In LA, A New Resource to Pull Families Back From the Financial Brink

Posted by Bob Annibale on June 29, 2016

When it comes to household finances, “just getting by” is a difficult and dangerous place for a family to be.

Regardless of income level, a family that is just getting by is locked in a state of stress and vulnerability. The threat of serious financial consequences, such as badly damaged credit, or a nearly inescapable cycle of accruing debt is just a broken-down car or house repair away. The family is unable to build a safety net or save for future goals like college education or homeownership.

This kind of financial fragility goes by another name: liquid asset poverty. And it affects nearly half of all households in Los Angeles County–just under five million residents–according to FamilyAssetsCount.org, a project of the Corporation for Enterprise Development and Citi Community Development.

These “liquid asset poor” households lack sufficient savings to sustain more than three months at the poverty level in the event of an unexpected shock to income. More than one in every ten LA County households do not have a bank account; another twenty percent are “underbanked,” meaning they don’t make use of traditional credit products. As a result, they may resort to alternative–and often predatory–forms of credit, such as payday lenders.

The task of overcoming such an immense and complex set of challenges demands a comprehensive approach that brings together the strengths and expertise of the public and private sectors around innovative, community-based solutions for enabling vulnerable Angelinos to strengthen their financial security.

Last week marked a significant step in that direction.

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Why Can’t Harlem Stop Gentrification?

Posted by Randy Shaw on June 24, 2016

In his May New York Times editorial, "The End of Black Harlem," Michael Henry Adams portrays the historic African-American community as moving inevitably toward gentrification.

He cites the familiar signposts—a Whole Foods market, “stroller pushing young families,” and “new landscaping and yoga studios”—as well as more nefarious indicia such as white resentment over blacks living in “non-eviction co-op conversions” at a fraction of the current market price.

Adams, a longtime preservation activist, Harlem historian, and author of the award-winning book “Harlem, Lost and Found,” knows Harlem as well as anyone. But as I was reading his argument that Harlem’s upscale transformation is inescapable, I could not help but ask, why? Why has Harlem not enacted the critical protections that have prevented gentrification in other communities?

For example, Adams asserts that while Harlem has “miles of apartments,” they are “ripe for destruction and displacement by gleaming glass-cube condos.” Why are these apartments vulnerable? Did Harlem activists attempt to pass anti-demolition laws to protect the neighborhood’s rental housing stock long ago? If past efforts failed, what is stopping such laws from passing now?

I ask these questions because too often the gentrification of working class neighborhoods is  deemed “inevitable” when it is not. Just as gentrification is often promoted by upzoning and other city laws, communities can pass measures to prevent or at least slow this process.

This sense of the “inevitability” of gentrification resonated with me because I have heard the same comments made about San Francisco’s Tenderloin neighborhood since the early 1980’s.

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True Financial Capability Requires Expanding the Definition of Wealth

Posted by Brent Kakesako on June 23, 2016

What is productive agricultural land and clean water worth? What are strong communal relationships worth? What is a clear connection to heritage, to culture, to past, to future, and self, worth?

As I read CFED's new book What It’s Worth, I asked myself those questions—questions that families across Hawai‘i continually ask us in our work as community practitioners. These are deep questions, and while these families understand the need to be financially capable and literate, they also push us to expand our definition of wealth and worth.

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The Real Reasons Affordable Housing Isn’t Being Built in California

Posted by Murtaza Baxamusa on June 21, 2016

The high cost of housing is one of the most challenging planning issues of our time. The meager supply of affordable housing is a major contributor to the problem, yet the policy tools to address the shortfall often seem to worsen the problem. But this is because they ignore the underlying infrastructure and financing to support growth.

Housing affordability is really about two things: income and cost. The building industry is doing very little about the former, oftentimes opposing prevailing wages for construction workers. On the latter, the key question (being debated in California now) is whether deregulation of market rate housing projects will somehow “trickle down” to households, enabling them to afford rising rents and mortgages.

The supply-side perspective, espoused by the state’s Legislative Analyst Office (LAO) suggests that the solution to containing housing costs is building 100,000 additional units annually. Given the LAO’s skepticism of affordability restrictions, the theory is that the housing bought by wealthier people will filter down to poorer people as the wealthy move up to more expensive housing.

This trickle-down theory is very leaky. It depends on upward mobility in the middle class, and assumes that there are no foreign investors swooping in with hard cash and clogging up the filtration system. And even if it did occur, research by the Urban Displacement Project shows that the filtering process can take generations, whilst the properties deteriorate. The steeper the price increases, the slower the rate of filtration. Also, if wealthy buyers are willing to pay exorbitant sums for an old house in order to give it a pricey makeover, the theory is turned downside up. I’d call it "trickle-up."

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The Romance and Reality of the New Financial Technology (Fintech) Companies

Posted by Josh Silver on June 16, 2016

Technology is enticing. It's fun. It can make life easier. With a click of a button, consumers can purchase items instantaneously and have them delivered within hours to their doorstep. But in the lending industry, can technology and online platforms thoroughly and quickly serve borrowers, or is it an inherently complicated business that requires care, deliberation, and a high-touch process?

Borrowing significant sums of money is a complex financial transaction. For many consumers, particularly low- and moderate-income consumers, it is the most complicated transaction they will ever undertake. Executed responsibly, lending can empower consumers and enable them to build significant equity. Executed irresponsibly, lending can result in financial ruination. And given its complexity, lending often requires significant amounts of counseling and underwriting to ensure that borrowers can afford the loan and make payments. A click of a mouse and fancy algorithms are often no substitute for patient counseling and careful underwriting, particularly for those unfamiliar with lending and not possessing an established credit history.

Recently, the federal bank regulatory agencies have been asking the public for comments on the role of technology in banking and whether the agencies should facilitate the development of so-called fintech companies that feature on-line applications for loans and other products. But before the agencies support fintech companies, careful research and assessment is necessary.

A recent Treasury Department paper examining online lending indicates that a key feature is loan approval within 48 to 72 hours. The allure of this feature has helped fuel a boom in the so-called “fintech” industry. In its white paper, the OCC estimates that fintech companies in the United States and the United Kingdom increased to number more than 4,000 and that investment in fintech companies has surpassed $24 billion worldwide. Fintech companies tout up-and coming-technology that appears particularly well suited to the Internet and digital proclivities of the Millennial generation now starting to enter their prime earning years and pursuit of homeownership.

Ominous signs, however, counsel caution regarding a regulatory embrace of fintech. 

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To Reduce Recidivism Rates, Turn to Housing Policy

Posted by Doug Ryan on June 15, 2016

A couple months ago here on Rooflines, I wrote about the value of addressing housing challenges that many former prisoners face upon release. Back then, it seemed that Congress might even pass bipartisan criminal justice reform. Sadly, that seems less likely now, but the need to confront the injustices built in to the system are no less urgent.

We have made some progress. HUD has prohibited housing providers from reflexively denying applicants with criminal records. Maryland, with a Republican governor and Democratic legislature, adopted moderate but meaningful reforms. And, perhaps most strikingly, courts in California and Michigan have ruled that residency restrictions that limit where or how close to a school a convicted sex offender can live violate state constitutions, and are too vague or otherwise fail to make sense. Last year, a federal judge ruled that Minnesota’s inability to find housing for offenders effectively extended their sentences illegally. In response to the California ruling, the state announced earlier this year that it would no longer enforce the blanket restrictions that have come to characterize so many of these state rules. Minnesota’s legislature may address some of its challenges in a special session.

Congress, in its 1998 Public Housing reform law, barred individuals on lifetime sex offender registries from federally assisted housing, an approach that at least offered some options to lower-level offenders. Yet far too many states have adopted one-size-fits-all policies that lump all classes of sex offenders together, despite study after study showing that these statutes are ineffective at best.

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Poetry Is Not a Luxury to Achieving Racial, Social, and Economic Equity

Posted by Jeremy Liu on June 13, 2016

In her essay, Poetry Is Not a Luxury, Audre Lorde, the Caribbean-American writer, poet, radical feminist, lesbian, and civil rights activist, describes an often overlooked yet necessary process in community and equitable development:

Poetry is the way we help give name to the nameless so that it can be thought. The farthest external horizons of our hopes and fears are cobbled by our poems, carved from the rock of experiences of our daily lives.

As they become known and accepted to ourselves, our feelings, and the honest exploration of them, become sanctuaries and fortresses and spawning grounds for the most radical and daring of ideas, the house of difference so necessary to change and the conceptualization of any meaningful action.

In defining poetry as vital to the human condition, Lorde reminds us that poetry is a step in the formation of ideas, rather than simply the expression of an already formed idea or feeling. Hopes and dreams are transformed into language, becoming coherent knowledge which can then catalyze action.

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The Costs of “Moving On”

Posted by Gregory Squires on June 9, 2016

In his recent New York Times op-ed, American Enterprise Institute president Arthur C. Brooks says declining mobility is a primary cause of the nation’s economic malaise. Among his suggestions, he writes that “we should reform place-based welfare programs to reduce the incentive to stay put. The social safety net should be designed to promote mobility and earned success, not to anchor people within struggling communities.” But in his simplistic paean to mobility he fails to acknowledge the devastating consequences often accompanying relocation.

Students who change schools underperform relative to similar classmates in similar schools whose school situation is more stable. Urban renewal and its progeny (e.g. many Hope VI projects) resulted in forced displacement undermining institutional connections, personal relationships, and other forms of social capital that nurtured prosperity in middle income minority neighborhoods and survival in poor ones. Gentrification perpetuates forced displacement and its many costs. In her book, Root Shock, Mindy Fullilove, professor of clinical psychiatry and public health at Columbia University observes that such displacement “destroys social, emotional, and financial resources and increases the risk for every kind of stress-related disease, from depression to heart attack.”

For those who want to move, particularly from high poverty to high opportunity neighborhoods, public policy and private practice should encourage such relocations. But those who want to stay put should have that option as well.

(Photo credit: Carl Wycoff, via flickr, CC BY 2.0)

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Millennials, Revisited

Posted by Alan Mallach on June 7, 2016

As both Joe Cortright of the City Observatory and I have written, Millennials—people who have reached adulthood since the beginning of the millennium—and their in-migration, are largely driving the changes that American cities are going through. More specifically, it is the ones with college degrees who are driving the change. That leaves a lot of questions, though, both about what’s currently going on and what’s likely to happen in the future. Two particular questions come to mind: first, where are they moving to, and how does that affect those places? And second, is this trend likely to turn into a tidal wave in the future, or ebb?

In attempting to answer the first question, I’m deliberately going to look not at the handful of "hot" cities, like San Francisco and Washington DC, but at the in-between cities, the ones that are also changing, but in more gradual and uncertain fashion.

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Did Amazon Really Just Create a Pop-up Homeless Shelter?

Posted by Keli A. Tianga on June 3, 2016

As cities around the U.S. scramble to figure out how to address the housing affordability crisis, one of them has now leaned on the benevolence of what some consider the least benevolent of them all.

Amazon, the world’s largest online retailer, declared Seattle (specifically its South Lake Union district) its new home several years ago, and began moving employees in last year. The corporation’s planned campus, to consist of three towers and at least 20 other office buildings, will bring more than 20,000 jobs to Seattle. Amazon’s presence has already propelled smaller tech startups (and big tech company, Google) to set up shop, and the buying and building frenzy that continues to ensue caused the mayor to declare a “housing state of emergency” last year in what is now the country's 4th-fastest growing city.

Amazon's move to this once-desolate neighborhood in Seattle has been the catalyst for the largest number of residential permit applications since 1984, according to The New York Times, and its masses of employees have attracted food trucks and other small business activity in and around the district.

Ironically, Seattle’s attractiveness to the tech sector is in part due to the fact that housing in the Bay Area—the nation’s largest tech hub—has become too pricey, and more and more people in the field are fleeing to what they consider more affordable housing in Seattle.

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