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.

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Could Creating Affordable Housing Become the Next Hot Thing?

New Orleans  In a meeting recently, I was asked who cares about providing affordable housing opportunities in rental and ownership markets for low-and-moderate income families, and after a nanosecond head scratch, I couldn’t help but reply, “just about nobody.”

Two pieces in the daily papers speak to the crisis, and, just maybe, the opportunity that interest is rising in reappraising this market, so desperately sought by our people.

The first in the Times looked at the surprising demand for homes in Houston, despite the flooding from Harvey, including in some neighborhoods still watching the water recede. One realtor claimed that of 50-odd pending sales, only 8 had backed out. Others noted that the number of calls from families expressing interest in buying even in flooded areas was soaring, surprising everyone. Sure, many are hoping for bargains, but that also goes to the heart of how desperate people are for housing. The story leaves with a question from one family mulling over paying $50,000 to buy a flooded property and another $50,000 to fix it up, and thinking that might still be a bargain, despite the history of flooding and the expectation that there will be more in the future. They noted that it might be worth it even with steep payments for flood insurance in the future. What can you say, but that this is crazy, and that it underlines how desperate families are.

Another piece in the Wall Street Journal talked about a company raising $233 million for an affordable housing fund from foundations, funds, and high-worth individuals because luxury housing has gone slack, while demand for affordable homes is skyrocketing. This is unlikely to be much of an opportunity for low-and-moderate income families, but still it’s moving in the right direction.

Median family income according to the Census Bureau is now knocking at the door at $60,000 per year. Families with $40000 to $60,000 in family income, fair credit, and steady jobs that are producing that income can afford to buy homes, if they are priced right, putting them in better shape buying, rather than renting. They might be better renting, if there were caps that hedged against gentrification and guaranteed affordability, and if the units were decent, but few developers are producing units for this market.

Yet, there are tens of thousands of abandoned homes in city after city creating the classic situation that spurred ACORN’s squatting campaigns in the 1980s to match “people that need houses with houses that need people.” This is affordable housing stock, if the will existed to rehabilitate it. Post-Katrina, it was amazing to have our partners from Cornell and other universities go door to door in flooded areas and find that more than 80% of the homes could be rebuilt rather than demolished.

We need a massive, national program that invests in putting these two problems together to come up with one solution. If we could do it, then, yes indeed, affordable housing could be the next “hot” thing in our cities.

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