May 16, 2020
The American Nightmare: A Housing Forecast for Black America after COVID-19
More than fifty years after the 1968 Fair Housing Act prohibited discrimination related to the sale, rental and financing of housing, the coronavirus is exposing a grave housing crisis for people of color in the United States. As deadly a threat as the pandemic is, housing discrimination and inequality are even more threatening to the economic standing and overall well-being of Black communities.
Before COVID-19, the housing landscape was full of obstacles and disparities. Economic fallout from COVID-19 is adding a new degree of difficulty to the prospects of housing stability and financial dignity. Social factors like quality of housing, food security, and access to healthcare are underlying social conditions leading to the disproportionate number of deaths and high rate of infections in people of color. Just like underlying health conditions, underlying social conditions are proving deadly in the current pandemic.
Systemic Housing Inequality
Gentrification in cities like Atlanta, New York and Washington, D.C. has forced housing prices to new highs. The rising prices have effectively cut off the dream of homeownership for many underemployed or unemployed Blacks. While homeownership for many White Americans is a lever to the middle class and to increased net worth, homeownership is beyond the reach of even highly educated people of color who are squarely in the middle class.
For those fortunate enough to achieve homeownership, subprime mortgages, predatory lending, higher interest rates, discrimination in appraising home values, employment discrimination and wage inequality make sure the American dream of homeownership is a nightmare for Blacks in all economic brackets. Housing studies estimate that equity in homes in Black zip codes is depreciated by up to $150 billion total dollars compared to equity in comparable homes in White zip codes. This disparity in home values alone is robbing Blacks of financial dignity, net worth and wealth.
Housing Losses for Black America
As recently as 2004, nearly 50% of Blacks owned homes. Today, Black homeownership stands at a 50-year low. The decline in homeownership has taken the percentage of Black Americans who own a home down to 40 percent. Further decreases in the homeownership rates for Blacks will lead to painful financial, social and health consequences.
The issue is deeper than homeownership too. In the residential rental market, the financial demands of increasing rent and low incomes has millions of low wage earners spending between 30% and 50% of their income on rent. Pandemic business disruption and unemployment has tenants struggling to pay apartment rents in large numbers. Almost a third of U.S. tenants in apartments could not pay rent in April 2020 amid the COVID-19 pandemic.
The Great Recession
During the financial crisis and housing collapse of 2008, foreclosure rates soared and Black homeowners suffered the most during the “Great Recession”. The record number of foreclosures — ten million by most estimates — recorded between 2007 and 2016 led to today’s record-low homeownership rates.
At the heart of the crisis are failed public housing policies and a for-profit residential real estate market that relies on predatory capitalism against underemployed people of color. Before the housing crisis of 2008, mortgage redlining and housing discrimination were mainstay weapons used to prey on Black consumers. Instead of stopping foreclosures and keeping struggling homeowners in their homes in the aftermath of the 2008 crisis, US policy makers allowed Wall Street private-equity firms to buy the homes that struggling Americans lost. Banks, corporations and Wall Street firms were allowed to gobble up hundreds of thousands of homes at discounted prices. Those private-equity firms are now the largest landlords in America. Invitation Homes, a corporation based in Dallas, Texas, owns more than 80.000 homes across the country.
Instead of pivoting public policy and taxpayer spending to stop the fall in homeownership and housing affordability, US Federal and State governments will spend over $50 billion dollars of taxpayer funds this year for public housing initiatives that are often ineffective and deadly.
Despite record low unemployment rates during President Trump’s early years in office, housing stability has been on the decline during the Trump era. Add the devastating effects of the pandemic and the forecast is clear. Even in 2020, Blacks are more likely to live in overpopulated, poorly outfitted housing that leads to negative health consequences. Affordable housing demand consistently outpaces supply and we live with a disheartening housing crisis in plain sight.
Health Considerations
The chronic housing crisis in Black communities and chronic health disparities are sadly linked. Substandard housing leads to health conditions and diseases like respiratory infections, mold toxicity, asthma, allergies, and lead poisoning. Environmental hazards like rodents and inadequate utilities (heating, cooling, appliances) plague many communities. Additional factors like crime, violence, mental health concerns and food insecurity compound the negative health impacts. Working low wage jobs and juggling expensive monthly rent, utilities, transportation and basic needs leads to stress and hypertension. Hypertension is the number one underlying condition found in Blacks dying of COVID-19.
Berry Glenn, Managing Director of Tech-Con Consulting Group and a housing activist, believes that housing is medicine. “Without stable housing you can’t be healthy. How can any creature experience well-being without a decent place to live?”
“Also, what are the conditions of transforming a house into a home? When we say we need housing stability, we are asking how do we put it all together? We have to stabilize housing, healthcare, education and generate gainful employment opportunities to strengthen our communities against these crises and so much lack,” he says.
Post-Pandemic
With ninety-five percent of Americans ordered to stay home to fight the spread of coronavirus, the COVID-19 quarantine in America means that quality housing in the pandemic landscape is a matter of life and death.
The housing landscape after COVID-19 will leave Black communities in the most vulnerability housing position in a lifetime. After the nationwide quarantine orders and economic stimulus phases of the current pandemic, Black communities are still struggling for financial balance. As of the beginning of May 2020, four million homeowners are missing their monthly mortgage payments. The number of forbearances is nearing $1 trillion in unpaid principal. Eleven percent of all FHA/VA loans are in forbearance.
Public housing is supposed to be the answer to housing instability. As the pandemic continues to disrupt the economy, public housing is seeing new challenges. The protection of essential workers and vulnerable communities has become a narrative amid emerges statistics that prove the disproportionate impact of COVID-19 on people of color.
In New York City, 174,000 public housing units are overseen by the New York City Housing Authority (NYCHA). 400,000 residents occupy the housing units. The reality is that many of the NYCHA tenants — and public housing tenants in all major cities — are the essential workers keeping sorely needed services going throughout the pandemic. Further, many NYCHA tenants are seniors and residents with underlying health conditions. Quarantining in public housing leaves millions of Americas sheltering in place in unclean, crowded, substandard housing. Many tenants are dying at home.
At nursing homes across the country, the picture is even more bleak. While nursing homes and assisted living facilities make up only a fraction of the total number of coronavirus cases, they represented up to one-third of all U.S. coronavirus deaths.
Disparities based on race and income prevail in city after city. In the poorest communities the COVID-19 infection rate is twice as high than in more wealthy zip codes. When evaluated for race, infection rates are five times higher in black and Latino areas than in areas that are predominately and almost exclusively White.
Bad Business
As the American economy opens up to uncertainty and volatility, home values for Black homeowners are sure to decline. Shrinking housing inventory and stricter mortgage underwriting will continue to render the prospects of homeownership unattainable for the majority of Black workers and families. Gun-shy landlords will leverage discrimination and predatory capitalism with more potent toxicity. The unemployed will continue to default on payments with the defaults leading to credit hits. Damaged credit will leave many more unable to take advantage of opportunities like low interest rates and mortgage refinancing. Loans for new mortgages will see a higher than average number of loan denials. We can expect the soaring unemployment rates to hit Black families and millennials especially hard. These troubling economic considerations speak nothing to the lack of large-scale land ownership for Blacks. There is also the lack of large-scale, Black-owned housing and agricultural firms to consider. And what about the punishing blow COVID-19 is dealing to hard working real estate professionals?
Towards Housing Stability for Communities of Color
1. Community development and home rule
While government and public efforts are good baby steps, the Black community has to shoulder the responsibility for improving its own housing landscape. Black communities and predominately Black cities must leverage home rule to enact public policy that creates housing security. With people of color occupying the top political and judicial positions in many major cities, there is no excuse for the lack of necessary focus to correcting the issues causing housing instability. Leveraging the intellectual and political capital already in place, communities can do more to develop quality housing. Communities should also look to geographic coalitions with nearby cities to raise and attract capital and to form a stronger lobby. Black elected officials have to be pressed to take meaningful actions or to be replaced by more effective leaders. Black legislative caucuses have to be educated and armed with more practical and effective political platforms. Grassroots organizations, advocates and residents rooted in the communities must be elevated to the frontline of planning.
2. Legal and policy challenges to discrimination, predatory inclusion and predatory capitalism
People of color must beware of predatory inclusion and discrimination in housing. Predatory inclusion is a racist process wherein lenders and bad financial actors offer services to Black communities using exploitative terms. Class-Action lawsuits and public policy challenges to discrimination and predatory practices must be leveraged to stop decades of illegal actions and abuse. Now is the time for an organized, vocal lobby to challenge banks, mortgage companies and government regulators to address housing disparities. Court rooms and ballot boxes must be used to escalate the offensive for truly fair housing.
3. Build and renovate millions of units
There is a need for general contracting firms, faith-based institutions and housing nonprofits to build and renovate millions of affordable housing units. These organizations must team with municipal governments and developers to build and renovate. A focus on vocational training and job creation must be at the center of the effort. In addition to providing training and job creation, the effort must be future focused on sustainable homebuilding and renewable energy sources like solar. An entire cottage industry of small businesses can be created to support the effort.
4. Community-based financial literacy
Community-based financial literacy and education programs sponsored by non-profits, faith-based institutions, schools, colleges, banks, insurance providers and municipal governments must focus on housing and financial education. Our communities need financial dignity for workers, financial security for elders and financial literacy for youths.
