The other housing crisis

MOST OF the news coverage of the housing crisis has focused on the plight of homeowners: declining home sales, the continuing and unabated rise of foreclosures on single-family homes, and the growing number of mortgages that are "under water"--that is, the loans are for more than the actual value of the homes, with the decline in home values.

But there's a hidden housing crisis that gets little or no attention--the increasingly difficult struggle of millions of people to find affordable rental units, and to pay the rent once they do find someplace to live. Their numbers are only growing as the wave of foreclosures continues.

The unraveling of the housing market is having severe consequences for the economy as a whole, with no end in sight. Almost 3 million households were in foreclosure in 2009, a 21 percent increase over 2008. Another 3 million or more homes will be foreclosed on in 2010, as the unemployment crisis drags on, and people are simply unable to afford bloated and overpriced mortgage payments.

The so-called "loan modification" programs instituted by the Obama administration have largely failed to help. The banks have no incentive to lower monthly payments and have thus created multiple obstacles for the average homeowner to overcome to even find out if they qualify.

In late August, the administration unveiled yet another program that is supposed to save homeowners--by helping homeowners who are "under water" on their mortgages and the creation of an "emergency loan homeowners bank" to help the unemployed keep their homes.

The administration is playing a shell game with people's housing debt, shifting it around without actually getting rid of it--while the big banks continue to boast profits, thanks to the infusion of taxpayer funds from the Wall Street bailout.

The end result is that millions of people are losing their homes--and becoming homeless or rejoining the ranks of the tens of millions of renters and tenants across the U.S.

But while the administration has made efforts--weak ones, but efforts nonetheless--to assist homeowners, the crisis in affordable rental housing and the lack of subsidies for those who need them goes largely ignored.

Only 4.5 million renters in this country receive some level of government subsidy. That's woefully inadequate considering the tens of millions of people who struggle to keep a roof over their heads.

And the crisis for renters will only get worse as unemployment and underemployment continue, alongside rising poverty rates.

According to the federal government, if you spend more than 30 percent of your income on rent, your housing is considered "unaffordable." Yet most people in major metropolitan areas can't imagine paying less than 30 percent of their income on rent.

In Chicago, for example, 50 percent of renters spend more than 30 percent of their income on rent, and more than 30 percent of renters spend 50 percent of their income on rent. In all there are more than 12 million renters who pay more than 50 percent of their income toward their rent.

According to one report, there is no state in the country where a minimum-wage earner can afford the market rate on a one- or two-bedroom apartment. In 30 states, more than two full-time minimum wages jobs are needed for a two-bedroom apartment.

The crisis in housing was illustrated graphically recently when more than 30,000 people in Atlanta lined up to just to get an application for Section 8 housing vouchers--a federal program that provides rental subsidies to low-income families and individuals. The news media focused on the fact that the crowd was mostly Black, and that riot police were called in to quell the threat of unrest--while ignoring the larger story of the level of desperation for affordable housing that would lead people to endure 100-degree heat just to get an application for housing subsidies.

Just weeks before the Atlanta debacle, more than 40,000 people in Chicago signed up online to enter into a lottery--in the hopes of being placed on the Chicago Housing Authority's Section 8 waiting list.

The dearth of affordable housing together with the deteriorating economic situation is leading to more homelessness.

According to the Department of Housing and Urban Development (HUD), the number of families in homeless shelters increased over the last two years from 131,000 to 171,000. In total, according to estimates, there are more than 3 million people who experience homelessness in the U.S. during the year.

Adding to the problem of homelessness and "housing insecurity" is the rising number of evictions across the country. Last year, there were 30,000 evictions in New York City. In Chicago, landlords filed more than 50,000 eviction cases--an increase of 15,000 from 2005.

According to the Lawyers Committee for Better Housing, Chicago's eviction court has become something akin to a conveyor belt. In a study conducted on fairness in eviction court, the committee found that the average length of an eviction trial without legal representation was one minute and 44 seconds--down from the three-minute trials that were the average in 1996.

Evictions are having a disproportionate impact on African American women. One study found that in major metropolitan areas, 40 percent of those being evicted were Black women. Black housing woes are bound to get worse as the jobs crisis continues to grip Black America--officially, unemployment for African Americans is 16.3 percent, nearly double the overall rate of 9.6 percent.

THERE IS a clear and desperate need for more affordable housing, tenant protections from evictions and a major expansion of publicly subsidized housing. Instead, the Obama Administration is pursuing a strategy of privatization and budget cuts.

The most recent attempts to privatize public housing are to be found in the Obama administration's proposal for the Preservation, Enhancement and Transformation Rental Assistance Act (PETRA). This proposal is the brainchild of HUD secretary Shaun Donovan.

After 40 years of neglect, public housing buildings are in a state of disrepair, with estimates for what it would take to make structural repairs running between $22 billion and $30 billion. But Donovan argues that in the current political climate--you know, the one with a Democratic president and the biggest majority in Congress in a generation--HUD cannot possibly ask for money to make needed repairs to public housing.

Under PETRA, local housing authorities would have the choice to opt into a program where they could take out private loans--from banks which wouldn't have any cap on interest rates--for the rehabilitation of buildings, and then charge up to 10 percent over market rents for the apartments.

All of the tenants in the buildings would receive Section 8 vouchers, paying 30 percent of their income toward rent, while the government subsidizes the balance. The money made from the higher rents would go to pay for regular upkeep of the properties--or so Donovan and HUD claim.

While local housing officials have the "option" to participate, massive cuts in the HUD budget ensure that there will be no money for maintenance or basic housing assistance if housing authorities don't sign on.

This year's HUD cuts $551 million from housing assistance for the elderly and $200 million cut for housing programs for people with disabilities. The Obama budget also cuts funding for local and state community development grants, from $70 billion last year to $4 billion this year.

So local housing authority officials have an incentive to sign up for Donovan's pet project. But PETRA is a disaster waiting to happen. By forcing local authorities to take out private loans and mortgages against the value of properties, they run the risk of those properties being lost to the banks in the case of default. Given how strained state budgets are, it isn't at all inconceivable that housing authorities could fail to meet payments to the banks, especially since there are no caps on interest rates.

PETRA is only the latest attack on public housing. Some 4.5 million Americans receive rental assistance and subsidies in some form from HUD--far short of the tens of millions more who need help. HUD's entire budget for all of its housing programs is less than $50 billion--while the cost of the home mortgage interest deduction in lost federal income tax revenues will be more than $100 billion this year, and is expected to rise to $131 billion by 2012. This shows how the government has always prioritized promoting single-family home ownership, while ignoring the hardships encountered by renters and tenants.

PUBLIC HOUSING has only been built or expanded on any significant scale in two specific historic circumstances.

One of those circumstances is mass struggle and social upheaval. The original legislation for public housing programs in 1937 was a direct result of both the collapse of the housing market and the "eviction riots" that ensued when greedy landlords attempted to throw out tenants who were behind on rent.

The social upheaval of the late 1960s also produced a major overhaul in federal housing policy, with the creation of HUD, a government ban of racial discrimination in all housing and a federal commitment to build 6 million units of new housing as part of Lyndon Johnson's Great Society anti-poverty programs.

The other expansion in the construction of public housing came in the 1950s and 1960s when "urban renewal"--popularly known among African Americans as "Negro removal"--destroyed Black neighborhoods. To prevent African Americans from moving into white areas, the federal government built housing projects in segregated neighborhoods to house the displaced Blacks. Historian Arnold Hirsch referred to this period as the "making of the second ghetto."

At most other points, public housing programs have been financially starved. The influential real estate industry always viewed public housing as anathema and a competitor with the private housing market. It actively sought to undermine funding and expansion.

In fact, the first public housing developments were so attractive that they attracted all kinds of workers to them. To help dissuade workers from wanting to live in public housing, new construction projects were ugly, nondescript high-rises, placed in isolated and racially segregated areas. To ensure that only the poorest of the poor would live in these projects, income requirements were dropped to the lowest possible level, which excluded the bulk of the working class from access to publicly subsidized affordable housing.

But while sociologists have made careers hypothesizing that the concentration of the poor led to the social disintegration of public housing developments, less attention has been paid to the malfeasance and deliberate negligence of basic maintenance by both local and federal housing authorities, which began almost as soon as the developments were created.

While most people know the demolition of public housing as a recent phenomenon that began in the 1990s, the first high-rise projects to be demolished on live television were the Pruitt-Igoe Homes in St. Louis in 1971. Maintenance in Pruitt-Igoe was ignored for years after they were built in the mid-1950s, but instead of investigating the budget cuts that led to maintenance failures in the projects, residents were accused of having loose morals. This is a story that would be repeated for decades to come and helped to establish the ideological and political attack on public housing.

That assault has continued unabated for almost 40 years--and the corollary to the attacks on public housing was the promotion of privatization.

Privatization of public housing gained steam with the Clinton administration's HOPE VI program. HOPE VI offered local housing authorities billions of dollars to tear down existing public housing units and replace them with so-called "mixed housing," including a range of units for subsidized public housing and market-rate units that would be privately owned.

The program was a disaster for poor people in need of housing. In the last 15 years, 150,000 units of public housing have been destroyed while only a fraction of new units have replaced them.

In Chicago, while the city readily took federal money and summarily destroyed most of its public housing projects, the Chicago Housing Authority was much slower in rebuilding new units--the city tore down 39,000 units, but built only 25,000 new ones to replace them.

Moreover, there was nothing in the HOPE VI legislation that guaranteed people who lost a unit in public housing would get a new one. Instead, strict rules and regulations were put in place to weed out tenants. The new rules for even being put on the waiting list for new housing included work requirements, mandatory drug testing and background checks. The rules for living in new housing include bans on "loud music" and "barbeques."

THOSE WHO didn't qualify for the new housing or were on the waiting list have been given housing vouchers, but for many, vouchers don't necessarily lead to an improvement in their search for housing security.

Multiple studies show that landlords discriminate against people with Section 8 vouchers--a disproportionately African American group in urban areas. While some cities, like Chicago, have passed ordinances banning discrimination against those with Section 8 vouchers, landlords can simply claim that poor credit or other reasons disqualify subsidized tenants. The result is that voucher users often end up in poor and segregated neighborhoods where vouchers are readily accepted by landlords as guaranteed income.

But even when people can find housing, Section 8 has other pitfalls. In order for tenants to maintain their vouchers, they have to endure annual home and building inspections. If the inspection is failed for whatever reason--and whether it's the tenant's fault or the landlord's fault--the tenant is forced to move, an expensive and disruptive venture under the best circumstances, let alone for people on a fixed income.

In poor communities where landlords are less interested in maintenance because they are slumlords or because they are working class themselves and can't afford to make repairs, Section 8 tenants are less likely to complain about conditions in their apartments for fear that a failed inspection will force them out.

Federal housing policy has always favored private property, developers, bankers and the real estate industry.

In part, this reflects the way that homebuilding and selling has played a central role in the U.S. economy since the 1930s. Whenever there is a lull in the economy, real estate is always seen as an immediate economic stimulus. Ideologically, single-family homeownership is promoted as the ultimate objective for Americans--and is used to justify saddling millions upon millions of people with a huge debt burden for the rest of their lives. Meanwhile, affordable and subsidized housing is underfunded at best, and at worst ignored.

As more people succumb to debt and lose their homes--rented or owned--the question of where ordinary people are to live is becoming a real and urgent one. The last two historical eras of sustained social struggle resulted in historic amounts of resources funneled into housing construction and subsidies. It will take no less to create new funding resources for the housing that is desperately needed by a growing number of workers and the poor.