Another Strategy to Revive the Faded Dream of Homeownership

ACORN Affordability Financial Justice Housing Investments Memphis Milwaukee

            New Orleans      The US government says that in 2023, through various intermediaries, they will insure mortgages as up to one-million-dollars for the first time.  Wow, that’s a big number, way out of reach for most of our neighborhoods!  In low-and-moderate communities the issues are insuring mortgages, accessing loans, soaring interest rates, stringent deposit requirements, and, increasingly, competition from deep-pocketed Wall Street and multiple property buyers and flippers able to do cash sales.

I’ve been beating on this drum for a while.  After the 2007-2008 housing meltdown whole tranches of houses were bought by big private equity.  Most were already in foreclosure or headed that way under modifications, and Wall Street found that it could buy cheap and rather than selling high, they could do some touchups and then rent high, and in some areas, for example Memphis, ACORN’s Home Savers Campaign found that they could set the market.  Others have madly followed and copied this strategy, further compounding the chances of LMI families being able to buy homes.  It too often left me scratching my head about whether or not home ownership is even a viable citizen wealth strategy for low-and-moderate income families, as opposed to stabilizing rental affordability and markets with other options.

All of which had me reading a piece in the Wall Street Journal entitled “Housing Groups Take on Wall Street” with great interest.  Of course, anything and anybody taking on Wall Street would have had me from hello, but in this case, they were focusing on a couple of nonprofits that were trying to salvage homeownership dreams by competing with the flippers, and, in some cases, copying their tactics.  The reporter looked at two nonprofit housing development groups, one in Milwaukee, Acts Housing, and the other, appropriately, in Memphis, Alcy Ball Development Corporation.  The Milwaukee group with two decades under its belt is trying to raise a fund from various sources of $10 million to be able to buy houses as an investor that they can then sell to LMI families looking to buy.  I’m sorry to have to put a “spoiler alert” on this but $10 million might mean being able to buy 100 houses at $100,000 or 200 at $50,000, if there is still such a thing even in Milwaukee, perhaps in the Amani neighborhood, but I’ve worked there, and there won’t be many, and it might cost another $50k to fix them up.  On their numbers, they hope to buy at $75,000 and fix at $25,000, so that would 150 houses.  Hardly, something that will even be noticed on Wall Street, sad to say.

In Memphis, Seth Hawkins, the director of Alcy Ball’s operation may be hitting the nail on the head, noting that…

…recently homes in the Alcy Ball neighborhood have been selling to out-of-town rental landlords paying in cash. “What that means to me is that no one in Memphis will ever be able to build equity in that house ever again,” Mr. Harkins said. He is now raising money from charity and government sources so he can purchase homes to sell back to neighborhood residents who qualify.

Eliminating the prospects of what has been the largest source of wealth for most low-and-moderate income families seems all too likely, as Hawkins notes, which wasn’t necessarily true as recently as 15-20 years ago when I was writing parts of Citizen Wealth

The article admitted that these were small, fledgling efforts, no matter how encouraging and inspirational.  They correctly saw a bit more hope in public efforts by California and the Port of Cincinnati, but, frankly, without a totally different national housing plan made by HUD and endorsed and funded by Congress, the dream of homeownership for most American families will start and finish at the same place as just a dream and never a reality.