Buying, Rather than Building, Affordable Housing

demo3-460x250Ottawa   In one city after another we’re getting closer to winning landlord-leasing rules, some rent controls, and inclusionary zoning programs. But, even as victories come closer to hand, the scale of the need for affordable housing is overwhelming our capacity to deliver change. It is not that our eyes are bigger than our stomach anymore. Our stomachs are ravenous and are outstripping the vision we can see with our eyes.

Social Policy does a trade-out with Shelterforce, and I happened to have a recent copy in the stack of things I brought to read on the plane and started flipping through it over breakfast at Carleton University before the beginning of the ACORN Canada national board and annual general meetings. Some of the pieces were a bit out of my league. I wasn’t sure what to make of something called “trauma-informed community building” or TICB, as they proceeded to call it, but I knew I was uncomfortable having poverty medicalized, no matter how good the intentions

On the other hand there was a fascinating piece by Alan Mallach, a senior fellow at the Center for Community Progress and the National Housing Institute that looked at a different direction that the French had taken to developing affordable and mixed-income housing. They were buying it, rather than building it. Mallach discussed the disastrous and well-documented French housing policy in the 1970s when many projects were built on the outskirts of the city and went down from there. The good news, according to Mallach, is that the French learned something from the experience that might teach us something in the United States and Canada as well.

“Now, when French developers build subdivisions or condo projects, nonprofit housing corporations enter into turnkey contracts with the developer to buy blocs of apartments or houses, up to a maximum of 50 percent of the units in the development. Based on those contracts, the nonprofits apply for a package of government loans, grants, and tax breaks so they can both buy the units and make sure they remain affordable. When the projects are completed, the nonprofit buys the units and operates them as affordable rental housing.”

In transferring the French lessons to the USA, Mallach made a couple of comments that made sense in many cities. First, he noted that “most parts of the United States have large inventories of good-quality existing housing available.” If Low Income Housing Tax Credit (LIHTC) funds could be utilized by nonprofit housing developers to buy blocks of these houses either from developers or on the market and convert and manage them as affordable housing, it would both save money, and immeasurably diversity communities, benefiting our families, and potentially serve as a bulwark against blight as well by keeping the housing maintained, viable, and affordable. He also made the case that private sector market developers can create reasonably good quality housing for a price point that is often significantly lower than nonprofit developers utilizing LIHTC monies. Maybe so? Maybe no? I haven’t really looked at that closely, but where I think he is absolutely right is that buying existing housing stock or buying into developments already in motion, drastically reduces the lead time and opportunity cost, meaning more affordable housing is developed now. And, now is when we need it!

This is worth a good look in a lot of places.

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Please enjoy Eric Clapton’s Alabama Woman Blues. Thanks to KABF.

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Gentrification Assault, Oakland Housing Market Out of Control

DARWIN BONDGRAHAM - Martin and activists outside of Community Realty's offices in April after delivering a letter requesting a meeting with Marr.

DARWIN BONDGRAHAM – Mr. Martin and activists outside of Community Realty’s offices in April after delivering a letter requesting a meeting with Marr.

Vicksburg, Mississippi   It was hard to believe a friend’s claim that Oakland, California has now become one of the three most expensive cities in the country in no small part because the housing market has gone berserk. He said that Oakland now only followed New York City and San Francisco, and had bypassed Seattle, San Jose, and other famously, exorbitant cities. What happened here? Oakland used to be where people moved for affordable housing who couldn’t afford to live in San Francisco, famous for its port, industry, and blue collar grit, and Jack London. The city where Gertrude Stein famously stated, “there’s no there, there.”

But, now they are all coming there. Suddenly, it is also one of the most diverse cities in the country with the population almost evenly split between Latino, African-Americans, whites, and Asian-Americans, so much so that one controversy, when I recently visited, had to do with racial profiling of neighbors in the Nextdoor.com application that is used by one-third of this highly connected city, exposing the well-known, little discussed racism that stalks almost all of these sites with their constant alerts of anyone with a hoody and a tan.

Not without a fight though. Visiting the weekly paper, the East Bay Express, I picked up a recent issue featuring a cover story on one of Oakland’s biggest landlords, Michael Marr, who had specialized in vulture investing of foreclosed properties after the 2008 real estate crash, ending up with 333 houses and apartment buildings in the city with 1300 rental units under management. Now he’s in federal court though for what the FBI characterized as a conspiracy to “rig foreclosure auctions” along with eleven other East Bay real-estate investors who “made a pact not to compete with one another at foreclosure auctions.”

Marr is letting his lawyers handle that mess and meanwhile is trying to jack rents in some cases by more than $1000 per month. Rent controls in Oakland only cap increases for homes built before 1983, as the impact of such increase would cause massive displacement of many long term residents. It was good to see that standing in the way and organizing the tenants was the Alliance of Californians for Community Empowerment, known as ACCE, and formerly California ACORN. The tenants and the organization have demanded a rent freeze while the court case is pending, a sale of Marr’s ill-gotten properties to the Oakland Land Trust, and action on lingering issues with mold, bedbugs and other problems. ACCE is not only fighting these issues in Oakland either. Fighting a foreclosure with a late night rally at a vulture investor’s house in Los Angeles has found them defending their free speech and association rights in Los Angeles as well.

ACORN has recently won rent controls in Edinburgh and throughout Scotland with the Living Rent Campaign, and more landlord accountability in Toronto and Bristol, but there is little in any of our arsenals to prevent sweeping gentrification without a public and governmental commitment to diversity and affordability in a city. Oakland could become the battleground where we have a chance.

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Is Squatting Back? No, It Never Stopped!

HomeSweetHome2New Orleans   There was a breathless article in the New York Times with a Las Vegas dateline purporting to have found something new under the sun, at least the desert sun, and the discovery was squatters. The sources attesting to the fact that the sky was falling and the horror of it all were, unsurprisingly, the police and neighbors.

The Vegas police began counting statistics several years ago of complaints being filed with the department alleging that there were squatters in the neighborhood. According to the report, “… there were more than 4,000 complaints last year, up 43 percent from 2014 and more than twice as many as in 2012.” Numerous neighbors were interviewed, particularly in high-end neighborhoods where squatters had taken over houses pushing the million dollar mark complete with swimming pools. Oh, my!

The one side of the story missing was of course any discussion from any of the actual so-called squatters. The police couched their side of the story in lurid tales of drug dens, counterfeiters, burglars, and the like. One story felt to be especially poignant was a confrontation with children of one family where a child produced a copy of a lease and the police wove a tale from the family of paying someone in cash monthly at a casino. The whine here was that it takes the police time to investigate whether the lease is valid and so forth and so on.

Where in the world are people imagining that families whose homes were foreclosed by the tens of thousands and even millions went? Is there a fairy tale somewhere that they all just got a U-Haul and moved happily ever after to affordable housing on the other side of town? Poppycock! The reporter also added in the story that squatting was also a common problem in places like Florida and Detroit. Who are we kidding? People have been squatting in houses in Detroit for decades for goodness sake.

They have also been squatting in the foreclosure “zone” of America in high numbers ever since the financial crisis and the housing meltdown. Five or six years ago in Phoenix, I stood with a couple in front of the house they thought they were renting and preparing to buy as they surveyed the block in a neighborhood of low-slung brick houses in the city. They pointed from house to house the ones that were vacant, the ones where families were living after the house had already been foreclosed, the ones where families were living waiting for foreclosure, the ones that new families were trying to occupy to buy, and the minority that tended to be older families that were stable. In their case they were later evicted after it turned out that the money they were paying to secure the house in lieu of a deposit was being collected by someone who was not in complete possession of the house. Where they squatters or just suckers desperate to believe a story perhaps too good to be true? Well, yes, in the eyes of the police maybe, but what were they really other than victims of a triple scam of sorts at the end of the line of multiple foreclosures.

What’s the beef here? Would these homes in Florida, Arizona, and Nevada and similar foreclosure zones be better off boarded, vacant, and deteriorating and duplicating too many abandoned areas in Detroit, Buffalo, Philly, and elsewhere? Or would they be better off with families trying to make them homes again? Are the cities of the South and Southwest going to learn a different lesson than the cities of the Midwest and Northeast? Vacant houses in sufficient number will be vandalized. There’s a guarantee that comes with those homes.

There’s nothing new about squatting and scams, but there would be something new with public policy that matched houses that need people with people that need houses. Learning that lesson would be big news everywhere!

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Home Stealing Swindles and Similar Crimes

$_72Baton Rouge   For years I’ve seen these almost handmade looking signs on street corners in our neighborhoods in various cities in the USA that say something on the order of “We Buy Old Houses, Call XYZ” or “No Matter What Condition, We Buy Houses” and so forth. In New Orleans it seemed part of the post-Katrina landscape, just like other signs that say, “I’ve Got a Backhoe, Call Me” or “House Gutting, Call Me.” Seeing those signs in other cities made me scratch my head but not hard enough to dent the brain until recently I read about several home stealing swindles preying on the elderly, uninformed, and lower income families.

The simplest swindle was a straight up proposition to buy a home with some age on it and some repairs needed and offer a hefty price, get the owner to sign over the documents based on a front end payment of a couple of thousand dollars, flip the house, and then stiff the original owner for a sucker. Invariably, the owner was desperate for money because of medical bills, payday loans, or whatever so overlooked the simple logic and fine print in order to get some real money in their hands while the swindler saw the switch as a down payment worth tens of thousands in their pockets. Worse, it’s horrifying how many get away with this swindle, much like a couple of years ago when shady mortgage brokers would dupe the elderly especially into refinancing their homes just to pocket the fees and points.

A more sophisticated swindle seems to take advantage of the modernization of county and parish property records on-line to speed transactions and increase transparency in the often burdened process of clearing titles and effecting sales at real estate closings. In some jurisdictions, virtually all of the records attending the sales are now visible online, often exposing not only a good facsimile of the owner’s signature for future criminal duplication, but also bank account numbers, social security numbers, and pretty much the whole package. Finding homes where there are absentee owners that rarely visit and inspect the property and often don’t have friends or neighbors keeping the extra eye out, allows the swindlers to come in, place the house for sale quietly, bring in a team of helpers to pretend to be the owners, and even con legitimate lawyers and title companies into handling the closing. The New York Times ran a story of an elderly woman who suddenly discovered a house she owned was sold out from under her for more than a half-million. She got lucky and the police did right, but we have to wonder how many times people get away with this kind of thing, and how many more may in the future. In red hot housing markets this may look like easy pickings.

Meanwhile, the big banks are still trying to muscle into the housing market to displace the federal lending authorities like Fannie Mae and Freddie Mac. Most of them have hardly paid off their billions in penalties and fines from their earlier crimes in crashing the housing market and now they think they should be trusted to control the whole shebang. Some reported the good news that homes that were underwater, where more was owed in mortgage than the value of the home in the market, had decreased from over 16% to only 13% and change in 2014. Some cities like Las Vegas, Chicago, and Atlanta are over 18% underwater in the market. Since 3 to 5% used to be the normal, and we are supposedly in recovery from the meltdown, it seems like we still have a long way to go with a lot of pain and suffering on the road.

Big swindles or small, no one can be too careful when there are so many vultures waiting to swindle homeowners on a regular and daily basis. Seems there’s always something.

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Supreme Court Sinks More Homeowners into Permanent Debt

dead_economy-300x199New Orleans    In a startling unanimous decision, the US Supreme Court overturned an 11th Circuit Court of Appeals decision finding in favor of Bank of America that even bankruptcy protection does not allow underwater homeowners the ability to escape the obligations of second mortgages.  The impact of the decision allows zombie banks to continue operating on the basis of balance sheets reflecting virtually lifeless real estate holdings and makes these beleaguered homeowners into walking dead debtors with virtually no hope of a second chance.The Supreme Court once again reminds Americans that the Constitution is fundamentally about property rights and that the sanctity of a contract trumps all vestiges of common sense.

Generally speaking, a home is commonly classified as “underwater” if the value of the outstanding mortgage is 25% higher than the current market value of the home.  Remember the mortgage we are talking about here is the first mortgage.  The second mortgage is satisfied after the first is fulfilled.  Many of these second mortgages are home improvement loans.  Others arose from the need to finance children’s education or medical emergencies by attaching what has historically been the primary asset creating citizen wealth for the vast majority of low and moderate income families in the country.   Bank of America in their court filings estimated that there were 2.1 million underwater homeowners with second mortgages at the end of 2014.   Others like Zillow estimated that there are still 8 million homeowners who are underwater and most real estate experts estimate that it is likely that half of them have some kind of “second” on their homes.  This is not an insignificant problem in either the economic recovery or the hope for narrowing the equity gap.

Of course not all of these families had declared bankruptcy, partially because banks and others have done an amazing job over recent years with Congress in making bankruptcy both harder to achieve for desperate families and less valuable as a chance for a clean slate and a second chance.  Filing for bankruptcy does not allow someone to wipe out a mortgage debt or a student loan debt for example.  The mortgage obligation is what forces an underwater homeowner into foreclosure.  The best hope for the debtor is that surrendering what used to be an asset to the bank, calls quits to that debt.  In 2007 and 2008 when ACORN was negotiating with big banks and mortgage loan servicers as the implosion began, I was at some of those meetings.Executives then believed that they would just have to wipe out their second mortgage portfolios as worthless.

The Supreme Court’s decisions says, “no way, you’re stuck.”Hey, some day in the by and by, real estate values may go back up, allowing the loan to be collected.  Some of these properties are so far underwater that it won’t be a year but a generation for that to happen.  For the banks paying a dollar on that loan every 90 days allows them to still call it a performing loan, helping their zombie balance sheets, and leaving the debtor, desperate for a clean start, carrying even more weight. The Justices say, “dude, it’s a contract, didn’t you get that?”  The debtors, like millions of others, were on the merry-go-round being pushed by these same bankers and promoters in the real estate bubble into these sucker bets.  These weren’t contracts as much as cons.

Only death relieves some of these debts.It’s already legal for 25% of someone’s social security to be attached.  Now the Supreme Court has just locked another ball and chain onto untold numbers of families with little hope for the future but dragging the weight behind them, sentenced to a life as walking dead, not in debtors’ prison, but in a permanent debtors’ probation of sorts with little or no chance of escape.

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Johnny Cash – Folsom Prison Blues (Live)

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For Banks the Party Never Stopped

indexHouston        Seven years after the wheels started coming off the bank’s mad money train, it seems clear that settlements for mortgage abuse, which is euphemism for fraud, Dodd-Frank legislation, and what should have been the awesome weight of having collapsed the US and world economy and upended the lives of millions, have essentially been water off a duck’s back for the banking industry and Wall Street.

Let’s just tick off a few recent cases in point.

  • The City of Los Angeles, yes, not the Justice Department, SEC, or Federal Reserve, sued Wells Fargo for pressuring employees in its retail bank with sales quotas to fraudulently enroll people in new customer accounts without their approval.  Plain and simple, shake and bake, no permission needed.
  • Two big banks rather than settling for some hand slaps and big fines, Nomura, a Japanese bank, and the Royal Bank of Scotland, both presumably figuring their home country customers probably didn’t give much of a flip about whether or not they had packaged bad mortgages in the USA, went to trial claiming the dog-ate-their-homework, the economy did it, not them.  The judge found against these miscreants and essentially said their behavior was disgusting.
  • And of course there is the whole cabal of banks that engaged in price fixing and chicanery to fudge the LIBOR rate for interbank and corporate lending including HSBC, JP Morgan Chase, Citi, and a rogues’ gallery of the biggest banks in the world.  Their fines are in the billions, and reportedly they are going to finally have to actually plead guilty as institutions.

Many have argued that part of the problem was the legal double standard that found law enforcement playing paddy cake with the criminal enterprise that banking has become rather than prosecuting them aggressively from the top down.  If anything was administered more than simple detention, it was from the bottom-up.  The bigger the guy at the top of the bank, the bigger and more obscene the paycheck continued to be.

More proof that bad behavior and thuggery is the norm in banking is emerging in a new study as well.   According to the Andrew Ross Sorkin at The New York Times,

“...about a third of the people who said they made more than $500,000 annually contend that they ‘have witnessed or have firsthand knowledge of wrongdoing in the workplace.’  Just as bad:  ‘Nearly one in five respondents feel financial service professionals must sometimes engage in unethical or illegal activity to be successful in the current financial environment.’”

Such statements take your breath away.  Not only has it not gotten better, it may have gotten worse!   And, the President wonders why Senator Elizabeth Warren is willing to go to the wall on a trade bill that had hardly interested her until she noticed the language leading her to believe that it would allow even more transnational banking criminality?

There oughta be a law, but there probably are plenty of them, just no one seems to care, and the party goes on, and we all pay for it.

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The Beermats – A Workers Song

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