Repetition in Land Contracts Confronts Simple Predatory Assumptions

New Orleans  One of the most interesting things the ACORN Home Savers Campaign has learned is to pay very close attention to what families are saying on the doors when we visit. Over and over we have had some of our operating assumptions challenged by what we learn when we are actually visiting with contract signers who are the owner-occupants in these deals.

None of this changes the basic paradigm at the heart of all potentially predatory transactions. On one side a company or individual or slumlord-wannabe is seeking to take advantage of a market dysfunction, usually financial, for consumers, usually low-and-moderate income. On the other side the consumer, often a family, is desperate for its tax refund or for affordable housing or for money to pay a health or funeral or education expense or access to credit for anything and everything. It’s the premise that allows banks and payday lenders to charge usurious interest rates, tax preparers to advance refunds a couple of days quicker than the IRS at incredible rates, and hundreds of other schemes.

In the real estate market it is why a Harbour Portfolio can charge 12% interest on a 30-year loan with a low downpayment on a contract-for-deed property when mortgage interest is running at 4%. It’s why thousands of slumlords in city after city can charge exorbitant rents, deposits, and fees for barely livable housing to families who are simply desperate for housing. It’s also what hovers around the rent-to-own, lease-to-own, lease-option markets that offer below market rents in “as is” condition, often with minimal assurances of habitability to families also desperate for housing but also sometimes hoping for ownership.

In the first months of doorknocking in Philadelphia, Pittsburgh, Akron, Youngstown, Detroit, and Atlanta listening taught us that the search for lower rent and bargaining power against rising eviction rates for tenants was making various land purchase schemes more of an attractive alternative for many lower income families than any hope of ownership. Often in the early doorknocking when we actually explained the contracts they had signed with various companies, families would ask us straightforwardly whether they should flee or fight, though most wanted to fight if they had a way to do so and had already put too much money and sweat into their places to want to walk away.

More recently in Detroit visits we are finding that families are often on their second or third contracts with various companies. In Detroit we also found in talking to people and warning them about the predatory nature of some of the contracts, almost as many people were asking us how they could get into a contract as were asking us how to protect themselves in a contract. In Detroit and Atlanta we were finding family after family where people were asking us how they could get into additional contracts. One young man in Detroit told us he was embarrassed that his mother, uncle, and sister were all “bettering themselves” in contracts, and he was still just renting a place. In Atlanta a Harbour contract holder told me her mother had also had a contract with another company, and she had tried to see if Harbour had other properties available.

So, yes, in some cases people are willing to sign a contract to have secure rent, regardless of the situation for a couple of years, but others, along with their families, are climbing up the contract ladder in the hopes of owning a home and doing so over and over again, even after slipping to the bottom, and they are bringing friends and relatives with them. Sometimes what you learn in organizing is not what you expect, but you have to adapt, and in this case it is clear that the Home Savers Campaign has to fight on one front to make sure the homes on various contracts are habitable for families and fairly understood, and on the other hand has to devise the ways and means to help families over the last rungs of the ladder to their dreams of home ownership.


Wages Start Low, Lifetime Income Stays Low

New Orleans   Joe Fox, an old comrade and friend visiting New Orleans yesterday, dropped by for a cup of coffee at Fair Grinds Coffeehouse on St. Claude, a tour of WAMF-LP, and a bit of nostalgia over the more than forty years we’ve worked with and known each other. We reprised an old story that centered on him, but that I have also repeated for years.

Somehow in the late 1970s fresh out of Harvard Business School of all places, Joe had applied to work at ACORN, and I had hired him not as an organizer, but to build other operations for us in the hopes of creating additional sustainability. Quickly, he was deployed to develop and build our radio station in Tampa, WMNF, and help get our station in Little Rock, KABF get on the air as well. Joe was magic to the task, creating an income stream to build the station between a door-to-door canvass and grants as well as a notorious and perhaps reckless stint of climbing the tower to secure it in Florida before a storm. The story though that we have both told repeatedly revolved around a report that Harvard Business School published in its magazine touting the enhanced income its graduates were going to make with their degree. Someone was the high, and Joe, working for ACORN was the low, pulling down the average that year. Joe reminded me as we talked that when we won the CORAP grant to receive 100 VISTAs in 1978, that ACORN had to raise its salary schedule so that there was no resentment because all of the VISTAs would be paid more!

According to the recently released Census Bureau report annual income has risen for the second straight year to the point the average American household is making just north of $59,000 per year, over a 10% increase in the last two years. Statisticians and economists note that this is still just catch up. According to the Times, “In 1973, the inflation-adjusted median income of men working full time was $54,030. In 2016, it was $51,640 — roughly $2,400 lower.”

Researchers from the Social Security Administration have done a deep dive into their huge database and have begun to report that the loss of income for workers has a lot of causes that are often cited from deindustrialization to automation to stagnant wages in the service sector, but that the issue of lower pay actually starts young and lasts forever, depressing lifetime earnings. What they are finding is that depressed wages at 25 years of age may end up as significantly decreased lifetime earnings even after 30 years of work at 55 years of age. And, it’s been falling like a rock. The Times’ report says that “according to one conservative measure of inflation, in 1967, the median income at age 25 was $33,300; in 1983, it was $29,000. Twenty-five year-olds did better during the 1990s, but then the slide returned. In 2011, the median income for 25-year-old men was less than $25,000 — pretty much the same as it was in 1959.”

I started working around 1967, though I wasn’t 25, but 19. If the median income was $33,3000 then, it was still over $30,000 in 1978, when we were raising wages to about $5000 per annually at starting to match VISTA paychecks, not counting the reserve ACTION held for the end of their service when they mustered out. When Social Security sends me my income statements, and I’m sure Joe laughs at this as well, even though he is a successful businessman in Little Rock running the iconic Community Bakery, it seems to have taken me until 1982 to crack five-figures.

Next time I see him, and so many others, I hope they remember all we accomplished from our youth forward, rather than blaming me for a reduction of their lifetime income.


Please enjoy Earful by the Oil Boom

& Lee Ann Womack’s All the Trouble.

Thanks to KABF.