Don’t Let another Housing Crisis Seize Wealth from Black and Brown Families
The United States stands on the precipice of a housing and eviction disaster manufactured by racial capitalism, exposed by the pandemic, and exacerbated by poor policy decisions. Nearly 30 million renters are at risk of eviction in the coming months and mortgage delinquencies are increasing. Eviction freezes are beginning to expire, and there is no end in sight to rising coronavirus cases or job losses.
In the months since the pandemic began, Congress has failed to enact transformative policies whose scale matches the severity of the concomitant public health and economic crises. Congress offered a constrained response while millions of people lost their jobs and sources of income (in many cases, permanently). The one-time economic stimulus check of $1,200 was considerably delayed so that some eligible recipients still haven’t received their money. The $600 weekly federal unemployment benefit, which some criticized as too generous, is set to expire at the end of this week. Banks’ racist implementation of the Paycheck Protection Program failed to deliver relief loans to Black-owned businesses and their employees. A second round of PPP funding earmarked for community development financial institutions (CDFIs) and credit unions has been viewed more optimistically.
Today’s housing and eviction disaster has haunting parallels to the foreclosure crisis that precipitated the Great Recession in 2008, when public government put private finance in charge of the recovery for a recession it had created. During the Great Recession, government incentivized corporate investors to purchase single-family homes on which banks had foreclosed. Oftentimes, these were homes for which borrowers were tricked into taking out subprime mortgages despite being eligible for better interest rates. Accelerating the societal shift from owning to renting, corporate investors purchased and converted these foreclosed single-family homes into rental properties. Nearly 10 million homes were foreclosed during the recession. Before 2008, only 1 percent single-family homes was purchased by corporate investors. This number rose to nearly 7 percent in 2012.
These new Wall Street Landlords entered communities across the country to convert families’ misfortunes into lucrative real estate investments and extract wealth via home equity. Then, since profiting from foreclosures wasn’t enough, they created another housing and eviction disaster by raising rents and displacing tenants at significantly higher rates than smaller “mom and pop” landlords. Wall Street Landlords did this during the height and aftermath of the worst economic crisis in modern history at the time — doubling down on profits at the expense of people.[1]
Racial capitalism is punishing and exacting, and it is especially so during crises.
Racial capitalism is punishing and exacting, and it is especially so during crises. The Great Recession’s foreclosure crisis was racialized and gendered. White, wealthy investors — corporations primarily led by men — used the foreclosure crisis as an opportunity to seize wealth and economic power from Black and Brown communities. Corporate landlords scooped up whole communities in cities like Atlanta and Detroit, with high percentages of Black and Brown residents. The Great Recession accelerated the widening of the racial wealth divide as Black families lost half their wealth. Targeted by banks and lenders for subprime loans, Black and Brown women in particular lost substantial wealth. In 2013, single Black women with a Bachelor’s degree held median wealth of $5,000 — nearly half the $8,000 held by single white women without this degree.
The mechanisms that were activated during the Great Recession may enable swift and efficient wealth extraction in response to the impending housing and eviction disaster. So far, the Great Recession is serving more as a blueprint for the Pandemic Recession’s policy responses, often repeating past mistakes as opposed to avoiding them. Policymakers have again looked to private finance for help and bailed out corporations before families whose relief has been practically nonexistent. Wall Street Landlords still collectively own hundreds of thousands of single-family homes and properties that they purchased during the Great Recession. Invitation Homes — one of the largest investors and which was a subsidiary of Blackstone until the company sold its shares in 2019 — still owns around 80,000 single-family homes nationwide. And these investors are poised to take advantage of foreclosures again.
Decisive and ambitious policy actions are needed to prevent another housing disaster and to stave the flow of Black and Brown wealth into white pockets.
Congress must act decisively and ambitiously to prevent another housing and eviction disaster and to stave the flow of Black and Brown wealth into white pockets. Moratoriums on evictions, debt forgiveness, and rent forgiveness throughout the pandemic are a start, as is enacting a Homeowner and Renter Bill of Rights. Coupled with paid sick leave, universal basic income, and an expanded federal unemployment benefit, these policies collectively begin to match the severity of looming housing and eviction disaster.
It may take bold and, what is perceived by some, radical action for advancing the policies necessary to prevent disaster, and especially to unequivocally protect Black and Brown wealth. Rather than doubling down on the blueprint of racial capitalism, the country has an opportunity to revision ways for building a stronger economy with justice as its foundation. An economy that puts people over profits. The high costs of the Great Recession’s foreclosure crisis — disproportionately paid by Black and Brown families — should make the need for today’s ambitious response crystal clear.
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Notes
[1] The exact amount of wealth extracted from Black and Brown homeowners by corporate landlords following the Great Recession is difficult to pin down. Though, research by Keeanga-Yamahtta Taylor provides an extensive historic account of how whites extracted wealth from Black and Brown families. Research by the Samuel DuBois Cook Center on Social Equity at Duke University and the Nathalie P. Voorhees Center at the University of Illinois-Chicago estimate that between $3 and $4 billion were extracted from Black families in Chicago during the 1950s and 1960s, through predatory contract agreements. Recent research by Eric Seymour and Joshua Akers indicate that Black census tracts account for 37% of the homes purchased by investors Harbor and Vision from Fannie Mae’s real estate-owned (REO) sales between 2008 and 2016. The NY Times reported that Wall Street’s real estate investments were a $60 billion market.
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Terri Friedline is an Associate Professor of Social Work at the University of Michigan, a Faculty Affiliate with U-M’s Poverty Solutions initiative, and an appointed member of the Consumer Financial Protection Bureau’s Academic Research Council. She is the author of a forthcoming book, Banking on a Revolution: Why Financial Technology Won’t Save a Broken System. @TerriFriedline
