some of the poorer areas of the country such as Mississippi and Alabama; and homelessness stays high and gets higher in red-hot housing markets. He draws the conclusion that the plummeting costs of housing opened up lower-rent stock during the economic recession, and the mechanisms of the market did the rest. 

However, another factor in the story of the recession and its non-rise in homelessness also warrants exploration: the federal government’s intervention.

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Stopping Declining Homeownership Requires More than Affordability

Posted by Doug Ryan on October 13, 2016

According to recent research, the availability of starter and "trade-up" homes is in the midst of a four-year decline, which, at least in most markets, shows little evidence of abating. (Trulia defines starter homes as those priced in the bottom third of the market and trade-up homes as the middle third.)

Homeownership rates continue to tumble from their 2005 perch of about 69 to less than 63 percent. The rates for African Americans and Latinos have settled in the mid-40 percent range.

This problem may get worse. A forthcoming paper by Arthur Acolin, Laurie Goodman, and Susan Wachter suggests that as California goes, so goes the nation. California, for many reasons—not the least of which is housing costs—has had in recent memory a homeownership rate considerably lower than that of the rest of the nation. According to the most recent data, California’s rate continues to decline. At 53.4 percent, the state now has the second-lowest rate of homeownership in the country (after New York). Acolin and his colleagues suggest that the factors that influence California’s low homeownership rate may drag the rest of the nation to the low 50s by 2050. One major reason, these authors argue, is the shortfall of production—300,000 fewer units than household formation in 2014.

A shortage of all homes impacts the likelihood of new homeowners. Fewer for-sale and rental homes, of course, raises prices, excluding families from the homeownership market. Meanwhile, the tight rental market eats up the cash that could otherwise be set aside for downpayments. And of course, not all markets are the same. The great variation among metropolitan areas is significant, and while prices in some markets have vaulted well past their previous highs, other have still not recovered. Dallas and Denver, for example, are up at least 30 percent above their July 2006 highs, yet much of Florida’s homeownership market remains stagnant.

Each of these market dynamics impacts the availability of homes for new buyers.

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The ‘Filtering’ Fallacy

Posted by Peter Cohen on October 12, 2016

The rationale behind recently-proposed “solutions” to the housing affordability crisis that seek to reduce limits and regulation on high-end housing development policy is the theory of Filtering. According to filtering, maximizing the supply of housing at the high-end of the market will eventually result in housing that “trickles down,” with reduced prices to meet all affordability needs. This theory relies upon the deregulation of the real estate market, through actions such as eliminating local development approval processes, eliminating requirements on developers to contribute to infrastructure or affordable housing, or easing restrictions on demolitions of existing housing.

But, as the head of the California State Buildings Trades Council pointed out recently in the Los Angeles Times, “We have found the history of mass deregulation in America doesn’t work well for working people.”

Understanding why deregulation policies like the "by-right" one proposed by California Governor Jerry Brown (Streamlining Affordable Housing Approvals), which would ease the zoning approval process for housing developers and other market-based solutions, won’t actually make housing more affordable requires a closer examination of the filtering theory. If you haven’t heard of filtering, have no fear–the Council of Community Housing Organizations has created an info-graphic (below) that breaks down the basics of filtering, the assumptions behind it, and the reasons it doesn’t work the way some say it does.

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#Renters Day of Action—Our Demands

Posted by Malcolm Torrejón Chu on October 10, 2016











Last month, on Sept. 22nd, renters took to the streets in 19 states and 52 cities for the national Renters Day of Action (RDA) to declare a national Renter State of Emergency. The uprising was the largest mobilization of renters for housing and economic justice in recent history. Thousands filled the streets, packed city halls, confronted landlord lobbying associations, marched on slumlords, and took the fight to the doorsteps of eviction courts.

“There is a national housing crisis facing renters,” says Dawn Phillips, executive director of Right to the City. “In nearly every state, evictions and rents are rising. One in four families pays 50 percent of their income on housing. In every community and at every level of government, the ability of renters and working families to thrive must be a central racial and economic justice issue of our time.”

The RDA was organized by the national Homes For All (HFA) campaign, a project initiated by the Right to the City Alliance and was conceived at the HFA #RenterPower2016 convening in Chicago in April.

“In Chicago, two things became clear,” explains Bárbara Suárez Galaeno of the Autonomous Tenants Union in Chicago. “First, organizing mass numbers of renters and people impacted by the housing crisis to defend against displacement must be central to our organizing. Second, the time is now to demand bold and transformative solutions to the crisis. The current system is failing our communities. Only a full overhaul of the system of land and housing will allow us to secure homes for all people.” 

Building off of this call for mass organizing and bold demands, organizers of the RDA initiated a process to develop demands with renters and organizers across the country under the following criteria:

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NIMBY, or Not? What’s Going on in New York City?

Posted by Benjamin Dulchin on October 6, 2016

Housing policy practitioners outside of New York City are often surprised that our local struggles are, compared to other parts of the country, less likely to be dominated by NIMBY (Not in My Backyard) fights against affordable housing. When talking with their national counterparts, New York practitioners are often asked, "so, what euphemism do you use in place of actually calling it 'affordable housing?'" They’re surprised to hear that we frame our demand for affordable housing as "affordable housing" because in most of the city's neighborhoods, that term isn’t generally seen as a dirty word or code for racial, ethnic, or immigrant diversity that white communities might oppose. Maybe this is because New Yorkers are used to a relatively integrated experience of the city, or because our affordability crisis is so wide that almost everyone can see themselves as a victim of it, or because activist movements have long made affordable housing a central focus of their fight for equity. Of course, this isn’t to say that there are not sometimes ferocious NIMBY fights, but they have not dominated the political discourse in a while. 

Recently, Mayor Bill de Blasio’s ambitious affordable housing policy goals have generated some high-profile community struggles that have raised the specter of wider NIMBY influence. Some of them may indeed be rooted in NIMBYism, but most are not, and instead swirl around the legitimate tension that arises in applying the mayor’s new Mandatory Inclusionary Housing policy in neighborhoods that are concerned about displacement. One example is a recent decision by a local city council member to block a vote on the proposed Sherman Plaza housing development in the Inwood neighborhood of Manhattan, an early test-case for the mayor’s new policy.

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The Danger of Middle-Income People Feeling the Affordability Crisis

Posted by Miriam Axel-Lute on October 4, 2016

The housing affordability crunch is being felt by ever more people. As this year's State of the Nation's Housing report found:

While the share of renters facing cost burdens has risen across all income groups, nationwide, burden rates for renters earning $30,000 to $45,000 per year actually increased more rapidly over the past decade than rates for those with lower incomes. This trend is particularly strong in high-cost metros. In the 10 highest-rent metros, renters with incomes between $45,000 and $75,000 per year have an average cost burden rate of 49 percent.

While housing instability isn't good for anyone, many of us were hoping there could be a substantial silver lining to this more broadly shared pain—that there would be broader understanding of the need to increase the affordable housing supply everywhere. We hoped that the cause would no longer be so easy to write off by a comfortably, affordably housed majority.

And there are some signs that is true. The most recent How Housing Matters poll on affordable housing showed strong acknowledgement of the problem and dramatic support for government action on it:

Nearly two-thirds of adults (63 percent) believe actions can be taken to solve housing affordability problems, and a significant majority (76 percent) believes it is very important (60 percent) or fairly important (16 percent) for their elected leaders in Washington to do so. The view that affordable housing should be a priority among policymakers is strong across the political spectrum—from most Democrats (88 percent say it is very/fairly important for leaders to act) to three-fourths of independents (75 percent) to a solid majority of Republicans (62 percent).

In recognition of this, states and localities have been stepping up even while the federal government's response is largely held hostage to an austerity mindset in Congress.

Unfortunately, a ballot proposition out of San Francisco shows us how this swell of interest could go very, very wrong—if it's used to co-opt, rather than increase, scarce affordable housing resources.

As Tim Redmond at 48 Hills describes:

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How *Not* To Do Economic Development

Posted by Alan Mallach on September 29, 2016

Camden is one of the most distressed cities in the United States, and if any city needs state help to build its economy, it’s Camden. While the state of New Jersey has responded, the way it has done so adds up to one of the most egregious examples of misuse of economic development incentives in recent memory. At the same time, it offers some useful lessons for thinking about urban economic development, especially about a concept that people working in this field don’t think about enough—opportunity costs.

New Jersey has created what it calls the Grow NJ program, a suite of incentives to encourage corporations to move into or stay in the state. It targets certain areas, with the most generous incentives offered for companies to stay in or move to the state’s four poorest major cities: Camden, Trenton, Paterson, and Passaic. So far so good.

Under this program, New Jersey has given out $1.1 billion in tax incentives to 16 companies in the city of Camden since late 2013. Five account for $900 million of this total, as shown in the table below. All are major, well-heeled corporations. With the exception of EMR, which is a scrap metal facility already located in Camden, all of the companies were already operating in nearby suburbs. The businesses are being paid nearly $400,000 per job, on average, to move operations 5 or 10 miles into new buildings in Camden, along with creating a few additional jobs once the companies relocate.

What’s wrong with this picture?

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A New Perspective on Housing Tenure

Posted by Jake Wegmann, Alex Schafran and Deirdre Pfeiffer on September 27, 2016

Those of us who work in housing and housing policy know how complicated housing tenure can be. The most common forms of tenure, which describes the legal status under which people have the right to occupy their accommodation, are homeownership (both owned outright and mortgaged) and renting (which includes public and privately rented housing). Even something as seemingly straightforward as owning a house is not that simple. Depending on your mortgage, local and state laws, your cultural norms, whether your property is governed by a homeowners association, and the type of structure it is, the basic legal, economic, and even emotional nature of the relationship between a household and its house can be very different.

These subtle differences in housing tenure for homeowners become even bigger when one considers renting, condominiums, residential hotels, community land trusts (CLTs), etc. Despite its image as a “home owning” nation, the United States has an exceptionally diverse array of tenures, so we took a deeper look at the issue to estimate how many Americans live in different types of tenure, what existing housing tenures are supported and protected, which are risky, and what all this means for policy and politics.

The first step for us was moving beyond a one-dimensional view of tenure, which sees renting on one end, owning on the other end, and various hybrids in the middle. Not only does this view exacerbate tensions between housing advocates, it also misunderstands tenure. Instead of this one-dimensional view, we argue that tenure should be thought of along two dimensions: wealth-building and degree of control. Think of these as the financial and political aspects of living in a housing unit, respectively: how much wealth you could gain or lose as a result of living there, and the extent to which you get to decide whether and how to renovate, refinance, sublet, sell, move out, or make major decisions about how and if you live in your home.

One-dimensional views assume wealth-building and degree of control go together, and sometimes they do. An apartment renter will lack certain controls over how the building is run, and will certainly not benefit financially over the long term. By contrast, a single-family homeowner, especially one that is not part of a homeowners’ association, will have broad latitude over most decisions and in turn accepts the risks and benefits of the home’s changing value.

But in other cases, wealth-building and degree of control are decoupled rather than linked: for instance, the owner of a manufactured home in a typical manufactured housing community will have control over their home but will likely not benefit a great deal from it financially because they don’t own the land it rests on. Many nonprofit and alternative housing tenure facilitators offer what we call the “third way” (mutual housing associations, limited-equity co-ops, community land trusts), which present different mixes of control and wealth-building potential. Different legal arrangements in different cities and states—like rent-control and anti-eviction rules—change this mix.

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