While Communities Move to Claim Vacant Homes for Human Need, Obama Kicks Off Plan to Sell to Wall Street
“What has taken place was not only predictable, it is a consequence of the very structure of the housing system and financial system,” says Michael E. Stone, Professor of Community Planning at the University of Massachusetts, reflecting on the ongoing foreclosure fallout. Ten million families have already been evicted from their homes as a result of foreclosure, while another 8 to10 million more may join them, according to industry expert Laurie S. Goodman of Amherst Securities Group in a late 2011 testimony delivered to the Senate.
The Obama administration and Congress have done very little to date to put a stop to this massive displacement of hard-hit families or address the structural conditions that led to this nightmare for so many families in the first place. Just as communities begin to gain steam organizing to build the community power necessary to take back their neighborhoods – neighborhoods that, in many places, have been left sparsely populated and speckled with vacant homes held by banks and government agencies – the administration has kicked off a plan to “save the housing market” that will fly in the face of these community efforts.
The plan is to sell government-owed foreclosed vacant homes to large real estate investors with the “financial capacity” to buy in bulk and manage the homes as rental properties. If this plan “works,” the banks say they will follow with their own bulk sales.
Those positioned to benefit from this massive redistribution of what is now publicly-owned land and housing resources: Wall Street and the same profit-driven real estate giants that just settled with the 50 State Attorneys General for $25 billion for taking advantage of vulnerable communities through predatory lending and engaging in illegal practices like "robo-signing." As a recent New York Times article notes, Wall Street’s publicly-traded real estate companies, Real Estate Investment Trusts (REITs), are “salivating at the opportunity to buy perhaps thousands of homes at deep discounts and fill them with tenants.” (The discount, estimates the Huffington Post, will be significant, at roughly 20-30 percent below market value).
REITs are designed to derive profit for investors from rents and are poised, after 10 years of rapid growth, to make a killing in the coming post-foreclosure years. REITs are already boasting about the huge returns they expect to make off renters. Despite these bald statements, Ben Bernanke of the Federal Reserve argues that turning over available and publicly-owned housing stock to these same investors will "lower rising rental prices" and "ease the cost burden of renters." But there is little supporting evidence that Wall Street landlords can be relied on to meet needs before profits, let alone to show greater respect to the dignity of renters than they have exhibited to homeowners.
With the shift of mortgage finance from Savings and Loans institutions to Wall Street’s capital markets and the creation of new hedge funds and financial instruments to maximize profits for Wall Street investors, home prices rose 188 percent while most people’s wages were flat or falling. The growth of sub-prime mortgages (loans with unbalanced terms that punish “high risk” borrowers with volatile interest rates, balloon payments and so on) soared , from 5 in 100 mortgages in 1994 to 1 in 5 in 2006.
It is true that we have a serious affordability crisis that has been largely ignored in the rental markets. Nearly 50 percent of all renters are "rent burdened" (pay more than 30 percent of their income) and half of those are "severely burdened" (pay more than 50 percent). Or, figured another way, 50 percent of all renters cannot afford their housing costs and a conservative estimate of other basic essentials like food. Rental prices in all major U.S. cities are far beyond minimum wage earners. In fact, for every 100 families that needs an affordable unit, there are only 23 available. However, our need for deeply affordable housing is not likely to be met by those seeking the highest possible returns on their investments.
This spring, communities across the country have begun to identify a root cause of displacement and lack of basic and decent housing: treating housing as a commodity instead of a human need. Many communities are shaping alternatives based on a human right to housing–some communities by engaging in eviction blockades and mobilizing neighborhood-wide “eviction free zones,” others by instituting a people's moratorium by disrupting foreclosure auctions with song, and others still by rehabbing vacant homes and moving in homeless families. Their goal? To establish the terrain of the "home" as not an investment opportunity, but a fundamental need and right. These powerful and beautifully executed efforts empower communities to decide their future needs and to reclaim from Wall Street's stronghold the places where they live, work, worship and play. But instead of ensuring housing is used to meet the needs of people and communities, the administration will be fueling profits through market speculation.