Features » March 31, 2014
Three Ways to Cut Wall Street Out of the ‘Housing Recovery’
Populating empty homes needn’t be a task for the 1%.
13.7 million homes nationwide sit vacant, decreasing property values and increasing safety hazards for communities.
Is the U.S. housing market really recovering? That depends on who you ask. Housing prices are on the rise again, but that gain is being driven chiefly by Wall Street investors, who in the past two years have purchased 200,000 homes nationwide at bargain-basement prices, with plans to rent them out. Meanwhile, the pain of the housing crisis endures for the estimated 10 million people who have lost their homes to foreclosure since 2007, as well as millions more who are still in foreclosure or struggling to keep up with rents that have skyrocketed thanks to a surge in demand. The housing recovery needn't be a boon for the same actors who caused the crash in the first place, however: Below are three alternative approaches being pursued by community groups and local governments.
1. LAND BANKS: 13.7 million homes nationwide sit vacant, decreasing property values and increasing safety hazards for communities. The governments of some hard-hit counties—including Cook County, Ill., Cuyahoga County, Ohio, and Genesee County, Mich.—have attempted to tackle the problem with land banks that acquire distressed properties to rehab and resell. However, some housing advocates have criticized government land banks for putting the lion’s share of funding into demolishing, instead of refurbishing, vacant houses. Since the Cuyahoga Land Bank was created five years ago, for example, it has demolished 2,000 properties and rehabilitated 750. Other advocates worry that rehabbed homes will eventually be handed over to private developers who will reap the benefit of public investments in repairs to homes, rather than maintained as affordable housing.
2. EMINENT DOMAIN: Richmond, Calif., Mayor Gayle McLaughlin ruffled the feathers of some financiers last year when she announced that the city would begin using the power of eminent domain to seize and restructure underwater mortgages. The plan is a bold one, intended to save homeowners from falling into foreclosure in the first place. Under it, the city would condemn loans tied up in private-label securities, paying fair market value, then help homeowners refinance with new loans that more closely match the current value of the homes. Richmond immediately drew the ire of the banking industry, which quickly filed lawsuits challenging the plan. The city has yet to use its power of eminent domain. Nevertheless, several other communities, including Newark, N.J., are now preparing to follow Richmond’s lead. There’s one catch, though: the Richmond plan relies on a venture capital firm that would take a cut on each restructured mortgage in exchange for providing capital. Some advocates would like to see such a plan financed instead by community organizations or nonprofit credit unions.
3. COMMUNITY LAND TRUSTS: Many activists argue that the best way to a real recovery is to put housing in the hands of communities. Nonprofit organizations such as the Casas del Pueblo Community Land Trust in Chicago are pushing banks to donate the foreclosed homes sitting on their books—rather than evicting occupants and then either selling to investors or allowing the properties to sit empty. Donated homes are then maintained as permanent low-income housing and managed by residents themselves through the trust.
Rebecca Burns is an In These Times associate editor. Her writing on labor, housing and education has also appeared in Al Jazeera America, Jacobin, Truthout and AlterNet. She can be reached at rebecca[at]inthesetimes.com. Follow her on Twitter @rejburns