The Housing Crisis and the Working Poor: Problems and Solutions from the Community Level

Abstract

This paper is about the housing crisis, both the endemic crisis that makes decent affordable housing an unrealizable dream for one-third of all American households, and the housing bubble that burst in 2006 forcing millions of working poor homeowners into foreclosure. It is written from the perspective of the working poor, a perspective that is sorely lacking in the national debate around housing. The information presented is grounded in a thorough review of the academic literature combined with our collective experiences in real life housing foreclosures. Based on calculations by the Federal Reserve Bank of Philadelphia, we develop a simple formula for calculating the bank costs for the foreclosure/eviction/REO liquidation process. We offer a creative alternative that saves banks money while also stabilizing families and neighborhoods — donation of properties to community-based organizations. Finally, we outline a functioning Community Land Trust and we invite financial institutions to discuss collaborations that can improve the bank’s bottom line while also keeping families out of poverty. We draw the following important conclusions: •The working poor, especially people of color, suffered the greatest losses from the current housing crisis, while real estate speculators are the only winners. •The foreclosure/eviction process sentences working poor families to lives of poverty and has negative impacts on entire neighborhoods. •In one-third to one-half of foreclosure cases in low income neighborhoods, banks lose more by proceeding with foreclosure than be simply donating the properties to community groups. In section 4, we outline an alternative to foreclosure — donation of unprofitable properties to Community Land Trusts. We address several possible concerns about this approach to loss mitigation, and we invite the major financial institutions in the US to discuss with us the donation option as an alternative to foreclosure. This paper is researched and written by members of the Casas del Pueblo Community Land Trust, part of the Centro Autonomo community center located on the north side of Chicago in Albany Park. The Centro Autonomo membership is largely Latino, and Albany Park is a majority Latino neighborhood, though also said to be the third most ethnically diverse neighborhood in the US. The community center is focused on four principal areas that are critical to the lives of working immigrants: education (adult high school, ESL and computer classes, gender workshop), work (women’s house-cleaning cooperative), health (community clinic), and housing. Both Casas del Pueblo and the Centro Autonomo are projects of the Mexico-US Solidarity Network, a non-profit 501(c)(3) organization registered in the State of Illinois.