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DC Bill Would Move Surplus to Housing Trust Fund, Schools

Image: Councilmember David Grosso, center

An exciting new bill from At-Large Councilmember David Grosso looks to get DC’s surplus funds moving for school improvements and affordable housing.

The bill, introduced last week, addresses one of the city’s self-inflicted wounds we wrote about a few weeks ago. As the city faces an affordable housing crisis, federal funding uncertainties, and more, it needs to have all options on the table.

Yet under current city law the District’s yearly budget surplus is required to be put into savings. This, along with DC’s overall fiscal strength, has contributed to a record-breaking general funds balance of $2.4 billion.

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The portion of that designated as “cash on hand,” however, is just over a billion dollars. The city’s goal is to have 60 days’ worth of operating funds in reserves, and by current calculations they are about four “days” short.

Councilmember Grosso’s bill notes that the District is double-counting some of its debt obligations, and it would have the city move to federal bookkeeping standards. If this were done, the DC Fiscal Policy Institute estimates that it would result in $90 million becoming instantly available.

Under the bill, this money—and all future surplus funds—would be split evenly between the Housing Production Trust Fund (HPTF) and school improvements.

The HPTF is DC’s main vehicle for funding affordable housing projects, and a $45 million infusion would be a big help in meeting the city’s ongoing need. It would also provide crucial gap funding for current affordable housing projects impacted by declining low income housing tax credit markets. (Those interested can learn more about this here.)

HPTF money has helped thousands of Washingtonians find affordable housing, and increasing its budget is one of the best ways to keep life-long residents from being priced out of their city.

While Councilmember Grosso is currently the only sponsor, we hope to see other councilmembers joining soon. Rarely does such an easy and impactful fix come along.

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GOP Moves to Block AFFH Desegregation Efforts

Image: Senators Mike Lee (R-UT; background) and Marco Rubio (R-FL; foreground) are co-sponsoring legislation to end AFFH

Using language that hearkens back to desegregation fights of the Civil Rights era, Congressional Republicans last month introduced legislation to combat the “federally mandated demographics” of the Department of Housing and Urban Development’s (HUD) desegregation efforts.

These legislators take issue with HUD’s work on affirmatively furthering fair housing, a subject that requires a brief history lesson and bit of jargon to understand.

The language of “affirmatively furthering” fair housing refers to government efforts to go beyond simply outlawing racist housing practices, to actively promoting integration in their jurisdictions. Affirmatively furthering fair housing is one of the key requirements of the Fair Housing Act of 1968.

In the 1970s, George Romney (Mitt’s father) tried to do just that as Nixon’s HUD Secretary, using HUD funds to pressure localities into building more affordable housing and integrating neighborhoods. The strength of segregationists’ opposition, however, proved formidable. Nixon ordered the program shuttered, and administrations both Democratic and Republican ignored the Fair Housing Act’s “affirmatively furthering” provision for another thirty years.

GeorgeMittatWorldsFairMay181964George Romney with son Mitt

This brings us to recent history. In 2015, the Obama administration introduced its Affirmatively Furthering Fair Housing (AFFH) rule, something we wrote about last year.

Obama’s AFFH functions similarly to Romney’s vision. Under the rule, localities are required to report on their jurisdiction’s residential segregation and how that relates to pockets of poverty and areas lacking quality services like schools, libraries, and hospitals. They then need to form a plan for how to address any disparities they find and submit that plan in order to receive their HUD funding—often a large chunk of money.

Now Senators Marco Rubio (R-FL) and Mike Lee (R-UT) have joined Rep. Paul Gosar (R-AZ) in introducing legislation to gut AFFH. Reasons for this opposition have been a bit scattered. Some, like Sen. Rubio, say it is an issue of states’ and localities’ rights. His office issued a statement decrying “Top-down, one-size-fits-all regulations by Washington bureaucrats” in explaining his support for the legislation.

In an interview with CityLab, Solomon Greene, a former HUD employee who is now a senior fellow at the Urban Institute, expressed skepticism about this explanation.  Because AFFH allows localities to use whatever tools they wish to address segregation and unfair housing practices, it actually gives considerable power to local jurisdictions. Greene says AFFH reflects the belief that “there’s no clear answer as to what is the best use of a federal dollar. It is the opposite of a one-size-fits-all model, which is how it’s been rebranded.”

Others take a different approach in explaining their opposition. Sen. Lee, who tried to defund AFFH last year, has found his biggest supporter in Rick Manning, president of Americans for Limited Government. In explaining his support for Lee’s defunding maneuver last year, Manning railed against “race hustlers who seek to put low income high rise apartments into middle class neighborhoods.”

Switching seamlessly from a racial argument to one of neighborhood preservation is a common tactic in AFFH arguments. In this way, Manning and other opponents work to tie these issues together in peoples’ minds while avoiding the public backlash of explicitly segregationist appeals.

Similarly, Paul Sperry, a right wing columnist for the New York Post, has criticized AFFH and parallel initiatives for attempting to “forcibly desegregate inner cities and integrate outer suburbs.” His writing none-too-subtly ties together race, crime, and drug usage in an age-old attempt to create a black boogeyman invading white neighborhoods.

Rep. Gosar’s bill goes a step further than the Senate version. If passed, his bill would require that HUD deactivate its newly released tool that allows localities and private citizens to assess the problems their city faces. An example of the kind of information this tool can provide is shown below.

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Job proximity in DC
1 dot = 100 people. Green dots are African-Americans, while orange dots show whites. The darker the grey background, the more easily accessible jobs are in that census tract. This map, created by the author with the new HUD tool, shows that literally no experience is required to find issues for AFFH consideration.

Rep. Gosar does not seem to have offered any public reasoning for his actions. Indeed, it is hard to imagine what reasoning he could offer. This tool is invaluable to local lawmakers, community groups, and private citizens who are trying to assess the challenges that their communities face.

Either of these bills, if passed, represent a serious challenge to HUD’s work and the implementation of the Fair Housing Act. Vague language about states’ rights should be discounted. The dog whistle segregationist language of “race hustlers” and “federally mandated demographics” cannot be.

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Automatic Tax Cuts: DC’s Leaky Bucket

An ongoing affordable housing crisis. A metro system in grave disrepair. An uncertain future of federal funding for Medicaid and other services. These problems and more face DC as the city looks to craft its budget for the coming year. However, since 2014 the city has given back $100 million dollars in tax cuts, built up $2 billion in savings for its reserve, and has plans to give back almost $130 million more before the decade is over.

In 2014, the City Council changed tax policy to give away increases in revenue as tax cuts. Whenever the District government reached a new level of income, a new round of tax cuts would automatically take place.

Some of those tax cuts made sense. For instance, a new bracket was created at a lower rate for individuals earning $40-60,000, helping middle-income families. The standard deduction that everyone can take has been raised and stands to increase even more.

Some of the cuts, however, clearly benefit only a select few. Those earning between $350,000 and $1 million a year saw their rates cut. And the new tax code goes further in making sure that this inequality persists from generation to generation, raising the threshold for higher estate taxes from $1 million to $2 million to, in the future, over $5 million.

The biggest issue with this model of tax cuts is that they are inflexible to current needs. Revenue goes out the door, right or wrong, before Washingtonians have a chance to weigh in on how they think it should be used. Our elected officials are shooting themselves in the foot by making it unnecessarily harder to deal with the affordable housing crisis, metro’s challenges, and more.

A similar problem is happening with DC’s budget surpluses. Although final numbers aren’t out yet, as of last estimate the District is looking at a $220 million budget surplus from the last fiscal year. However, this money also can’t go to any of the above concerns—it’s legally mandated to go into DC’s savings. That law has led the city to a record-breaking $2 billion bank account.

In many ways, it’s a good problem to have. Disputes over how to spend surpluses are what accountants dream of.

But in a city where families are being priced out of their homes, trains are smoking on the tracks, and a volatile federal government threatens safety net spending, reserve requirements should be revisited. And automatic tax cuts shouldn’t be slipping out the door.

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As Trump Moves in, 40,000 Locked Out

Hours after President Trump moved into his new home on Friday, he was busy blocking an Obama administration initiative that could have helped 40,000 low- and moderate-income households move into theirs. It was a move that united affordable housing advocates, realtors, and mortgage brokers in opposition.

It’s an issue that can be tricky to understand, but it has broad implications for affordable homeownership across the country. Stick with us as we break it down:

  • The Federal Housing Administration, or FHA, issues loans to homebuyers who probably couldn’t otherwise afford to own their own home. They target first time homebuyers and buyers with lower credit scores. The FHA requires a 3.5% downpayment as opposed to the 20% often required for conventional loans.
  • It has wide reach—One in six single-family homebuyers in the second half of 2016 used FHA loans.
  • These homebuyers are required to purchase mortgage insurance from the FHA to make sure the agency doesn’t go under in case of default.
  • In December the Obama administration announced that premiums for this insurance would be cut by a quarter of a percentage point. That would mean a savings of about $500 per year for the average FHA homebuyer, and several times that amount for FHA buyers in the pricey DC housing market.
  • On Friday the Trump administration announced it was putting an indefinite suspension on that rate cut, leading many to believe that the administration intends to make it quietly disappear.

With us so far?

Republicans argue that the premium cut is irresponsible coming less than a decade after the FHA needed to be bailed out in the wake of the housing crisis.

But the data tell a different story. The FHA’s cash reserve in case of defaults (what’s known as the capital reserve ratio) has been exceeding requirements for two years in a row, and the Obama administration had wanted to pass those savings on to the borrowers.

What’s more, the cut could have a big impact for such a small price tag. The Mortgage Bankers Association reported that mortgage refinancing applications were up 7 percent in December after the news was announced. A half-percent premium cut two years ago caused a big increase in refinancing and new mortgage applications.

And because so many potential homebuyers are right on the bubble, the National Association of Realtors estimated that up to 40,000 more households could have qualified for FHA loans with the rate cut. Some 800,000 would have seen savings. What happens to those households now is in limbo.

As interest rates rise and homeownership languishes at a 50-year low, government at all levels will need to work diligently to make sure the American dream of homeownership remains accessible to everyone. On Friday, however, the Trump administration seemed content with just making sure that the President got the keys to his newest property.

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Investment Without Displacement: The Challenge East of the Anacostia

In the raging tempest that is DC’s housing market, the areas east of the Anacostia River offer a final bastion of affordability. But with prices starting to rise in this area too, more needs to be done to make sure longtime residents can stay.

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Wards 7 and 8 have increasingly become a world apart from the rest of the city. While DC as a whole has seen a huge influx of wealth and young, largely white, professionals, east of the river poverty and unemployment rates remain stubbornly high. Education levels languish, and segregation is more pronounced here than anywhere else in the District.

The silver lining for residents is that average home prices in these wards are hundreds of thousands less than on the river’s western bank, leaving a swath of affordability that is about 95% black households. Data suggest that the area has become a last source of refuge for many black families priced out of their longtime homes in other parts of the city.

But with a housing market so far out of control, nowhere in DC is safe for long. Neighborhoods in Wards 7 and 8 saw some of the city’s biggest yearly price increases in 2016, and many are already speculating that there’s more to come in 2017.

This is driven in large part by a huge slate of new developments planned for the area*. While this kind of investment is clearly needed, many residents have legitimate fears about what it will mean for their ability to stay.

One of these developments, the 11th St Bridge Park project, has taken significant steps to ensure that it won’t end up forcing out the people it’s trying to serve. The project is working with MANNA on the development of affordable townhouses near the park, as well as a homebuyer’s club to prepare residents for homeownership.

Also in partnership with the park, the Local Initiatives Support Corp. (LISC) has pledged $50 million for the area to support affordable housing and community development needs. LISC’s website shows the individual projects that money goes to fund: several neighborhood festivals, a local school, and numerous units of affordable housing make up the first tenth of the investment.

The 11th St Bridge Park offers a model that can serve as a launching pad for even more community-oriented projects in the future. Without this kind of commitment, the areas east of the river will soon become just another gentrified section of our overpriced city.

 

*Hyperlink specifically for Anacostia

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Two more communities preserved – going from market to affordable!

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What does it take to create or preserve affordable housing? What does it take to partner with and improve the quality of life for lower-income families, enhancing the economic diversity of communities all over the city?

These efforts, often spearheaded by the Coalition for Nonprofit Housing and Economic Development (CNHED) and its members, were celebrated during last week’s Community Development Week in D.C. The week of October 11th included events ranging from open houses to ribbon cuttings to groundbreakings, celebrating hundreds of affordable housing units being created or preserved all across the city.

This past Tuesday, to help launch Community Development Week, the Urban Institute published an online database highlighting one type of affordable housing in the District: assisted rentals.

Maintained by NeighborhoodInfo DC and CNHED, the database, called DC Preservation Catalog, contains a map of 39,000 affordable rental units spread out across the city. Along with the map, the catalog also offers property names, locations, and data on the various subsidies that contribute to a property’s affordability. This tool will be infinitely helpful to the DC Preservation Network (DCPN) and others, providing information that housing counseling organizations, legal services providers, affordable housing developers, local and federal agencies can use to assist lower-income renters in preserving their affordable rental housing over the long haul.

Over the past decade, the District has suffered a 50 percent loss in their low-cost housing supply due to a rapid rise in housing costs. The preservation of already existing affordable housing will ensure that lower-income residents will be able to stay in the communities that they have called home to for a long time.

And two more rental communities were added to the Preservation Catalogue last week! On Thursday, October 13th, MANNA hosted a groundbreaking event for the rehab of two rental buildings in Ward 4’s Brightwood neighborhood: 1370 Ft Stevens Dr NW and 734 Longfellow St NW. The event featured guest speakers ranging from tenants, to DC’s Department of Housing and Community Development, city council members, banks, non-profit financiers and more.

Tenants in these buildings worked with the Latino Economic Development Center to exercise their Tenant Opportunity to Purchase rights when their buildings went up for sale. They selected MANNA to rehab their buildings and operate them as an affordable rental into the future. The financing MANNA is using, Low Income Housing Tax Credits, will keep the buildings affordable for residents under 60% of the Area Median Income for 15 years. These time frames are one of the most important things tracked by the Catalogue, allowing entities to keep tabs on when subsidies will expire and start conversations with owners and tenants early to ensure that the buildings will be maintained as affordable into the future.

Maintaining and preserving affordable housing should be one of the city’s top priorities. Councilmembers Todd, Silverman, and White are all committed to affordable housing in the city, but agree that more resources are required, and those resources need to be invested in the right things. As Councilmember Silverman pointed out, she and her peers are committed to affordable housing, “but it’s going to take a lot more time and resources.”

This groundbreaking event proved that it doesn’t take a lone individual to create change in affordable housing, but instead it takes a diverse community. Community organizers, policymakers, banks, District agencies and tenants all play a role. And although all these entities are involved, there is still a great deal left to be done to create more affordable housing.
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Affordable Housing – It Doesn’t Just Happen!

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Over the past couple of weeks alone, the city of Washington has committed $20 million to affordable housing projects across the city.

The Department of Housing and Community Development (DHCD) says that it has dipped into the city’s Housing Production Trust Fund to fund more than 100 units of affordable housing in Wards 6 and 8.

The 100 plus units will be spread over two apartment buildings. The first apartment is a 93-unit building located a few blocks from the Anacostia Metro Station. The units will be reserved for residents making less than 50 percent of area median income (AMI). The second apartment building is a 12 unit cooperative within walking distance of the Potomac Avenue Metro Station. These units will be reserved for residents making less than 80 percent of AMI.

In Ward 4, the District has committed $13 million to rehabilitate a majority affordable-housing apartment complex in Brightwood Park. The building will be updated top-to-bottom, and 45 units will be reserved for residents earning up to 60 percent of the area median income.

Where did this money for housing come from?

The Housing Production Trust Fund (HPTF) is the District’s largest affordable housing program. The Trust Fund supports the construction, rehabilitation, and acquisition of housing affordable to low- and moderate-income residents.

The HPTF provides grants and loans to affordable housing developers. These funds can be used to acquire, rehabilitate, and build low-cost housing. The Trust Fund assists both homeownership and rental housing. Since 2001, the HPTF has helped build or renovate over 9,000 affordable homes throughout the District.

Since she took office in 2015, Mayor Muriel Bowser has pledged to commit $100 million every year to the Trust Fund. The Housing Production Trust Fund is a great thing, but it is also really important to understand how all this money got there. It was residents, community organizations and others that banned together to create the political will to fund affordable housing at this level. And more is needed.

Let’s take a look at the Housing For All Campaign. The Campaign was launched by the Coalition for Nonprofit Housing and Economic Development (CNHED) and its mission is to call on District officials to invest in housing programs that meet the needs of all District residents. In a matter of four years, the campaign succeeded in bringing the District from massive cuts in affordable housing budgets (a 70% drop to $20 million in HPTF in FY 12) to the level of committed funding we are now seeing.

Rallies are one way to mobilize people into joining your cause. They not only educate people about a certain injustice, but they also encourage people to take action. And you have to be diligent to build support and couple rallies with other kinds of action, both public and behind-the-scenes.

It is amazing to watch the evolution from the Housing For All rally in 2012, when affordable housing budgets were drastically cut, to just this past year. In 2016 the Housing For All Campaign put on its largest rally to date, packing Foundry Methodist Church with over 1000 people and public officials wanting to show support. The message was clear: DC is our home, and everyone in it should have a home.

Several prominent District officials, including Mayor Muriel Bowser, also made an appearance. The city’s mayor continued her commitment to increase investments in a wide variety of affordable housing types. “When we think about the $100 million for affordable housing I know we have to think about it across the entire spectrum. From very very low income housing to middle income housing. We have to think about new housing and we have to think about preserving housing…I consider this among the top things I have to do as Mayor.”

And the rallies for meeting affordable housing need continue. Over this past weekend, a small group of activists planned to gather in front of D.C. General and D.C Jail to press the city for a larger investment of time and resources into affordable housing and anti-poverty strategies. The rally was aimed to get the attention of Mayor Muriel Bowser and other District officials, another seed in the push for making DC a place where all can live, thrive and grow.

 Activism comes in all shapes and sizes; a large organization, or a single person can spearhead it. These actions all build off a one another and we have  to get involved and be strategic to continue building political will to meet the affordable housing needs that still exist. We’ve come a long way, and there is more to go…

What’s your story? Do you believe that everyone should have the right to a roof over his or her head? How are you getting involved? What will you do advance the cause and help create change?

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Mount Pleasant On My Mind

mt-pleasant-photoby Max Walker, Fall Advocacy Intern, MANNA

The Mount Pleasant neighborhood, situated in Northwest DC, has been my home for over 21 years. Throughout my time living here, I’ve seen many people come and go. My neighbors have changed countless times, and so too has the scenery.

In 2006, I was a 5th grade student doing a class project on my neighborhood. I was tasked with describing what my neighborhood was like, as well as talking to my neighbors about how they’ve seen or felt the neighborhood change since they’ve lived there. The first person I talked to was Mr. Eddie. Mr. Eddie, one of my favorite neighbors growing up, was an elderly black man who used to sit out on his porch every day. His response to my question was “I’m scared”. He told me that with the rapidly changing neighborhood, he was afraid that he would no longer be able to afford to live in the place he’d called home for the past 30 years. Two years later, Mr. Eddie moved out of the Mount Pleasant neighborhood of Northwest DC.

Also in 2006, The Washington Post published an article titled “Un-pleasant Gentrification”. This article revolved around the ongoing battle between Mount Pleasant’s new residents, and long-time local business owners. Minority storeowners feared being bought out by developers, and restaurant-owners feared that the changing community would lead to lack of business.

Alberto Ferrufino, the owner of Don Juan’s, a popular restaurant in Mount Pleasant, agreed with the neighborhood alliance to make some aesthetic changes to his restaurant in order to cater to newer clientele. He banned live music, and even re-painted the outside from blue and red to a dull gray. Although voluntary agreements, Mr. Ferrufino said that he feared that the neighborhood would want him out should he not agree.

Other minority community members spoke out as well, voicing their concern over their changing neighborhood. In Mount Pleasant, a place that at the time was predominately Hispanic, the Hispanic community seemed to be on the sidelines in issues over their own neighborhood. Arturo Griffiths, a community activist and Panamanian immigrant who had lived in Mount Pleasant for over 40 years, had this to say:  “We built this community in many ways. We are the flavor of this community, and now we are getting kicked out.”

Mount Pleasant was once a cultural hub. The streets were lined with Central American restaurants, bodegas, and family-owned shops and eateries. But over the past ten years, things have been changing.

In an article published by the American Observer in 2016, the authors shine light on just how much the Mount Pleasant neighborhood has changed over the years:

“According to the U.S. Census Bureau, the zip code encompassing Mount Pleasant and Columbia Heights, 20010, is among those across the country that have seen the highest increase in white residents over the last decade, jumping by 24.7 percent.”

Immigrants that were once from El Salvador have turned into immigrants from the Midwestern United States. Families have become younger, whiter, and more affluent. Condos have replaced homeless shelters. Chain coffee shops and restaurants have replaced locally owned businesses.

It is hard to combat gentrification and displacement, but a few of the District’s community leaders got together at the end of the summer to talk about how they would tackle gentrification. An article by Greater Greater Washington brilliantly summed up the panel discussion hosted by the Washington Post and these community leaders.

The conversation boiled down to the government’s role in creating, and combating, the displacement of long-time community residents. The main point was that “better public policy can shape the outcomes of economic gentrification.” The article also highlighted several ways in which the government can have an impact on gentrification:

“Communities are marginalized when they are displaced from their homes, so if housing could be more affordable, the level of displacement would decrease.”

“In an attempt to level the playing field, government needs to be held accountable for ensuring that all residents can afford to live in D.C., while balancing the power of developers and special interest groups.”

As so many people are forced to leave the neighborhood they’ve called home for many years, it is ultimately up to the government to combat the displacement of these people.

At the beginning of the summer, I took a walk around my neighborhood and remembered the conversation I had with Mr. Eddie. To this day, his fears are still relevant. I’ve seen many people just like him succumb to the changing neighborhood and rising rent. I thought about how the people living around me are starting to look less and less familiar. I thought about how confused the neighborhood made me feel. I thought about how my “home” was starting to not feel like home anymore. I thought about how long my family has before they too have to pack up and leave.

This fall, I will be holding these personal experiences close as I explore how organizing and policy, both current and new, can help maintain or recreate some socio-economic diversity in my neighborhood and others.

 

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Displacement Comes in all Forms

A couple weeks ago marked the 11th anniversary of Hurricane Katrina. August 29th, 2005 was a historically disastrous day as the peak of the storm was tearing through the streets of the southeastern United States.  Strong winds knocked trees onto cars and houses. Torrential rainfall led to the flooding of streets and homes. Everything was destroyed. At least 1,800 people were killed by the storm and subsequent flooding, and more than 400,000 people were displaced from their home, community, and city.

Everyone knows what happened that fateful summer month in 2005. Countless families lost loved ones as well as the place they called home.  But did you know that in the days leading up to Hurricane Katrina’s 11th anniversary, 11 families in DC were displaced after severe weather damaged their DC public housing apartments?

Natural disasters come in all shapes and forms. On one hand, it can be the largest hurricane the United States has ever seen. But on the other hand, it can be something as small as a thunderstorm. Both on seemingly opposite ends of the spectrum, yet both providing the same outcome: the damaging of homes and the displacement of families. Although a huge natural disaster such as Hurricane Katrina is a tragedy, it should not take something so catastrophic to bring the issue of displacement to light.

Families are not only displaced by natural disasters, but by accidents as well. Did you know that in the middle of August, an apartment complex in Silver Spring, MD caught on fire and exploded? At least 7 were killed and more than 100 people were displaced.

These are just some of the few ways families become displaced every day. Take the story of Jose Hernandez for example, a Salvadoran immigrant who has lived in the Mount Pleasant neighborhood of Northwest DC for over 25 years. For the past decade, he and his landlord have been in fisticuffs over increased rents amid terrible living conditions. This article highlights the injustices that minority renters face at the hands of their landlord. Mr. Hernandez is still battling with his landlord, but for many, displacement due to increasing rent is just something that comes with being a lower-income renter.

In an article put out by Greater Greater Washington, the relationship between rising rents and the District’s lower-income renters is very apparent. From this article we learn several important issues:

1. “The rent is too damn high”: over 60 percent of extremely low income, and over 30 percent of very low income renters, spend more than half their income on housing.

2. Rent in the District is rising faster than income, particularly for low-to-moderate income households: for those in the middle to lower end of the income distribution, wages have remained fairly stationary while rent has continued to increase.

3. DC’s supply of affordable housing has drastically decreased: “between 2002 and 2013, affordable units (those priced under $800) went from making up 40% of the rental stock to barely 20%. “

Displacement happens every day and there isn’t one sole cause. That is why preventing it, or minimizing it as much as possible, is truly important. Changing, creating, and sustaining political policy is key when it comes to mitigating displacement. The tenants can only do so much. It is up to the government to put in place the right laws and assistance programs to reduce the number of families displaced each year.

The Tenant Opportunity to Purchase Act (TOPA) is one of the very few laws in place to help tenants. This act allows tenants the opportunity to purchase their place of residence before the landlord sells the property to a developer (or anyone else). But there needs to be more.

Programs that help lower-income families transition from renting to homeowning are also extremely vital, as homeowners don’t have to deal with rising rent brought on by greedy landlords.

Other necessities include imposing rent controls to keep people like Jose Hernandez and his family in their homes; raising the minimum wage to allow lower-income minorities the chance to keep up with their ever-increasing rent; and creating and establishing relocation assistance programs for those who are displaced due to natural disasters, severe weather, and house fires.

Families are displaced every day, and it is up to the government to help protect these families and reduce displacement.

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The Racial Wealth Gap: Why Home Buying is a Must

Manna Blog PhotoIn an out-of-touch and at times baffling article, Washington Post opinion writer Charles Lane recently penned a piece he entitled “Why the decline of the homeownership rate is good news.”

He’s referring to the fact that the homeownership rate in the U.S. has dropped below 63 percent to its lowest level in decades. We covered this news slightly differently several weeks ago.

In the article, Lane tries to simultaneously make the case that homeownership is a bad investment and that the government is unable to affect homeownership rates. The only option, he says, is to get government out of the housing market.

Homeownership has long been the American Dream, with studies showing that it contributes in positive ways to everything from education to wealth-building. So why does Lane think that Dream is dead? His argument can, with some effort, be broken into two pieces.

  1. The Great Recession shows that homeownership is too risky to be a good investment.

“If the Great Recession taught anything, it was that… homeownership is not a surefire ticket into the middle class. It can be downright risky.”

This is an interesting example from someone who is advocating for less government involvement in the housing market. The Great Recession, as many readers may recall, was precipitated by the collapse of the predatory mortgage market.

Mortgage brokers and Wall Street bankers, who for the better part of a decade had been getting rich off of deceitful loans to poor families (and people of color at disproportionate rates regardless of income), saw their party come to a bitter end in 2007.

That crash logically left two options: to provide greater government oversight of loans, which we know for a fact to be effective from CRA data, or to let homeownership become an exclusive pursuit of the wealthy.

Homeownership remained a solid investment throughout the recession for many low- and moderate-income families with fair mortgages (and good counseling), especially now on the other side of the collapse as prices begin to rise again.

As you might have guessed, however, Lane picks option two, where owner-occupied homes become the yachts of the future.

But jettisoning homeownership is unavoidable for Lane because of his second point…

  1. The government has no place in the housing market.

Why? Because… Europe.

“[Europe’s] modern experience suggests no simple connection between a high homeownership rate and the ‘positive externalities’ often attributed to it.”

Lane makes a convoluted argument about European countries, some with homeownership rates higher than the U.S., others lower, and draws the conclusion that government policy doesn’t matter.

But to borrow a quip, it must be noted that we are not Denmark.

Government intervention has clearly had huge impacts on homeownership rates in the U.S., although it’s not surprising that Lane has missed this.

Lane, like many Americans, seems to have only a vague understanding of the racial wealth gap in America. He does mention this phenomenon briefly, right after celebrating falling homeownership and right before deriding government involvement in it.

“…the reconcentration of home equity, while positive for those who own homes and for the overall stability of the economy, is regressive with respect to wealth distribution. This is especially so because African Americans and Hispanics remain less likely to own homes than whites.”

A fleeting moment of insight. The gap in homeownership between whites and people of color is a huge part of the reason that black families on average have just 1/16th the net worth of white families. The numbers are similar for Latinos.

But what Lane fails to mention is that these lower homeownership rates for people of color are no accident.

A whole series of racist government policies, some of which were dismantled just fifty years ago, provided bountiful opportunities for white families to own their homes, while locking black and Latino families out of the process.

And unsurprisingly, that dynamic shows up in the data. The reason white families have a homeownership rate today that’s about 30 points higher than black and Latino families is precisely because of this government intervention.

http://www.epi.org/files/2012/charts-swa/6J.png.640

U.S. homeownership rate by race over time; from the Economic Policy Institute

We can see that since 1975, shortly after the end of explicitly racist housing policies, the homeownership rate for different racial groups has moved more or less in sync. All groups had made solid gains by 2006 before the crash wiped them out.

So a recap on our history lesson…

In the early 20th century, the government made a push for white families to become homeowners. This effort was successful and resulted in higher homeownership rates and greater wealth for white families.

In the decades after the U.S. did away with its explicitly racist policies, homeownership rates for different racial groups began moving together. By 2006, all Americans had seen an increase in the homeownership rate.

But due to an under-regulated mortgage market, which disproportionately targeted black families with sub-prime loans, many of those gains were erased. Families with fair mortgages who were able to keep their homes have still seen solid returns on their investments—a point Lane unintentionally hammered home at the opening of his article—but many others have not had that opportunity.

The logical question, then, would seem to be what the government can do to close the racial gap in wealth and homeownership that it has created.

Unfortunately, the logic in Lane’s article is about on par with his framing of history.

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