June 29, 2017
The Hispanic Homeownership Gap
Freddie Mac’s latest Economic & Housing Research Insight asks Will the Hispanic Homeownership Gap Persist? It opens,
This is the American story.
A wave of immigrants arrives in the U.S. Perhaps they’re escaping religious or political persecution. Perhaps a drought or famine has driven them from their homes. Perhaps they simply want to try their luck in the land of opportunity.
They face new challenges in America. Often they arrive with few resources. And everything about them sets them apart—their religions, their languages, their cultures, their foods, their appearances. They are not always welcomed. They frequently face discrimination in housing, jobs, education, and more. But over time, they plant their roots in American soil. They become part of the tapestry that is America. And they thrive.
This is the story of the Germans and Italians and many other ethnic groups that poured into the U.S. a century ago.
Today’s immigrants come, for the most part, from Latin America and Asia instead of Europe. Hispanics comprise by far the largest share of the current wave. Over the last 50 years, more than 30 million Hispanics migrated to the U.S. And these Hispanics face many of the same challenges as earlier European immigrants.
Homeownership provides a key measure of transition from a newly-arrived immigrant to an established resident. Many immigrants arrive without the financial resources needed to purchase a home. In addition, the unfamiliarity and complexity of the U.S. housing and mortgage finance systems pose obstacles to homeownership. As a result, homeownership rates start low for new immigrants but rise over time.
The homeownership rate among Hispanics in the U.S.—a population that includes new immigrants, long-standing citizens, and everything in between— stands around 45 percent, more than 20 percentage points lower than the rate among non-Hispanic whites. Much of this homeownership gap can be traced to differences in age, income, education and other factors associated with homeownership.
Will the Hispanic homeownership gap close over time, as it did for the European immigrants of a century ago? Or will a significant gap stubbornly persist, as it has for African-Americans? (1-2)
It concludes,
Census projections of future age distributions suggest that the age differences of Whites and Hispanics will be reduced by six percent (0.7 years) by 2025 and 12 percent (1.2 years) by 2035. If these projections are realized, the White/Hispanic homeownership gap is likely to narrow by 20 percent (five percentage points) by 2035. The Census projections include both current residents and future immigrants, and averaging the characteristics of these two groups of Hispanics tends to mask the relatively-rapid growth in homeownership among the current residents.
It is important to remember that about 13 percent of the White/Hispanic homeownership gap cannot be traced to population characteristics such as age and income. The explanation for this residual gap is unclear, although some of it may be due to wealth gaps and discrimination. (12)
Researchers at the Urban Institute have documented the importance of the Hispanic homeownership rate to the housing market more generally. It is worthwhile for policymakers to focus on it as well.
June 29, 2017 | Permalink | No Comments
Thursday’s Advocacy & Think Tank Roundup
- The U.S. is no longer an affordable place because many of the low-cost units no longer exists across the country. In an article that analyzes recent housing reports entitled, “Our Disappearing Supply of Low-Cost Rental Housing,” an analyst finds the number of units available units under $800 have drastically declined while the number of units available above $2000 have increased “three-fold.” The article further notes the growing trend in many of the U.S. largest metropolitan areas such as Denver, CO.
- Harvard’s Joint Center for Housing Studies recently released a report titled “State of the Nation’s Housing.” In their report, ten new trends illuminate. The most availing trend is the lack of homes available to buyers. In the last ten years, the inventory of homes has been at its lowest point. Why one may ask? Fewer homes are built and many individuals are not selling their homes.
June 29, 2017 | Permalink | No Comments
June 28, 2017
Addressing NYC’s Affordable Housing Crisis
The NYC Rent Guidelines Board (of which I am a member) held a public hearing as part of its final vote on rent adjustments for the approximately one million dwelling units subject to the Rent Stabilization Law in New York City. My fellow board member, Hilary Botein, and I submitted the following joint statement at the hearing (also available on SSRN and BePress):
The Rent Guidelines Board determines rent increases for New York City’s 1 million rent-stabilized apartments. We must weigh the economic conditions of the residential real estate industry; current and projected cost of living; and other data made available to us. To make our decision, we reviewed reams of data and multiple analyses of those data. We also held five public hearings at which we heard hundreds of tenants speak, sing, chant, cry, and demonstrate. These hearings are among the only opportunities that tenants have to speak publicly about their housing situations, and they made clear the extremity of the housing crisis in the City, and that it will get worse without significant intervention.
Tenants who came to the RGB hearings are not a representative sample of rent-stabilized tenants in New York City. But they told us a lot about the state of housing in the City. We felt that it was incumbent on us to respond to what we heard, even where it did not relate directly to the jurisdiction of the Board.
New York City cannot expect any meaningful housing assistance from the federal government in the near term. Our observations therefore focus on state and municipal actions that could address some of the issues that regularly cropped up at our hearings.
There is a desperate need for affordable housing that is pegged to residents’ incomes. Housing is deemed “affordable” when housing costs are 30 percent of a household’s income. There is no guarantee that rent stabilized housing remain affordable to a particular household, and there is no income eligibility for rent stabilized housing. This aspect of rent regulation explains its durable political appeal, but makes it an imperfect vehicle for meeting the needs of low-income tenants.
Mayor de Blasio is protecting and developing hundreds of thousands of units of affordable housing through the Housing New York plan announced at the beginning of his term. More recently, his Administration announced a program to create 10,000 deeply affordable apartments and a new Elder Rent Assistance program. But more can be done to help low-income tenants.
The Senior Citizen Rent Increase Exemption (SCRIE) and Disability Rent Increase Exemption (DRIE) programs have proven their effectiveness in “freezing” the rents of more than 60,000 low and moderate income rent-stabilized households. The state should create and fund a similar program for low-income rent stabilized tenants who pay more than 30 percent of their incomes towards housing costs.
State laws governing rent stabilization must be amended. Three elements of the law particularly penalize low-income tenants in gentrifying neighborhoods, and were behind the most distressing tenant testimonies that we heard. They are not within the RGB’s purview, but change is critical if the law is to operate as it was intended to do. The state legislature has considered bills that would make the necessary changes. First, owners can charge tenants a “preferential” rent, which is lower than the legal registered rent for the apartment. Preferential rents are granted most often in neighborhoods where the rent that the market can bear is less than the legal rent. This sounds like a good option for both tenants and owners, and perhaps that was its original intention. But now, as neighborhoods gentrify and market rates increase, the prospect of increasing a preferential rent with little notice has become a threat to tenants’ abilities to stay in their apartments. Preferential rents should be restricted to the tenancy of a particular tenant, as was the law before a 2003 amendment. Owners would then be able to increase rents for those tenants no more than the percentages approved by the Board.
Second, owners can tack on a 20 percent “vacancy increase” every time an apartment turns over. This increase incentivizes harassment, and should be limited to situations of very long tenancies, to keep owners from actively seeking to keep tenancies short.
Third, owners making what is termed a Major Capital Improvement (MCI) – a new roof, windows, or a boiler, for example – can pass this expense on to tenants via a rent increase that continues in perpetuity, after the owner has recouped her or his expenses. We also heard allegations of sketchy capital improvement applications that were intended to increase rents without improving the conditions in the building. The state legislature should review how MCIs work in order to ensure that they are properly incentivizing landlords to invest in their buildings to the benefit of both owners and tenants.
New York City needs a repair program for broken gas lines. We heard from tenants who had not had gas in their apartments for more than a year. We understand that fixing gas lines is particularly complicated and expensive, and that gas leaks raise serious safety concerns, but it is unacceptable for families to go for more than a year without gas, and we are concerned about fire safety issues resulting from people using hot plates. The city needs to step in and make the repairs.
We have a housing crisis. Low income tenants, who live disproportionately in communities of color, experience this crisis most acutely. We will not find systemic solutions within the housing market. All solutions require a lot of money, and we cannot count on anything from the federal government. But it is imperative that our state and local governments act, or New York City’s already burgeoning shelter system will be forced to take in even more people. Since the 1970s, New York City has been a leader in committing public resources to housing its low income residents, and that legacy must continue. The Rent Guidelines Board cannot solve the housing crisis, but other arms of the New York State and City government can work together to reduce its impacts on low-income households.
June 28, 2017 | Permalink | No Comments
Wednesday’s Academic Roundup
- Household Credit and Local Economic Uncertainty, Kerami, Maggio, Ramcharan, and Yu
- The Shift in Bank Credit Allocation: New Data and New Findings, Bezemer, Samarina, and Zhang
- Retire on the House: The Possible Use of Reverse Mortgages to Enhance Retirement Security, Warshawsky
- “Don’t Know What You Got Til It’s Gone”- the Effects of the Community Reinvestment Act (CRA) on Mortgage Lending in the Philadelphia Market, Ding and Nakamura
- No Home for Justice: How Eviction Perpetuates Health Inequity Among Low-Income Tenants, Gold
June 28, 2017 | Permalink | No Comments
June 27, 2017
Painful Lessons from Roommates
Realtor.com quoted me in Painful Lessons Learned From Living With Roommates. It reads,
With rental prices surpassing nosebleed levels in many parts of the country, more and more legit grown-ups are cutting costs by sharing their home with roommates. But here’s the unavoidable reality: Sharing expenses and living arrangements with roommates can lead to some painful situations. There’s a strong possibility you’ll learn about personality clashes, crazy quirks, and the financial habits of your cohabitant the very hard way. Sometimes, renting with a roommate can end in tears—or in court!
We asked our readers to air their roommate horror stories in the hope they’ll serve as cautionary tales for you. Here’s hoping your own living situation stays drama-free and way less sticky than the following ordeals.
Pets come in all shapes and sizes
One day Karin Ranta Curran’s college roommate brought home an aquarium and said she was getting a small pet. Curran, who lives in Denver, was leaving town and didn’t want to pry—but she assumed it was probably a hamster or a cat. After the weekend she came home and was greeted by a massive cockroach chilling out in the living room.
“I killed it and later showed my roommate, who burst into tears,” she says. It was a pet Madagascar hissing cockroach she had just gotten (her dad was an entomologist), and it was named Henry.
“I still feel bad to this day because the other cockroaches were pretty cute once you got used to them. Kind of like hermit crabs,” says Curran. “My roommate moved out a few months later. I don’t know if Henry’s death was a factor.”
Lesson learned: Communicate with your roommate about any big changes to your living situation like pets, no matter the size or species.
“What is perhaps obvious to the offspring of an entomologist is not obvious to the rest of us,” says David Reiss, academic program director for Brooklyn Law School’s Center for Urban Business Entrepreneurship.
Beware of double-dipping leaseholder
Peter Ponce was sharing a large three-bedroom apartment in New York City. He was not on the lease but had agreed with the leaseholder to pay $1,000 a month to rent his room. After living in the apartment for nine months, he booked a job where he had to be away for three months.
“I found and vetted someone to sublet my room, but at the 11th hour the leaseholder said he didn’t want another person in my room while I was away,” says Ponce. He had no choice. If he wanted a place to come home to, he had to just eat the rent for those three months.
When he returned home from the gig, he discovered that someone had been living in his room—and paying. The leaseholder had collected double rent.
“I couldn’t sue because I wasn’t on the lease; there was basically nothing I could do,” says Ponce.
Lesson learned: Get everything in writing.
“If you have a real estate agreement and you want to be able to enforce it in a court, get it in writing,” says Reiss. “You do not need to be the main leaseholder to enforce a sublease agreement.”
Know when it’s time to get out
Kensie Smith had only recently moved into her downtown New York City apartment when things began to get weird with her roommate. Upon returning home from work one day she noticed that her room looked different from the way she left it.
“Someone was obviously coming in my room,” she says. “I confronted my roommate, and he confessed that he was going into my room to ‘inhale my aura.’ I point-blank asked him if he’d been going through my clothes and underwear drawers, and he said, ‘I may have done that a few times.'” Yikes!
Luckily for Smith, she had an opportunity to rent another place in the West Village. “As quickly as I could, I moved in there.”
Lesson learned: Know when it’s time to move out.
“When you find out that you live with someone who is undesirable—whether they’re a crank, a criminal, or a creep—it’s best to cut your losses and move on as quickly as you are able,” says Reiss. “In the meantime, put a lock on your door or call the police if your roommate’s behavior rises to the level of a crime.”
Nickels, dimes, and security deposits
A few years ago Jewel Elizabeth rented a room in a two-bedroom apartment with a woman who had the lease in her name. It turned out the woman was rather crazy in a “Single White Female” way. She would tally up the “expenses” and charge Elizabeth ridiculously minuscule amounts like $2.47 for floor cleaner or $1.27 if you drank a Coca-Cola from the fridge.
“She left Post-it notes everywhere to tell you how to close the doors or put away dishes or what time you should go to bed,” says Elizabeth, who currently lives in New York City.
When she moved out a month later, her roommate kept $692 of her $900 security deposit as a cleaning fee. Elizabeth took her to small-claims court. But the judge said she couldn’t rule in Elizabeth’s favor because they didn’t have a contract that said Elizabeth would get the deposit back.
“There was nothing the judge could do. But I’m still glad I took her to court anyway,” she says.
Lesson learned: Spell out the terms of your rental agreement on paper.
“Whenever you hand over a security deposit, you should always have something in writing—signed by them—that spells out how you are supposed to get it back,” says Reiss.
June 27, 2017 | Permalink | No Comments
Tuesday’s Regulatory & Legislative Roundup
- Ben Carson’s fellow Republicans are pleading with him to revisit HUD’s 2017-2018 budget. 23 Republican Congressmen claim there is not enough funding for homeless citizens across the country. Additionally, they urge Carson to revisit the Obama’s “Housing First” program because it eliminated a great deal of homelessness issues.
- The Federal Housing and Finance Agency released its foreclosure prevention report for the first quarter of 2017. So far, Fannie Mae and Freddie Mac participated in approximately 50,000 foreclosure prevention actions with homeowners across the U.S. Additionally, over 2 million homeowners in the U.S. have successfully had their loans modified.
June 27, 2017 | Permalink | No Comments
June 26, 2017
FHFA’s Asks from Congress
The Federal Housing Finance Agency released its 2016 report to Congress. Of particular note are its legislative recommendations. The first is one that I and every other housing policy analyst has been saying for years. The second two are very technical, but also very important to the long term health of the mortgage market.
Housing Finance Reform
The Enterprises have been in conservatorships since September 2008. These conservatorships are unprecedented in duration and scope. While a number of important reforms have been made to the Enterprises during conservatorship, FHFA continues to believe that conservatorship is not sustainable and that Congress needs to undertake the important work of housing finance reform.
Barriers to Investor Participation in Credit Risk Transfer Transactions
Under FHFA’s annual conservatorship scorecards, the Enterprises are working to transfer to the private sector a substantial amount of the credit risk they assume in targeted loan acquisitions. This credit risk transfer market is relatively new and evolving and relies on ongoing investor interest and ability to purchase the credit risk. FHFA has previously identified several statutory impediments which, if addressed, could avoid unintended consequences for some types of investors and thus help to expand investor participation in Enterprise credit risk transfer transactions. FHFA continues to believe that these statutory impediments should be removed.
Examination of Regulated Entity
Counterparties FHFA’s regulated entities contract with third parties to provide critical services supporting the secondary mortgage market, including nonbank mortgage servicers for the Enterprises. While oversight of these counterparties is important to safety and soundness of FHFA’s regulated entities, it is currently exercised only through contractual provisions where possible. In contrast, other federal safety and soundness regulators have statutory authority to examine companies that provide services to depository institutions through the Bank Service Company Act. The Government Accountability Office has recommended granting FHFA the authority to examine third parties that do business with the Enterprises.37 The Financial Stability Oversight Council also made a similar recommendation in its 2016 Annual Report. FHFA concurs with these recommendations. (63)
June 26, 2017 | Permalink | No Comments
