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- Council Committee Passed the Freeze
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- My first trip to the public library
- Fight digital exclusion
- What if half of Philadelphia didn't have roads?
Gentrification: putting your money where your mouth is
Submitted by Ray Murphy on Sun, 07/15/2007 - 7:18pm.
After such an intense amount of time and attention devoted to the primary election, I have been catching up on other things in my life. For me, that has meant a more organic examination of the issues that matter to me the most as a person and as a citizen.
What I mean by that is that as a political professional or a hobbyist, it’s easy and natural to take an interest in ALL of the issues and stories emerging from the political world, but in terms of the real and concrete needs that I face myself as a citizen, a pared down list of priorities emerges.
For me, one of the big ones is housing.
Gentrification in my part of West Philadelphia is a problem, enough so that I can not afford to buy a home in an area that used to be famous for housing activists and social justice practicioners, among others. Of couse gentrification here, in a neighborhood that was white, Irish and middle-class until the 60’s and 70’s, and has been multi-income and multi-racial since, is not quite the same as it is in other parts of the city. In Grays Ferry, Fairmount, Bella Vista, Fishtown, Brewerytown and now the area near Temple University, more text-book gentrification has been occurring.
In those neighborhoods, lower income working families in neighborhoods have been or are being almost systematically replaced by middle and high income earners. Not all of the native populations have been forced out of course, some have taken advantage of huge increases in home values to accrue a bit of wealth. However, in the this still tight housing market, those who are selling their homes to the highest bidders aren’t very likely to move anywhere that is still in the city and be able to afford to buy a house with the money they get.
The potential Manhattan or Paris -ization of Philadelphia may seem a distant reality, but already gentrifcation has ravaged some neighborhoods and further displacement or lack of opportunity for decent housing worries me.
In opposition to all of these big changes and sometimes disturbing trends, I learned about something cool from an email from Bread & Roses Community Fund a week or so back:
Recently…a Bread & Roses supporter gave us $10,000 from the sale of their West Philadelphia home to be used to fund housing justice and affordable housing work.
snip
Our donor made enough money from the sale of their home than they were able to recoup their original investment, give money back to their long-time renters and give to Bread & Roses Community Fund so that we can continue to fund organizations who are working to make the goal of home ownership and affordable housing achievable for all Philadelphians.
Now, I am not sure I could be so selfless, but I gotta give credit to this anonymous donor for doing something really cool. I did some digging, and I happen to personally know the donor involved here—she’s done some great activist work around the city and sold her house because she’s moving away. She’s also about my age.
Me and this anonymous donor, and many of you reading this, are a part of a generation of Americans that will switch jobs many more times over the course of our careers, and earn less money, than the members of the generation that precede us.
Which is why, if I could make a $10 or $20 K profit on the sale of a house, I’d seriously consider keeping it. After all I cannot buy a house in the part of West Philadelphia where I grew up and where I live now, because my varied employment has not allowed me to accrue the level of savings I need to make a down payment and I don’t have a partner who earns more than I do or parents who can just buy one for me.
That all said, the commitment of Bread & Roses’ anonymous donor is pretty damn amazing.
We need some policy-based solutions to radically alter Philadelphia’s gentrification and development problems—like inclusionary zoning, increased contributions to/expenditures from the Affordable Housing Trust Fund and out-of-the box ideas like young homeowner assistance programs and changes to the tax abatement program.
However, making a personal sacrifice from the sale of a home whose property value has increased due to gentrification is pretty damn cool.
In a similar situation? Give your dough away here at Bread & Roses’ website.
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Zoning Code Commission names most of members
As noted at All for the Taking.org, the Zoning Code Commission named most of its members this week. The rest will be announced (I believe there are five more out of twenty) before mid-august.
A revised zoning code could be a boon for everyone including struggling neighborhoods, or it could be another tool for developers to enact their will. This will be decided by the Zoning Commission over the next year. Note that one of those named to the Commission is John Westrum, CEO of Westrum and the Brewerytown dev, while only one person from a neighborhood or community association was included.
This is something we all need to pay attention to. Most planners I have talked to roll their eyes when "community input" is mentioned in development matters. Development is never a situation of absolutes, but if planners, developers, and politicians are the only ones guiding this process it will mean more opportunities for gentrification and displacement.
"A revised zoning code could
Agreed x 1000.
Here's the current list of named members, pulled from Matt Blanchard's great reporting over at planphilly.com.
As an aside, interesting that we get representation of the various ethnic groups/communities through their respective chambers of commerce as opposed to groups more directly representational of the interests of those communities.
Jennifer
be more specific
aaron, tell me more about how a revised zoning code help out neighborhoods struggling with gentrification.
Well it wasn't my thought
So I don't know if this is really responsive.
But very basically there'd be greater weight on the planning end, with greater opportunity for some kind of formal involvement by interested constituencies (including existing residents' groups) in the form and arc of development.
To a certain extent, any revised zoning code will help bring that about because zoning decisions will be less based purely on discretion by the Board and/or political influence.
But a good revised Code with some greater institutional role for the Planning Commission (which itself can and I imagine should be restructured for its larger role and to remedy that problem of detachment from community perspectives/input) could help take back a good chunk of the control that's been in the hands of politically connected developers.
ps Hi Ray, it's good to have you putting this stuff up.
pps Seriously, anyone who makes any charitable contributions or has thought of doing so or even hasn't --- go to the Bread and Roses site and look at what they fund and do. It's a truly amazing foundation that let's you direct whatever money you might have to give to powerful local projects that often wouldn't have access to funding from other sources. Even a really modest donation has an outsize impact.
Jennifer
rules for radicals
hey jennifer, it's good to be back (not that i had a choice with Dan strong arming me--do you know i capitulated to him for dinner, and he didn't even buy my meal?). i am not challenging aaron--i am looking for more specific tips. like, obviously it's good not to have crooked people on the board, but beyond that, what specific things could we get a new zoning board to do to specifically combat gentrification?
haha the heading is funny
Because i've been promising to write something for a couple days opening a conversation about organizing tactics and structures. I was thinking about it reading a chapter of this book on neighborhood-based initiatives to combat poverty, that talked about Saul Alinsky's start in Chicago and some of the competing organizing structures there and their outcomes.
The thought is an offshoot of some of the conversations about 'alternative' ward structures and now it sort of reemerges with your questions about transit riders' unions and some of my thinking about the current relative lack of organized tenants' movements here.
In terms of how to get some progressive zoning changes through this process, I really don't know about the how. A weird issue is going to be how the timing interfaces with policy changes on the table for a new Nutter administration.
(Just to clarify, and apologies if this is obvious and I'm misunderstanding the language you are using, but we're not replacing the zoning BOARD, we're basically going to be drafting a whole new CODE. Since the current one is so outdated, it's just variances on top of variances, and they don't follow the actual on-paper zoning that much--hence my references to the very wide discretion of the Board and the weight of political connection in getting approvals. If you have a modern Code, the Board has less discretion because they are pretty much bound to follow the written Code more often. But in creating the new Code you also have a chance to--theoretically--restructure the balance of power between the Planning Commission and the Zoning Board, as well as work in some progressive zoning/planning ideas.)
Also, ha, I think he even called yr dinner a date so you really should have been taken better care of!
Jennifer
no, i got it wrong (paging jeff or other housing coalition folks
so the code is being rewritten. i see.
so could the newly written code include inclusionary zoning for instance (inclusionary zoning is the idea that developers have to develop affordable housing or make a contribution to affordable housing when they do bigger projects)?
Yeah, that's a question
and hopefully one of those guys can answer. But that's what I meant about wondering how the timing will interface with some of the more progressive and exciting Nutter proposals on the housing/development front.
I THINK that inclusionary zoning is the sort of thing that'll get pushed by Nutter in some form and passed in Council apart from the Code redrafting, but that's not necessarily true.
Maybe Kenney can comment on some of this process, he's been right up there talking about the inclusionary zoning piece for a while.
Jennifer
don't forget your bigger point
i just want to reaffirm Jennifer's bigger point: some of us need to stop blogging on every issue or forming/joining every coalition.
there are very specific constituencies that need to be organized: septa riders, folks in need of decent housing (a group which includes many of us younger philadelphians who are priced out of the housing market/dealing with shitty landlords), people who need healthcare.
There is som good organizing going on at the issue/constituency level, but not enough. And relying on a colaition to solve all your problems is silly when the elements of a base for a coalition are missing. It's also silly to rely only on the people we have elected--even if some are quite good--because again, a base constituency is needed.
Oh, I forgot
The back end of that comment is that while a modernized zoning code is a good in itself, there's definitely a risk that we could institutionalize more of the same to a certain extent (obviously that's the point being made by pointing out the placement of Westrum et al. on the committee).
I think for anything particularly progressive to happen, at least oversight--and to the extent possible, influence though organizing and reporting--is probably necessary.
I don't know what's possible really, though, or how to actually go about trying to influence the process. There's certainly some infrastructure in place from the alternative Casino planning process (PlanPhilly, etc) but does that or can that translate into anything?
Jennifer
timely info and standing
the most basic thing is access to information about developments that are coming to neighborhoods.
secondly is the ability to have standing in zoning disputes with developers. zoning is one of the only cards communities have. a new zoning system could be created to make it easier or more difficult for communities to have a say.
Be Careful What You Wish For
If the new zoning code does what it's intended to do, standing shouldn't be as significant an issue. The point of rewriting the code is to promote as of right development -- i.e., development that doesn't require a hearing before the ZBA.
I suspect that some of the most vocal proponents of a revised code haven't thought through all of the likely consequences. If the rewriting goes as it should, community input will be at the front end of the process; input on individual developments will, on the other hand, be eliminated.
While I see that as a positive outcome, I'm not certain everyone would agree.
If the rewriting goes as it should
Making sure the first part of this really and sufficiently happens is key.
Jennifer
Exactly. Then there would be
Exactly. Then there would be uniform standards with predictable results. Residents would know what to expect in their neigborhoods, and developers would know what's acceptable before beginning a project.
The drafters should use the Chicago code as a model. What a terrific job they did.
not to put words in anybody's mouths
... but one obvious way that a zoning code might help would be if it required mixed-income housing developments (or even contributions to a housing trust fund for the city to distribute). but nothing about that list of folks makes me think such ideas are on the way...
acm
"Never doubt that a small group of thoughtful committed citizens can change the world. Indeed, it is the only thing that ever has."
— Margaret Mead
another example
a year or two ago, the wawa at 16th and walnut closed. Now, the convenience store at 12/walnut closed. I am not sure how to do this, but one thing a zoning code could do in a very small way is make sure that basic services (milk, bread, eggs, cigarettes, diet coke, newspapers, gum) in neighborhoods are somehow provided for in the face of rapidly rising real estate values.
certainly the lack of good grocery stores in tons of neighborhoods, despite the great work of the food trust, is a huge problem. and good restaurants in huge swaths of the city are also missing.
Ray, you pestered me to eat
Ray, you pestered me to eat dinner, you buy. That is the rule.
Anyway, on gentrification, I think we can all agree that if the dichotomy is managing economic growth and rising home values vs. managing economic decline, we would choose growth. Obv. it is not as simple as that, and W. Philly is somewhat unique in that it not only had the market pushing it, but also added incentives (school, loans) from a private institution. But, I think the gentrification of neighborhoods is a little more nuanced than 'ravaging' would make it seem. The phenomenon of me not being able to buy a house in the same neighborhood I grew up in (and more so for you) is very real, and sucks, but I am pretty happy that people want to live in Germantown, and that my parents have a big chunk of equity if they ever need it. Basically, while I am concerned about people being able to buy where they grew up, I am much more concerned about people already there staying, and holding on to the equity that they are accumulating.
The only studies I have seen about gentrifying neighborhoods (they are old at this point, and I need to re find them, but one is about low-income renters in NYC, and another is about low-income homeowners in Boston) have generally indicated that when values rise, lower-income people actually stay at a higher rate then when they are stagnant. In my perfect world, along with inclusionary zoning when we do get new construction, I would much rather focus on the people already in these neighborhoods than worry about who wants to buy in.
Homebuyer assistance programs, including settlement grants and the like, are programs that the slogan 'the road to hell is paved w/ good intentions' is made for. Putting people on economic margins into homes they would otherwise be unable to afford sounds great, and sometimes works out. But it is also a fact that it has led to a stunning amount of mortgage foreclosures in Philadelphia. I have worked on a study of Philly foreclosures, and Philly predatory lending, and besides the crappy loans that we can no longer outlaw thanks to Dwight Evans and Vince Fumo, a big chunk of foreclosures came from the Delaware Valley Mortgage Program. The DVMP was a settlement where banks targeted redlined neighborhoods, and extended credit where they would not have otherwise. It created a ton of new homeowners, and banks and politicians smiled and posed for the cameras and all was well. And then when the same people started flying into foreclosure, no one seemed to notice. So, did we really do these people a favor in getting them into homes? Not in my opinion.
Here is my housing plan, off the top of my head, that I think would deal with both some of the ill-effects of gentrification, as well as not put people into homes they can't afford.
Instead of focusing on increasing homeownership, I would instead focus primarily on preservation, and personal savings.
First, I think the City should put a lot of money into rehab grants (there is some already, I believe). But, anyway, partner with some City banks who could help administer it, and give people 10k or something in a no interest loan, that could be paid back over 15 years (payments would be really small). Make some residency requirement part of it.
Second, let people, and actively encourage people to pay their real estate taxes monthly or at least quarterly. Right now you can only pay less than yearly if you have already gotten into trouble. That is asinine, and people who don't have their taxes escrowed can really get whacked.
Third, develop a real list of approved Philadelphia contractors that the City would aggressively monitor to make sure they were on the up and up, so that those low-cost loans weren't used for rip-off artists. You could use the City's nascent consumer affairs office or something to develop a list of procedures to help them. The grants/loans could also potentially have some sort of requirement that the work must be performed by Philly contractors, etc.
Fourth, encourage real savings. We of course would love if people could afford homes. But the best way to get people into those homes is to help them save. We should figure out a way to (along the lines of John Edwards' national plan) incentivize people to both save, and to use mainstream financial institutions. Banks make tons from the City and our deposits; we should make/encourage them to do aggressive outreach in the City, and come up with a program to match people's savings. In fact, I would rather that than the Cohen wage tax break for low-income earners.
Fifth, beg, plead, yell and do whatever else to get Fumo and Evans to give us back the power to get rid of predatory lenders in Philadelphia. They screwed us royally, and someone like Evans especially, really screwed the people he represents when he killed the Tasco Bill.
Sixth, along the lines of the Nutter plan, cap property tax increases. Unfortunately, due to the State, we also cannot make this income dependent. But, anyway, cap them until the person sells, so that they are not forced out, and collect them only if they decide to cash out.
Seventh, pass a law that elevates the responsibility that owners of rowhomes and twins have to the neighbors with whom they share a common wall. As too many people know, if your connected neighbors home falls apart, you are really screwed and the best case is to hope for an expensive demolition that stabilizes your common wall. The City pays a ton, the homeowner still staying is basically encouraged to bolt, etc. The City should be much more aggressive in going after these problem homes before they even get there.
Anyway, that was long winded. But, I guess my point is that I think gentrification- which I think about as lower-income people being forced out of a neighborhood- can be dealt with, especially as part of an overall strategy that will help people stay in, and improve their homes.
Quickie
I like many of these ideas.
One group of people I often see being pushed out due to their fixed income are seniors.
I think a "reverse tax-abatement is reasonable." For instance, if you have lived in your home for 20 years, are over the age of 65, retired and/or living on a fixed income, you recieve an abatement similar to that given on new construction. It must be owner-occupied, however. The program could last every 5 years and allow for a simple reapplication process.
This would allow for wealth (someone's home is typically their largest investment) to remain in families and not to be sold when taxes become to high.
I am working to elect Larry Farnese to the General Assembly. Unless otherwise expressly stated, this and every comment or blog I post on YPP and any action I take hereon is solely attributable to me and not Farnese or Friends of Farnese
nice package dan
wrap it up and put a bow on it. i am all for that. how do you make all these things happen?
I do think that multi-racial, multi-income communities are a special thing, and so what is happening in parts of west philly and germantown concern me. Unlike the model spouted off by that horrible Richard Florida (do you how many times I heard him positively referenced on the campaign trail by city council candidates) who basically suggests that you send a group of white "pioneers" into "marginal" neighborhoods (he is obsessed with gays) and flip all the houses and make it all pretty and white, Gtown and West Philly have a long history of maintaining racial and income diversity.
further, not only because i (and you) are personally affected, but even neighborhoods where housing prices have always been lower--like north philly near templ or south south philly--the fact tha housing prices are outpacing median wages of natives IS a problem. You are probably right that incentives and settlement grants are not really helpful in that they create a level of home ownership that is not ultimately sustainable HOWEVER, after so many years of Philadelphians figthing population loss, people who grew up here should be able to buy where they want when they grow up.
Again, in places like South Philly or North Philly, if you can't afford to pay what used to be a reasonable price for a house (let's say $50 to even $150 k for a rowhouse), you might very well end up in the burbs.
so maybe it's not an affordable housing/gentrification question so much as a planning question or a simple economic justice/economic development question, but either way, in addition to making sure we keep people in their homes and capable of maintaining them, how do we plan the character of neighborhoods in the city or is character a market-driven force?
There Goes the 'Hood: Views of Gentrification from the Ground Up
for an interesting recent book on gentrification, i highly recommend this book.
There Goes the 'Hood
Views of Gentrification from the Ground Up
Lance Freeman
http://www.temple.edu/tempress/titles/1827_reg.html
the author, an professor in the Urban Planning program at Columbia University has written extensively on issues of gentrification and has really complicated questions of what gentrification is and how it affects different people. the book consists of interviews with African-American and Latino residents of two New York city neighborhoods, Harlem and Clinton Hill (Brooklyn), two changing neighborhoods. I dont think I can do justice to his findings right now, but they do demonstrate that residents have a lot to gain from gentrifying neighborhoods and yet the changes bring many new problems. in sum - its complicated.
Could be wrong, but I think
Could be wrong, but I think he is the same prof who did the NY study I was talking about.
Low Income People Don't Have Savings Due To Low Take Home Pay
Low income people don't have savings because they have low take home pay. Cutting the taxes of low income people--as the federal and state governments do, and the city government does not--increases their take home pay and thus makes savings more likely.
Subsidies for low-income people tend to be highly controversial, while tax cuts seem as American as apple pie to many moderate and conservative citizens. That is why in the last years of his life Councilman David Cohen's signature issue was cutting the wage tax for low income people to the maximum degree allowed by state law.
The average low income person has a negative net worth in financial terms. That means that they have more debts than assets. Given the high interest rates that creditors pay--and the lower one's income, the more risk of nonpayment to creditors, so the higher the interest rates that creditors tend to charge--paying off one's debts, not savings, makes the most financial sense.
It makes no financial sense for instance, to be paying 28% interest on a debt of $10,000, and to have $10,000 in savings earning 4% interest. The sensible thing to do in this circumstance--all or virtually all financial advisors agree--is to spend one's savings to pay off one's debts.
Low income people don't have
That sounds nice and simple. But then, why don't middle class people have savings either?
Anyway, yes, of course we want good paying jobs to give people more money to take home. And in a perfect world, poor people wouldn't have to pay taxes. However, even with the Cohen tax cut- how much do people actually bring home additionally per week? If they are in a neighborhood that only has payday lenders and check cashers, how likely are people to savings? And, if they are that poor, is homeownership a good choice for them?
Anyway, of course those living below the poverty line and anywhere near it will not be able to save, almost by definition.
A Person With Two Dependents at $20,000 a Year Would Save $600
A person earning $20,000 with two dependents would save $600 a year under the tax cut proposal my father fought for.
Many pay day loans are for about $200. So a $600 savings in taxes would eliminate the need for three pay day loans, and save a lot more than $600 when the interest payments are added.
"Anyway, of course those living below the poverty line and anywhere near it will not will be able to save, almost by definition" explains why giving out grants to match savings does not really benefit low or moderate income people.
The savings middle class people have is almost all in the form of home equity, social security, and, if they are fortunate, pension plans. Rising real estate values (and monthly mortage costs) and rising education costs have pretty much ended the day when people with dependents could have significant bank accounts.
Really, Mark? So, you think
Really, Mark? So, you think a poor person getting 12 dollars extra a week would be saving that up for when they hit those rough spots? That is an interesting theory.
In any case, yet again, we are talking about a housing plan, right? My point is that for increasing homeownership, it is a far better policy to help people save, rather than to put them into mortgages they cannot afford.
sort of Dan
Dan, i am a bit confused by what you are saying. There are different levels of need and different levels of income. People my age and your age who are in some kind of career path may not be able to save $8,000 or $9,000 for a down payment, but we could easily swing mortage payments. Buyin a house is also important to me as someone who might one day like to start a small business, so that i could start investing money i currently pay in rent into future equity.
Now if i bought a house with assistance (like Penn offers to its employees), especially one with an apratment or two in it, I could probably handle any repairs that come along.
Like I said before, I like most of the package you put together above, but I personally would love a program like the Penn Mortgage assistance program that was extended to people like me.
Maybe you could... but what
Maybe you could... but what happens when a pipe breaks or the heater needs to be replaced?
Yes, the reality is that you probably could figure it out- people with a lot of experience with mainstream lending, who grew up with families who had mortgages and bank accounts, and have good paying, steady jobs (or, if they are doing things like low-interest public interest jobs and could 'sell out' if they really needed), and sit firmly in the middle class, can probably get by. Not only do they have income and did they grow up with this as part of their lives, they probably have people they can lean on if they are really, really in trouble.
But while that may be an excellent program, it is not what I am talking about with gentrification- at least in the way I am thinking about it- which is displacing low-income homeowners.
gentrification is not a fixed term
i don't disagree with your take on gentrification, but it is a multi-faceted concept.
housing policy in Philadelphia is failing the city's economy in a number of ways, and you have articulated some fixes for some very clear problems regarding low income housing issues
however, I am personally being failed by a housing market that has outpaced my earnings as are you. therefore, i am suggesting a mortgage assistance program or a change in tax abatements that would serve you, me, and other people who are capable of home ownership but need a boost.
that need not be mutually exclusive with the goal of housing lower income people or the goal of raising wages.
I will say that allowing West Philly and Germantown and other traditionally mixed income neighborhoods to be sold to the highest bidder is problematic not just for me and you, but also for renters in the neighborhood who relied on people like me to earn the income i would need to make a mortgage payment by renting a floor of my theroretical house to them.
in west philly, higher income people have been actively encouraged to move in and deconvert homes with apartments to single family units which has decomposed the mixed income nature of the community here.
It's More A Matter of Paying Off Debts
It's more a matter of paying off debts than accumulating savings. Yes, another $50 a month in take home pay would reduce debts and dependency on pay day lenders and other high interest lenders.
$50 a month is a big deal to a lot of people. State programs giving out less $600 a year to many people--LIHEAP, property tax rebates,for instance--are widely considered to be a big deal too by the beneficiaries.
Of course, other things are more important. Raising the minimum wage to $9.35 an hour by 2010, as I have proposed, would add $84 a week (before taxes) or $4,360 a year to the income of year around full-time minimum wage workers now making a vastly improved, but still inadequate, $7.15 per hour.
I should not have even
I should not have even mentioned the Cohen tax break. Because, in the end, it doesn't have anything to do with housing policies. My point is that shoving people into mortgages they cannot afford is bad policy, period. And it would be better policy to instead take those people, and help them save.
I think you're wrong about the Delaware Valley Mortgage Plan!
The Delaware Valley Mortgage Plan (DVMP) is 3 decades old and is the result of the same type of activism that led to the Home Mortgage Disclosure Act (HMDA) and the Community Reinvestment Act (CRA) from the same time period.
I don't see its relation to mortgage foreclosure rates decades later unless you're suggesting that HMDA and CRA also should not have led to more home mortgages for low and moderate income borrowers and neighborhoods.
If the premise is that "affordable housing" is what you can afford on your own - doesn't that also apply to the GI Bill that built middle class suburbia decades before HMDA and CRA?
You need to study red-lining and mortgage discrimination in that time period before you criticize the DVMP.
But more importantly, what does it really have to do with current foreclosure rates?
WWGjr
P. S. - I do agree that financial literacy and economic self-sufficiency initiatives should have more weight in public policy around government subsidy and corporate charity, but CRA was/is about giving fair lending access to bank depositors - i.e., you shouldn't take our deposits and then refuse to lend in our neighborhood.
I think I am right...
I am not questioning the motives of the DVMP, nor the idea of getting people into homes. In addition, I have studied redlining, and Philadelphia home lending extensively. But, as someone who has probably spent more time looking at actual Philadelphia loans in foreclosure than just about anyone else, I can tell you that in the early 2000s, there were two types of loans generally:
1)Your really crappy, predatory lender. In Philly this initially was companies like Equicredit, United Companies Lending, Household Finance and the like. These days if you looked again, the foreclosures would more likely be from companies like Ameriquest, Option One, Fremont, Household and the recently departed New Century.
2) But, in some of the neighborhoods with incredibly high concentrations of foreclosures- you had something else driving up the number of foreclosures-- Your big Philadelphia institutional bank... that participated in the DVMP. It was crazy to see how many loans in foreclosure in highly concentrated areas were the neighborhoods specifically targeted by the DVMP.
Does that mean the DVMP was a bad intentioned program? Not at all. It was, as you say, a way to strike back at banks who redlined. But, the numbers do not lie- a very high amount of people who had those loans went into foreclosure, and at some point, I can show you them if you like.
How does that relate to foreclosures and housing policy today? Well, for the large amount of foreclosures that are from your standard, crappy, and should-be outlawed subprime lender, not much. But, if you are thinking about the best way to get- and keep- people in housing, then I think the DVMP is really useful to look at. Because the results really seem to show that even with the best intentions, if someone is on the economic margins, you are not helping to push them into loans they cannot afford.
(As far as the GI Bill- the reality is that those returning GIs also returned to a Country where they had jobs waiting for them, to move them into the middle class.)
There is a difference, right- in saying you can no longer redline- and then getting people up to the point where they can afford a mortgage (maybe forcing banks to help you with this), versus saying, you redlined, now to make up for it, give x number of people loans, whether they can afford it or not. And whether the DVMP expolictly did the second thing, from the numbers, it appears that is how the banks reacted. And the end result is certainly more homeownership, but it is also a striking number of foreclosures.
I'm right about extending credit to redlined areas... ya gotta!
Naturally, extending credit to areas that have been historically underserved by traditional financial institutions will lead to higher rates of foreclosure. But higher than what, extending little to no credit to those areas?
I'm not debating the foreclosure rates of DVMP areas.
I'm arguing that the 30-plus year DVMP program and other CRA-type programs have created more economic benefit than harm.
And not all GIs had jobs waiting for them - or equal access to the GI bill benefits.
The larger question is - what should have been done to create more access to capital and credit for disadvantaged people and neighborhoods that would have had more economic benefit than DVMP?
WWGjr
You do have to extend
You do have to extend credit, but...
Do you extend mortgages to the geography, or to the people within that geography who can afford them, and use the rest of the money to instead do things like match people's savings, workforce development, etc. In terms of mortgage plans, there are two questions: in a city-wide, macro sense- did it help? And second, even if it did, what rate of foreclosure is too high to make it an acceptable solution? If a pool of loans goes into foreclosure more than, for example, FHA loans, is that acceptable? There really is no answer that isn't based on personal opinion- but in mine- the after effects of the DVMP were too negative.
Anyway, I think we are probably mostly in agreement about strategies going forward.
Economic Competitiveness
Credit has to be extended, not to everyone, but to every demographic within the city in order to maximize economic competitiveness for the city.
This city is majority-female, majority-low to moderate income, and majority-people of color. If credit is not extended to all of these demographic groups, their economic disadvantages become the city's economic disadvantages.
A few other points:
1) Lending resources from traditional financial institutions, if not applied to DVMP areas, won't be converted to other programs like savings "matches" and workforce development funds - the lending and "charitable" components of those institutions are generally kept separate. Furthermore, we actually need to capture as much traditional financing as possible because the rate of subprime lending in DVMP areas, and in the city, is excessive - affecting the economic competitiveness of the city, as a whole.
2) DVMP definitely helped to expand traditional mortgage lending to areas that were previously redlined and that otherwise would receive almost all subprime and predatory loans. The foreclosure issues that you've raised are real, but don't overshadow the broad impact of the initiative.
3) Foreclosures happen for a variety of reasons - job losses, divorce, family deaths, predatory home improvement loans, credit card debt, etc - not always directly related to DVMP or its original program design.
4) Lastly, the after-effects of DVMP can not be separated from the after-effects of CRA in general. It's the same movement of economic justice - and DVMP was a leader.
In the end, it's a matter of "how" to strengthen the economic "weak links" in the chain. We may disagree on "how" - that's because it's viewed by some as welfare economics, by others as economic integration, and by me as economic expansion - not purely market-driven - but with new markets developed. New markets perform differently than existing markets, but it's still economic expansion.
WWGjr
I am going to write
I am going to write something longer on mortgage foreclosures at some point, because I have a lot of data that would be good to show you, and everyone. But I will just say while a variety of things may cause foreclosures, a very small number of things cause the vast majority of them.
massive mortgage assistance
if the city guaranteed loans or even provided settlement grants at a large scale to people who are being kept out of the housing market now, there would be growth in construction, home repair, retail sales that could create jobs and higher wages.
a tiny, piece meal approach would not really help, but if the city got serious about boosting wages and stablizing neighborhoods, with huge goals--like 100,000 new homeowners in 10 years like in the Veteran's loan example Goode cites above--the foreclosure rate you predict could be somewhat altered.
and if the city was guaranteeing the loans, much like with HEMAP, the kind of foreclosures that occur could be kinder and gentler than with a conventional loan.
One idea: subsidize multifamily/multiuse housing
One of the bad externalities of the Penn mortgage program is that it's driven up the home prices in University City, since it increases the size of the mortgage that beneficiaries can afford, increasing the amount sellers can charge. The low mortgage rates from 2002-2005 and the property tax abatements have had a similar effect. So with a massive mortgage assistance program, you have to worry about the real benefits being lost to higher sale prices.
Also, if the mortgage you can afford is somewhere between 100K and 150K, and the prevailing sale price is closer to 300-400K, it's hard to see what kind of assistance in either grants or points on the mortgage can meaningfully close that gap. And if the city guaranteed that much debt, the city's bond rating might finally collapse. It would also compound the results of foreclosures, hitting the city twice over, rather than making them easier.
But I don't want to be totally down on the idea of a subsidy. One more targeted approach would be a mortgage subsidy or down payment assistance (or both) to encourage something good, which Ray already mentioned. What you really want in neighborhoods like West Philly is owner-occupied multi-family or mixed-use housing. There's a lot of property management companies in and around the universities in W. Philly, and there are now lots of single-family houses farther into the neighborhoods. But if you target support for this group -- and it can already be tricky to get a mortgage when you want to claim future rental income -- you can increase the number of homeowners AND the number of affordable rental units in one swoop, particularly if you tie the subsidy to both owner-occupancy and some kind of rent control.
For people who can't afford to buy housing at current prices, there are other ideas besides subsidies or loan guarantees. There are already nonprofits, like the People's Emergency Center or APM, who rehab houses to sell them below market value for people who meet certain income requirements. In many cases, sale at the reduced price is again tied to compacts either not to sell the house within a certain time frame or to sell to another low-to-moderate-income buyer. It's really hard to actually lower the purchase price of a house, which is what you need in order to but these programs can pull it off. There aren't enough of these houses available, but you could easily support and expand these programs (that is, the ones that work -- they can easily turn into boondoggles).
Massive expansion of Habitat for Humanity Type Thing
Interesting. Rather than say, spending 10-15k for 100 thousand people, the city could radically expand a habitat for humanity like program. It would be a job creation bill- where you could work with the building trades and schools to basically give jobs out to kids who would basically apprentice by building- more likely rehabbing- Philly homes.
And at the end of the day, you give people homes with tiny mortgages that they could afford- that come due closer to their market value when the person sells. It would effect much less people than, say, a massive mortgage assistance program. But, I think it would be a much smarter thing to do.
Yes
I really like this idea for a number of reasons. First, it will stimulate economic activity that might not be undertaken by the private sector for a variety of reasons. It will provide young people with jobs and also an opportunity to perform community service. Finally, I think it could be a great way for the labor movement to show it's committed to programs that help build communities.
---
Check out my blog!
youthbuild
Dan, have you heard of YouthBuild? it's a national program that uses home construction and contracting apprenticeships as an alternative education for young people who haven't flourished in traditional school environments. We have a chapter here in Providence, and they do some good work, though I'm not super familiar with it. http://www.youthbuild.org. Job training and GED's for kids + affordable home renovation for people who need it. seems like a good idea if it's implemented correctly.
Miriam
Thanks. I had not heard
Thanks. I had not heard about it, but yeah, that seems to be about right in terms of what I am thinking of.
Second try
I started to say something, then figured Dan knew more and could say it better, but whatever, here:
This isn't the only thing you are talking about, but a big concern with something like a project to put a ton of new homeowners in place through settlement assistance is that the last time they tried (with the settlement grants), the failure rates of the recipients' loans were really, disturbingly high. (You can read the pdf of the study here, if anyone's interested.)
Of the $1000 settlement grants the city made in a period of 1995, by 2002 even the people with DVMP assistance foreclosed at 14%. People with Pennsylvania Housing Finance Agency assistance foreclosed at ~18%. And those who just participated in the city program without that extra help, 24.5% went into foreclosure.
I think that we definitely have to keep examining counseling and support programs to figure out what will help keep new homeowners in their homes. But I think Dan's stance is that even that 14% is too high, and raises questions about the ethics of putting people in homes who may end up worse (in terms of credit and even equity) at that rate.
He has some information, I think, about a Baltimore city program that has had some problems too. I'd like to look harder to see what works though.
Some of Tim's proposals are good, like that modified limited-equity nonprofit-run thing, though we are away from zoning now--I think looking at anything that will encourage long-term residence and stability (lowering the risk of speculation messing so badly with prices) is helpful.
Jennifer
SELP
The Baltimore Program is/was called SELP- Settlement Expense Loan Program, or something like that. Basically, the City aggressively tried to get people into homes, by doing outreach around the City, and then gave them a silent second mortgage. It was an acknowledged disaster- something like half the people went into foreclosure. There is a new program now, that I think does similar things, but involves counseling, etc.
But yeah, point is: I do not think it is acceptable to expose potentially a fifth of the people of a City program to the mortgage foreclosure process. Something like HEMAP is not really designed for people who cannot pay their loans- it is designed for one off 'shocks' like temporarily losing your job.
I mean, I know it sounds good and right to say put people into homes. But, in practice, it is a lot more humane to say we will robustly expand rental vouchers, and then work with people to help them save, get their credit score to a place where they can get a prime loan (with the accompanying 1 percent foreclosure rate, as opposed to the subprime rate, which is eons higher).
And if you need proof- during 2004 George Bush kept saying things like 'we need to put more people into homes" and John Kerry, in a little noticed stance, said we really need to greatly expand section 8. So, just remember, if you are with Ray, you are with the terrorists.
beating a dead horse Dan
but..Dan you have really conflated what I said to take on new meaning. I agree that blindly pushing anyone into home ownership is dumb. However, in between people who are capable of buying market rate housing and people who are not capable of home ownership at all, are people who who could use some help with a down payment or with mortgage insurance.
I don't know how big that cohort is, but there are metrics that could be used to look at people who have jobs, don't have a lot of savings, but have ok credit, and would make good first time home owners if they could get over the hump of down payments.
Which is why a lot of people my age I know who buy houses do so because their parents front them the down payment: all I am asking is that the city front down payments to people who are not lucky enough to have family who can help in that way.
That's quite different from being more liberal in qualifying people for loans.
Not to step in the middle of a cute-boy fight
But I really think YOUR issue is housing prices more than loan availability.
Nowadays if you have income but not too much savings, you can get second mortgages at not-ridiculous rates to cover much of your down payment. And if you are educated and/or have access to information, and that'd be you, you can avoid loans at really bad terms and can refinance to get even better rates as your situation improves.
It's finding something you can afford to buy with that loan.
You and Dan are both right about the first-time homebuyer assistance thing. There is a meaningful category of people who should qualify for prime loans but don't know the difference or where to go, or who are in a good position to fulfill their mortgages but would benefit from help with closing costs. Identifying them is important. But there is a real risk in the administration of these programs, shown by past experience, that they do focus on numbers instead of carefully targeting those populations.
Jennifer
i have qualified for loans
my education and race and gender privellege has qualified me for loans. my issue if not loans (sub prime, prime, or whatever). My issue is cash for a down payment. My issue is also monthly mortgage payment amounts.
The city could help with settlement grants. The city could help reduce my mortgage payment with subsidized, low-cost mortgage insurance and/or tax abtements.
the question is why should the city help me?
I think I have enumerated that point above--how investing in someone at my income level will pay off for the city in multiple ways.
I think what Ray is
I think what Ray is indicating is the need for affordable housing, not howeownership for low income families.
Philadelphia is special in that it is a city with a true middle and working class. In some cities, like Boston and San Fransisco, teachers and social workers (let alone civic activists) cannot afford to live. Ray's concern, I think, is (1) is Philadelphia going in that direction; and (2) his want for that not to happen.
Personally, my situation is much different than Ray's. But, my concern for decent housing at a reasonable price is the same. I do not want to own a home that locks me into a certain lifestyle or one that precludes me from doing other things (like travel).
Also, my concern for a relatively diverse community is the same. I want to have my family in South Philly. And, I want it to at least resemble the South Philly I knew as a child. I don't want to live on a street of just lawyers, doctors, investment bankers or Penn Professors. I want to live on a street with a variety of people and families.
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DVMP was designed to offer counseling and support...
DVMP was designed to offer counseling and support and you noted the corresponding lower foreclosure rate comparable to PHFA assistance - or no assistance at all - in the example that you provided related to settlement grants.
We all agree that these programs can be improved.
My major point, in the end, is that the DVMP model was designed by bankers who were forced to do something - but the specific model was not forced upon them. It was their way to enter new markets. And at my urging, they are now replicating the model for small business lending.
Under the City's fair lending and community reinvestment program, we also require two things:
1) Our City depository banks must submit annual community reinvestment goals for lending and investment in low and moderate income neighborhoods.
2)Our City depository banks must also submit annual strategic plans to address disparities disclosed in comprehensive lending studies commissioned by the City annually. Both the studies and community reinvestment goals are currently available on the City Treasurer's Office website. The strategic plans are designed by the banks to match or exceed peer lending performance in the market, based upon the latest disparity study. In other words, develop a way to extend as much credit as your peers if you rank below them in fair lending.
My goal is to allow those banks to share risk while addressing disparity concerns and to determine what government subsidy or credit enhancements may be necessary. Some of those strategies are contained in the lending studies as recommendations. The fact that the banks are all forced to examine the credit gaps in the market at the same time annually, that's revolutionary - but we have never demanded that they "do bad loans".
And DVMP did not demand that they "do bad loans", just extend more credit to underserved areas.
A lot of economic factors play into how to serve financially underserved populations, particularly over decades of changing economic conditions.
That's why I like the annual strategic plans that we are requiring for the second year, and into the future.
WWGjr
The loans that came out of
The loans that came out of it were not 'bad,' in the sense their terms and fees and everything seemed to be where they should be. But- the banks gave loans to a lot of people who evidently could not afford them. So, a lot of people went into foreclosure.
To be clear- if you looked at all Philly foreclosures- subprime loans, which have nothing at all to do with the DVMP, make up an overwhelming majority of Philly foreclosures.
However, when you do drill down into the DVMP, you do see an incredibly high and unacceptable (at least to my standards) rate of foreclosure.
DVMP vs. the Subprime Epidemic
To address the prevalence of subprime mortgages and higher foreclosure rates associated with predatory lending in Philadelphia, hasn't the DVMP model simply been modified? And won't it simply continue to be modified? Good changes are made to good models over the course of time - as we grow in our understading of how to better address the issue.
In fact, the DVMP model is managed by GPUAC utilizing a similar bank consortium for a variety of existing and proposed anti-predatory lending, subprime refinance, first-time homebuyer, settlement grant, down-payment, and home improvement lending programs.
Maybe, the larger issue is the economic condition of the DVMP areas and the lack of - or changing - economic opportunities available to their residents due to the type of disinvestment caused by redlining.
In other words, a lot of damage has been done through redlining that won't be resolved through conservative lending and investment.
Not to mention, the multi-year (up to 20 year)Reagan-Bush divestment from urban and inner-city economic development has something to do with the economic condition of DVMP areas and its residents.
A 30-year mortgage to a economically disadvantaged person in 1979 during the Jimmy Carter administration would not have foreseen the Reagan Revolution and Bush I and II.
WWGjr
DVMP evolution
Yes yes yes. I think that this is obvious but has been key. The programs have already improved a lot over 15 or so years.
It does seem like from looking at past experience a lot of the work to keep chipping away at the sustained damage from redlining and the subsequent financial isolation is on the front end, before the loans are given out: both in credit-supportive activities and in developing really solid underwriting standards.
I think for this last part, there is a real open and debatable question about how you balance the fact that 'conservative' lending won't get us as far as we need to go, and the recognition that more stringent underwriting standards do seem to strongly corrolate to the success of the loans. I think that one result of looking at the data has been a belief that we need to focus on putting people in the place where they fit those underwriting criteria first, as opposed to focusing on the amount and number of loans extended to new homebuyers.
Jennifer
I agree ... and the CDFI model is another vehicle.
Community development financial institutions (CDFIs) are another vehicle that can help get us to where we need to be - but their capacity as financial intermediaries that specialize in underserved markets is still limited.
Therefore, we will still need to see a sustained increase in traditional financing to these underserved areas as we develop the appropriate underwriting criteria and products that might be offered by CDFIs or even bank CDCs - and eventually by traditional financial institutions.
WWGjr
Settlement Grants Aside
Doesn't the FHA already guarantee the loans of first time homebuyers? And hasn't it been doing it for a long time?
I made an offer on a house a few years ago. I chose an FHA program with a low downpayment. When the FHA inspector came in, however, he wouldn't approve the home (FHA inspections are more rigorous than typical home inspections). I didn't buy the house.
As for the City guaranteeing loans, I agree with Short, if done on a massive scale could hurt all Philadelphians. But, the Federal Government is already doing this. So why be duplicative where the risk is spread around 1.5 million people versus 300 million?
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I'm not sure what the criteria is
for eligibility for FHA versus non-FHA loans. Here's how FHA status played into the study I cited.
In terms of sample composition:
In terms of results:
Jennifer
So, it would seem that for
So, it would seem that for Ray's purpose (and people similarly situated) the FHA is a prime source of financing.
The question remains, how is it serving the low-income community is an open question and needs to be studied. Or, in the alternative, how it can serve the low income community better.
I am working to elect Larry Farnese to the General Assembly. Unless otherwise expressly stated, this and every comment or blog I post on YPP and any action I take hereon is solely attributable to me and not Farnese or Friends of Farnese
income levels
first of all, this discussion is interesting and cool.
however, i believe that my household income is too high for FHA. But Joel and I can't really afford a house right now. If we got some help, we could and would be able to maintain it.
This conversation has veered toward the generalist and I was simply trying to identify a specific place (myself) where housing policy is failing. The city's housing policy is giving preference to people who can pay the market rate now. However, at least in U City the impact of those sales is a reduction in the overall number of affordable rental units--something I would not do as a homeowner--and houses are being sold to people who are less likely to settle here as long as I am.
There's a long trend on West Philadlephia of increased home values and new residents who leave the city the first time their car windows gets broken.
I imagine housing policy should be dynmaic, and among many other failures and gaps (not to mention success), one that I wanted to note was the difficuluty people in my income bracket are having buying homes (whereas my parents and many of my neighbors who are similar to me in terms of income, did not have the same problems 20 or even 10 years ago when they bought).
Liek I said a long time ago, yes, there is a good chance that i will eventually earn enough to afford market rate housing, but for me and Joel, that may take as long as 5 years more whereas my parents bought their house (in a red-lined neighborhood which forced them to take out a mortgage with the seller) when they three years younger than me.
If I was a homeowener now, I'd offer more to the city's economy as a property tax payer, a water bill payer, and as someone who will stay in the home I buy for a long time, therefore investing a lot in the community. In short, I am a godo risk for the city to invest in via some sort of settlement assistance.
Does this solve the problem of low-income home ownership? No. But helping me a buy home would help enrich teh city's tax base by bringing a sure thing into the fold earlier than the market would allow.
More about you and Joel
and a little less about housing policy.
I'm looking at houses too. I try not to talk about it a lot (try) because between when I realize I only talk about the bar examination and housing prices I start to hate myself and my first world problems. But yeah, prices are crazy--and I am in about as privileged a position right now as you can be.
So I think that the key issue is finding a collection of policies (there are a bunch in Dan's first long post) that work towards preserving current ownership and thereby checking the absolutely insane speculation that is plaguing Philadelphia since maybe 2000 and so much of the country. Try reading Craigslist ads; every jerk is watching 'How To Flip A House' on the Learning Channel or whatever. And SO few houses, relatively, are being sold by owner-residents.
(Anyway I slightly disagree about W Phila, though I am sure you know it better than me: though I completely agree about the huge issue that's going to emerge about decent rental properties there, I think connected to that is that the turnover of a lot of those very rental-heavy neighborhoods has been to new resident-owners who I think are going to stick around. Although the point about Penn subsidies distorting the market is good, I think compared to a lot of areas of the city (esp. say the parts of Point Breeze that are now shamelessly called Graduate Hospital) the value is real: it's catching up after having been underrecognized.)
Jennifer
ok..
I'm not sure that i want to stop talking about housing policy since nothing Dan proposes addresses the need I am bringing up.
jennifer, you and I are in very different income positions. Our home buying experiences are different. I am never going to earn as much annually in my life as you are in your first year at a firm. I need more help than you do with a down payment. i can probably afford upkeep and mortgage payments, along with Joel's help as an equally low paid potential city employee, but the first hump will be the biggest for us.
beyond the down payment, we could save 20% a month on our mortgage payment if did not have to buy mortgage insurance. maybe a simpler policy solution is to have the city underwrite a really cheap plan.
last, there is the tax abatement. tax abatements are being offered to wealthy people whow ant to buy brand new condos. Why not revoke that and offer the abatement to people in other places? That would save me another $100-$200 a month.
Ah, good point
about the mortgage insurance. Yeah.
I think the tax abatement thing is absolutely due to end, because the justification of needing to incentivize development here (at least in certain areas) is obviously no longer the case.
But it seems like there is such political will towards renewing it that the conversations have mostly been about trading the renewal for an inclusionary zoning agreement. So it's the bargaining chip.
It's a good question though whether that's necessary and whether inclusionary zoning could be passed without the tradeoff.
Jennifer
more on inclusionary zoning
correct me if i am wrong, but i think the housing coalition folks are now asking for inclusionary zoning to come in the form of cash payments to a new subset of the affordable housing trust funds. which means that new units get built only when a developer comes to the city and requests money from that pot for the purpose of building affordable units.
that's great, but it's still pretty market-driven at a macro level.
a micro market approach might be expanding the basic home repair grant program (which ACORN has pushed hard, but I am not sure if the coalition has) and the addition of settlement grants and a mortgage insurance program--not to mention, as Dan already has, an expanded home rehab program beyond just basic systems.
can anyone report on the coalition asks and see if any of the suggestions above are already included?
If that's true
It's kind of weird but not unexpected. You lose even a prayer of this collaterally encouraging mixed-income development (because developers'll try to avoid it anyway, but here the market rate and affordable development are not even potentially linked up).
Those other things are all good, obv, and it'd be good to hear what the current requests on the table are from the coalition.
Jennifer
PS
Just wait a year or so. Not only will I be probably making nothing--I'll be a spinster without even a boy making a low city salary helping me out! ha. (I hear you, though.)
Jennifer
PPS
I don't mean to sound so whiny. I am just sharing my own real life examples of how policy fails.
Some of us approach being "progressive" as "us" helping "them," but I think a lot of us actually need a lot of help our seleves in getting government to better serve us--and I think younger progressives are very much set apart from older ones on this point.
Of course, i don't mean ti ignore the fact that race and class privellege really screw a majority of Philadelphians and that the #1 thing city government should do above all else is boost wages and elminate economic injustice.
That said, I doubt you will ever be a spinster Jennifer. Kind of anti-feminist anyway huh?
Yeah, probably not
I'm afraid that I'm post post feminist at this point though. Subverting gender roles through my choice to reify them or something equally dumb.
And I guess in the fight in my subconscious between my 13-year-old Beauty-Myth-reading self and my 4-year-old "Old-Maid"-card-playing self, the 4-year-old wins.
Jennifer
The Ray Murphy Settlement Grant
I agree with Jen that relative to the rest of the city, the housing value in West Philly in general, and Cedar Park in particular, is still very good.
One of the reasons this veers into general policy, rather than the specific program that would help Ray Murphy buy a house in his favorite neighborhood, is that there is a problem in identifying optimal criteria for a program that would help you and people like you. (Everyone is really trying very hard!)
If it's really about financing a down payment, what you could do is structure a combo loan with a first and a second mortgage. The market is tighter on these since the last wave of defaults, but if your credit is good, you can do a 5/15/80 (5% down payment, 15% second mortgage, 80% first mortgage) or even a 20/80 (80% first, 20% second). It lets you reduce your down payment and avoid mortgage insurance. You can also structure your purchase to include seller's assistance to pay part of your down payment and your closing costs (usually with a boost in the overall sales price). It's not as sweet as a pure grant, but it gets the job done. You usually wind up paying a higher (sometimes a variable) rate on the second mortgage, so it's worth paying it down as fast as you can -- but most people can pay the down payment on installments, even at interest, more easily than they can pay the whole thing at once.
PS #12 or whatever
I meant, when I said 'more about Ray and less about housing policy' that that is what I was going to talk about, not, like, that we should be.
Yeah, that second mortgage thing was what I was meaning to describe. But I thought they still have you get mortgage insurance when you do it that way. Maybe I'm wrong. My brain's kind of fried right now from memorizing common law crimes like that it's only "burglary" if it happens at night.
Jennifer
NOT my grant
I realize I have been dense at times in this conversation so far, so let me go back to the beginning.
"gentrification" is a loaded term, but housing value increases have outpaced wage growth in Philadelphia and the result is that some people who would have been able to 10 years before now can't afford a mortgage at all and some people simply can not afford to buy a house.
What were working-class and/or mixed income neighborhoods are becoming more and more homogeneous as wealthier people buy up all the houses. Lower income people are being forced to move to fewer and fewer urban neighborhoods or are going to outer ring suburban neighborhoods like Chelthenham, Bensalem, Upper Darby, etc.
Let's leave my neighborhood in West Philly alone and turn our attention to South Philly where a rowhouse 8th and Oregon that ten years ago would have sold for $50 or $60 k is now selling for $150 or $160 k. So instead of coming up with a 2,000 downpayment, a family of four will need a $7,000 downpayment. The monthly mortgage cost would go from about $500 to $1200 a month. $1200 for a household that brings in $50,000 or $60,000 a year is doable, but that down payment is still going to be very hard to come up with.
The same scenario could very easily be applied to a family in North Philly, at say 16th and Oxford.
What I am saying is that City Council and the Mayor should step in and interfere with the housing market by tinkering at the edges to make down payments easier to come by and to also help reduce monthly housing costs through new tax abatements and through a mortgage insurance program.
I understand that there is another whole cohort that could not even afford to make monthly mortgage payments at all with these kinds of programs--and for this group what we really need is economic development that will boost wages--helping people learn to save is great, but you can only stretch a meager salary so far. However, for the people who could afford to keep up a mortgage, but can't afford a downpayment, rather than sending people to get an addition mortgage, it would make more sense for the city to step in.
Over the long run, I think the investment will be worth it rather than driving working families out of the city now on deference to a housing boom that is gonna go bust very soon.
Beyond which--and this is a planning question more than a economic one--who the hell wants the city to be full of lawyers, doctors and investment bankers? As Gaetano says above, that is pretty boring and will force working families and service sector workers to live in Parisian-style suburban ghettos.
I think that sounds like a
I think that sounds like a good idea. I am not sure how you decide who qualifies, but it could be a great way to get middle class people to settle here who otherwise would not. There is no reason we cannot incentivize middle-income people to buy in the City.
But, first, I don't really think it is realistic to say that these people are forced to the suburbs, because home prices in a ton of the City are still a heck of a lot cheaper than elsewhere, including the overwhelmingly large majority of the SEPA and S Jersey burbs.
Anyway, there is no question that trying to attract middle income people is a good idea. But, if the City were to spend a lot on trying to attract them- I would think that affordable housing advocates could potentially feel like their issue was being taken over because middle class people will be forced to wait a couple of years before they buy.
I think you have to sort of make clear what your goals are. Increasing homeownership, or keeping middle-income people? Keeping neighborhoods economically mixed is probably not realistic for something like this, in that, if you have a hot neighborhood, the market will adjust to simply charge you the subsidy, too. The people who can already afford the ten grand down payment will now end up paying 10 grand plus most of that subsidy, and prices will still go up, and you will still be unable to buy a house on the street where you grew up. (It is just easier to keep this personal.)
However, because a lot of the City is more affordable than other places, I do think it would be an effective tool to get middle income people to buy in neighborhoods that are not as hot, or are on the edges of it. But, of course, as a bunch of middle-income people congregate in new neighborhoods using that subsidy, we swing back around to fears of... gentrification.
As I said in the beginning of this whole thing- if that is our problem, I think we can deal with it, and it is far better than managing decline. But, it is something to be aware of.
preventing gentrification
yea, so just in case I was not being clear, and forgive me I am gonna sounds like a nativist, I am thinking about a program to allow native or long-time renting Philadelphians to buy homes. The easisest way to make this happen is make length of residency a condition for assistance. i am willing to be liberal: 2 years. Maybe 5?
Again, a family of four making $60 k isn't exactly all that middle class, but they would have been able to afford a nice rowhouse in South or North Philly 10 years ago and still should today.
I think the suburban exodus of working Philadelphians from places like South Philly and North Philly and the NE and West Oak Lane etc. is more complicated than rising home values, but I betsome significant number of people cashing in on rising home values at 8/oregon or 16/Oxford are leaving the city altogether.
Quick point-- I think FHA is
Quick point--
I think FHA is more geared toward first time homebuyers. There is a certain level of house price it will go up to. In Philly, 3 years ago, it was roughly 240,000. But, income level didn't come up (aside from the credit check).
I am working to elect Larry Farnese to the General Assembly. Unless otherwise expressly stated, this and every comment or blog I post on YPP and any action I take hereon is solely attributable to me and not Farnese or Friends of Farnese
And, I think the CRA is a
And, I think the CRA is a great thing. I just think that in thinking about maximizing the good you get from demanding banks re-invest in neighborhoods they basically leached from, there are probably some other ways to go. Or, even if the DVMP is the answer, then spend a ton more money on working with people to make sure they are consistently able to pay their mortgages.
I agree with that!
Affordable housing has never been a real anti-poverty or economic self-sufficiency strategy. That's why my policy and legislative focus has been on economic opportunity. Even my CRA focus is mostly on small business development.
WWGjr
Raise taxes on speculators
I'm not sure what the logistics are but I'm heavily in favor of temporarily raising real estate taxes or issuing fines for owners of abandoned/vacant houses. Some YPP contributors have noted the pluses of a land-based value tax but it seems too complicated to get City Council to seriously consider it.
If there was a rule on the books that allowed neighbors to file a complaint such that after a year a judge (city tax assessor) could review cases individually and levy either temporarily higher real estate taxes or a fine, I think it would force property owners to either invest in their properties or sell them within a three to five-year period. Ideally, the fines would grow exponentially annually and could be escrowed against the sale of the property. Some guidelines could be developed so that judges or whomever could take into consideration the financial wherewithal of the property owner and the needs of the neighbors such that fines had a meaningful deterrent effect without drastically penalizing the poor. Such a program would ideally be created in concert with an effort to improve how the city manages and disposes of properties that it currently owns.
The incremental taxes, fines or profits from the sale of abandoned foreclosed properties in default under the program could pay for the administration needed to operate this program. There is no reason there should be tens of thousand of potentially affordable housing sitting vacant throughout the entire city for decades at a time.
I think...
I think the land bank proposals would pretty much deal with this, right? And getting that going seems politically possible I think given what was discussed in the primary cycle.
I like the coercive/tax aspect of your version though.
And yeah, these models seem to pay for themselves pretty well where implemented.
Jennifer
Two Ideas From Yours' Truly
Previously, I have put together two ideas here on YPP that would give the city (1) the ability to help old-timers and (2) a permanant stock of affordable housing.
(1) a reverse abatement for homeowners who have lived in the same place for X amount of years and fall within a certain income window--or equation, which is in part based on the upswing of market value within a certain radius;
(2) (this is a variation on what you wrote) allowing the person to sell a deed restriction on their land that would not allow them to sell the property for market value in the future, but for a % of market value to approved affordable housing candidates. I'm not going to explain this as well as I'd like to, but they sell this deed restriction to an affordable housing trust administered by the PHA or PHFA. The money they get in return equate to a % of market value. So, if they needed $15,000.00, they would only be able to sell the home for X% of market value when they did. The sale would be administered by the agencies above to ensure compliance. And, to ensure the home was not sold to just anyone, buyers would have to be approved affordable housing purchasers.
This would ensure people have money in their pockets, that we have a steady stream of affordable housing and that no one is getting ripped off.
I would say that the number two option only goes down as far as 70% and is an option that can only be used once. And, people would have to choose between option one and two.
I am working to elect Larry Farnese to the General Assembly. Unless otherwise expressly stated, this and every comment or blog I post on YPP and any action I take hereon is solely attributable to me and not Farnese or Friends of Farnese
Great post Ray
I have a lot to say on this subject but will try to keep it short. Solutions to