Supreme Court Preserves Legal Remedies Against Discrimination in Housing

Housing-court-caseLast week was quite a week at the Supreme Court, with three historic decisions! 1) The Court mandated that single sex marriage is protected by the Constitution. 2) The Affordable Care Act was protected. 3) Finally, in the third decision that was not as well known, the Court preserved the effectiveness of the Fair Housing Act (FHA) as a legal remedy against discrimination.

Affordable housing advocates should know about the background of the FHA and how it works to root out discrimination. In the 1960s, President Lyndon Johnson established the Kerner Commission to investigate the causes of the riots and social unrest in the nation’s cities. The Kerner Commission concluded that residential segregation, unequal housing, and economic distress in inner cities were significant causes of the unrest. The Commission concluded that “our Nation is moving towards two societies, one black, one white, separate, and unequal.” To combat this, the Commission recommended enactment of a “comprehensive” law “making it an offense to discriminate in the sale or rental of any housing.”

Leading up to the Kerner Commission, entrenched real estate and lending practices were creating segregated neighborhoods. Racially restrictive covenants made it illegal to sell property to minorities. Real estate agents “steered” or directed people to neighborhoods where their race was the predominant race. Lenders engaged in redlining or refusing to make loans in minority neighborhoods.

Lyndon Johnson exhorted Congress to pass the Fair Housing Act (FHA) in the wake of Martin Luther King’s assassination. The FHA makes it illegal to refuse to sell or rent a dwelling to any person on the account of race, color, religion, sex, familial status, or national origin. Also, it is illegal to discriminate in real estate transactions or in the terms and conditions of those transactions.

The FHA makes it illegal to practice overt or intentional discrimination. These are cases in which the intent to discriminate is explicitly stated such as when a landlord says he will not rent to African-Americans or Latinos. In addition, Justice Anthony Kennedy writing for the majority, reaffirmed the use of disparate-impact theory. Under disparate-impact theory, discrimination can be proved when there is no explicit discriminatory communication but when the results of a practice lead to segregationist or discriminatory outcomes. For example, a lending institution may state that it will not make loans below $200,000. The lender is not explicitly discriminating with this policy but if the great majority of members of a racial minority obtain loans from competing institutions of below $200,000, then the particular lender’s policy could be found to be discriminatory.

The FHA states that it is illegal to refuse to sell or rent a dwelling, or “otherwise make unavailable or deny” a dwelling on account of race, religion, gender, or familial status. For Justice Kennedy and the majority, the phrase “otherwise make unavailable” indicates that the consequences of an action as well as its intent can make it illegal. In other words, if an action has a disparate impact affecting a particular racial group, the action can be illegal even if no explicit intent to discriminate was communicated.

At the same time, Justice Kennedy warns that statistical disparities by themselves are not illegal. He reiterates previous legal practice that the disparity must not have a business justification. Referring back to the previous example, if there was no way to make safe loans (that did not default) below $200,000, then the lender would not be found to discriminate. However, if borrowers with loans below $200,000 regularly made their mortgage payments and did not default, there would be no business justification for the policy and the lender would be found to have discriminated.

Justice Kennedy’s opinion also reviews and reaffirms Congressional intent in establishing the disparate-impact standard. In 1988, Congress amended the FHA but did not address or curtail disparate impact. By that time, all nine Courts of Appeals had also ruled in favor of disparate impact. Congress was well aware of these judicial interpretations but did not change the wording of the statute to eliminate the disparate-impact standard.

The Supreme Court’s opinion is a tremendous victory for fair housing enforcement. Jurisdictions still enact zoning decisions that have an exclusionary impact against minorities. Some lending institutions engage in pricing discrimination charging higher rates to minorities or women that are just as qualified as whites or men. The Department of Justice and other agencies have used the FHA and disparate-impact theory to issue cease and desist orders and to require lending institutions to compensate the victims of discrimination.

Today, most have learned that it is not too smart to explicitly state their discriminatory intentions. Instead, they usually adopt policies that have a disparate impact. The elimination of the disparate impact standard would have been a big blow against fair lending and housing enforcement.

Justice Kennedy concludes that the “FHA must play an important part in avoiding the Kerner Commission’s grim prophecy that ‘our Nation is moving toward two societies, one black, one white – separate and unequal.’ The Court acknowledges the Fair Housing Act’s continuing role in moving this Nation toward a more integrated society.”

I could not have said it any better. Thank you Justice Kennedy.

Josh Silver is the Development Manager at Manna, Inc. Prior to his time at Manna, Josh served as Vice President of Research & Policy at NCRC. Josh is an avid District sports fan and loves spending time with his daughter.

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U Street On the Rise with Affordable

U Street

More affordable housing is coming to the U street corridor, and it’s bringing mixed-use development with it. This week Somerset Development expects to close on a $21 million dollar loan that will be used to begin construction on a 366-unit, mixed use development in one of the District’s most popular neighborhoods. This new development will be replacing Portner Place, a 48-unit Section 8 housing project, and in return a eight story building with 96 units of affordable housing will be built.

A second building will also be built, which will include 270 market rate units and 14,000 square feet of retail for the U street corridor. While the land was purchased last year for $16 million, Somerset has been working with the tenant association and community on the project since 2008. All current residents of Portner’s Place will be relocated during construction, and their Section 8 status will carry over into the new building. The remaining 48 units of affordable housing will be made available to individuals making 60% AMI or less.

Somerset Development specializes in preserving and developing affordable housing. This project is indicative of the great work that can be done when private dollars are paired with public dollars to increase the Districts affordable housing stock.

At The New Era of Affordable Housing in DC event that happened last week, Mayor Muriel Bowser called out private developers, stating that they will need to play a bigger part in the coming years to make sure the housing needs of  lower-income District residents are met. But in order to truly tackle the issue, we must begin to think bigger. David Bowers of Enterprise Community Partners says the real estate industry is thinking far too small on the issue; “We’re having million-dollar conversations about billion-dollar problems.” In the District of Columbia access to quality housing is the premier issue. Unless we think bigger, or at least more creatively, a city that was once more inclusive will only be accessible to the few.

 

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Why Affordable Housing Advocates Should Care about the Purple Line

Purple-Line

Over the years, a Montgomery-based transit advocacy group called Action Committee for Transit (ACT) has been advocating persistently and effectively for a new Metro rail line called the Purple Line that would run from Bethesda to Silver Spring and provide an East-West transit link across Montgomery County. I am a dues-paying member of ACT and live in Bethesda, but I must confess my support for the Purple Line was lukewarm. I commute from Bethesda to Manna, mostly on bicycle. The second choice is transit on days I do not bike. I avoid driving like the plague because I rather have a root canal than sit in traffic and I hate the idea of my idling car polluting the air.

But I was not a strong advocate for the Purple Line. I will not directly benefit from it for most of my travel. I also am a big fan of buses. In the 1990s, I chaired a transit advocacy group called MetroWatch. This was the time period of fiscal crisis in the District and cuts to bus service came fast and furious. I become a bus-first advocate because I saw how critical buses were to middle-income and low-income District residents.

However, I just finished reading Dead End: Suburban Sprawl and the Rebirth of American Urbanism by Ben Ross and I am now a fervent supporter of the Purple Line (http://greatergreaterwashington.org/bross/). Ben was President of ACT for many years and is a strong advocate.

Given my affection for buses, I would wonder from time to time why proposals for Rapid Bus were not sufficient to generate the transit volume that the proposed light rail Purple Line would. In theory, rapid bus could possibly come close to light rail transit volume but our politics and culture do not mesh well with rapid bus. It is much easier politically to cut back on bus service and dismantle rapid bus than it is to eviscerate a light rail line once it is built. Culturally, our country may not be ready to adequately support rapid bus. The suburbs, as Ben points out, appeal to people’s egotism and thirst for status. Suburban folk are more likely to ride an elegantly designed light rail line than crowded buses. I don’t like it but Ben is probably right about that. Ben’s blog posts also show how relatively inexpensive the Purple Line would be.

There is also a powerful affordable housing reason to support the Purple Line. Ben describes in great detail how suburban zoning, particularly the emphasis on single family homes and the exclusion of apartments, has driven up housing costs in general and for low- and moderate-income households in particular. Currently, when inner city neighborhoods experience gentrification and become attractive, rents and home values are bid up so high because there are not many alternatives to city living that is less dependent on the automobile. In contrast, if we had more communities in the suburbs and city that were less typically suburban and had higher housing densities, there could be less price pressure and displacement associated with gentrification and demographic changes.

Well, why not just change suburban zoning to allow for more apartments and higher densities? The difficulty is political. There is just too much cultural resistance. On the other hand, if more heavy and light rail gets built, zoning changes become easier as people observe that higher densities work better near rail and that higher densities make rail and neighborhood revitalization more economically viable. Build it, they will come, and the neighborhood will change for the better. Is that pie in the sky or realistic? Based on what has happened in DC and Bethesda neighborhoods with which I am familiar, I think Ben is onto something here.

Communities surrounding the Purple Line are likely to experience increases in housing prices as development heats up after the Purple Line is constructed (http://greatergreaterwashington.org/post/21888/behold-how-the-purple-line-corridor-is-changing/). Dan Reed suggests extending the price restrictions on low-income rental housing near the future line. Like Ben, Dan states that more housing development could ease the pressure on prices.

In any case, go Purple Line! It might just help affordable housing, even here in the District. Is the book perfect? Not quite. The prose can be difficult in spots if you are not a planner or transportation junkie. Also, Ben knocks buses a little more than I would like. However, he does support buses as essential to a viable transit network (but not as a replacement for rail).  On balance, if you want to understand suburbs, what changes we need, and you are looking for a good read, pick up Ben’s book.

Josh Silver is the Development Manager at Manna, Inc. Prior to his time at Manna, Josh served as Vice President of Research & Policy at NCRC. Josh is an avid District sports fan and loves spending time with his daughter.

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Housing and The Achievement Gap

The District is making changes to address the city’s growing achievement gap. Usually teachers are left to their own devices as far as how they administer and contextualize the required materials. Recently, this has been discovered as a huge catalyst for widening the achievement gap because teachers tend to focus on teaching specific facts or main ideas, but research shows you can’t understand what your reading unless you have background knowledge and vocabulary about the subject matter. That greatly affects low-income students, who are less likely to be gaining knowledge at home. This is why common core was developed, to build the knowledge of children from an early age. However, common core is simply standards, not the curriculum, which is still left up to local jurisdictions.

Despite the relaxed guidelines, DCPS got to work and began developing a curriculum rich in science, history, and literature beginning in kindergarten. The fruits of these efforts are a module based curriculum that uses six to seven week themed lesson plans to engage students. This new structure not only provides a more concrete minimum level of quality but should also help even the playing field for children who aren’t acquiring as much knowledge at home. Teachers in support of the changes hope that teacher feedback can be used to further polish and refine some of the requirements and curriculum in general.

This comprehensive approach, ensuring that a baseline level of support is providing for all students is a model that can be used in other arenas like affordable housing. This budget season the District Council supported the funding of $100 million to the Housing Production Trust Fund. In addition to these needed funds, if elected officials, program administrators, and practitioners could work together to refine the programs connected to affordable housing all efforts could work together in concert. Like the city’s growing achievement gap, the city’s affordable housing crisis must be addressed strategically and comprehensively, and we need to remember that these two issues are not mutually exclusive. Like the article stated, one of the biggest factors contributing to the achievement gap is the lack of knowledge being acquired by children at home. A stable housing situation has been known to be one of the biggest components of economic mobility. If the city can address these issues in tandem, the future of young Washingtonians looks very bright.

 

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Homeownership Works to Reduce Inequality and Build Family Equity

Last week, Manna released two studies finding that low- and moderate-income homeownership programs and nonprofit development of homeowner units reduces inequality, provides a ladder of economic opportunity, helps stabilize neighborhoods, and is cost effective. During the financial crisis and Great Recession, homeownership in general and low-income homeownership in particular lost much ground and some pundits questioned the benefits of homeownership for broad segments of the population. These new studies are hopefully more than feel-good studies and show that when carefully executed, homeownership remains quite beneficial.

Manna’s new study, The Financial Benefits of Homeownership: An Evaluation of a Nonprofit Housing Development Model, evaluates the equity accumulation and foreclosure experience of more than 700 homeowners that purchased Manna-developed units since 1982. The study finds that the typical Manna homeowner, who started off as low- and moderate-income, gained $171,000 in equity. This wealth accumulation has provided a pathway to the middle class and enabled the new homeowners to escape intergenerational poverty. The homeowners can use the equity in their homes to pursue more education, start or expand small businesses, and/or pass their wealth to their children. Moreover, the Manna homeowners helped stabilize their neighborhoods since they experienced considerably fewer foreclosures than other homeowners citywide.

The second Manna analysis, the CityLift Consumer Analysis, evaluates a down payment assistance program made possible with grants from Wells Fargo and NeighborWorks America. Assisting 350 borrowers purchase their first homes, CityLift effectively targeted traditionally underserved populations in the District of Columbia and Prince Georges County. About 77 percent of the borrowers were African-American, two thirds were female, and 85 percent were low- and moderate-income. In addition, the program is cost effective: every dollar of subsidy, most of which is repaid, leveraged ten dollars in private sector lending.

Manna CEO and President Jim Dickerson remarks, “These studies demonstrate that homeownership for low- and moderate-income families is one of the most effective and efficient strategies for building wealth for modest income people and combating inequality that is prolonging the nation’s economic recovery. We are proud of Manna’s hardworking homeowners who underwent hours and hours of counseling to prepare themselves and successfully weather the Great Recession to the benefit of themselves and their neighbors.”

“It is great to see innovative opportunities that help D.C. residents reach the American dream of becoming a homeowner. It is the Department of Housing and Community Development’s (DHCD’s) goal to create pathways to the middle class through producing, protecting and preserving affordable housing which lead to more inclusive and diverse communities. We are pleased that the additional homeownership resources provided to our Community Based Non-Profit partner helped further leverage resources from the District’s Home Purchase Assistance Program,” said Polly Donaldson, DHCD Director.

John Taylor, President and CEO of the National Community Reinvestment Coalition (NCRC), stated, “Homeownership is the single best mechanism for individuals and families working to climb the economic ladder. There is no comparable tool in terms of allowing working people to join the middle class. These studies show the impact of Manna’s important work over thirty years of homeownership assistance for low- and moderate-income families in the District of Columbia. As an NCRC member, Manna has been a strong ally in our work to create opportunities for underserved communities to build wealth.”

“Homeownership is the foundation of economic growth and stability for most families in this country,” said Deborah Boatright, regional vice president of NeighborWorks America’s Northeast Region. “Manna and other NeighborWorks organizations have been able to pair homebuyer education with down-payment assistance programs like CityLIFT to create educated homebuyers who are prepared for successful, long-term homeownership and are on a clear path to upward mobility.”

“Manna’s findings mirrors those of our 2013 Experian-Meyer study that demonstrated that homeowners educated through NeighborWorks organizations are one-third less likely to become delinquent after two years than those who do not receive counseling,” said Boatright.

Here are the major points of both reports:

The Financial Benefits of Homeownership: An Evaluation of a Nonprofit Development Model

The results of this study confirm that Manna’s model of homeownership has succeeded in producing stable and financially beneficial homeownership. Consider the following:

  • The median duration of homeownership is 12 years, which indicates that stability in homeownership has been achieved. Only 25 percent of the 706 households in this survey sold their homes.
  • Manna’s homeowners have a lower foreclosure rate than homeowners throughout the District of Columbia. Manna calculates that the cumulative foreclosure rate for the city is 8.4 percent in contrast to 3 percent for Manna’s homeowners from 1995 through 2012.
  • No Manna homeowners who settled in 2004 or subsequently have experienced either a foreclosure or deed-in-lieu, suggesting that Manna’s counseling services prevented abusive lenders from tricking Manna’s homeowners into refinancing into an unsustainable loan during the years when reckless lending was rampant.
  • The total equity accumulation for the homeowners in this survey is $162,244,512 and the median equity gain is $171,343. The great majority of these households had little or no wealth before buying their first home from Manna. Accumulating close to $200,000 in equity for the typical Manna homeowner is an economic gain that can be used for further education, starting or expanding a small business, or passing along wealth to children.

CityLIFT Consumer Analysis

Launched in October 2012 at an event that attracted over 1,300 people, Manna administered the CityLIFT program through a grant from the Wells Fargo and NeighborWorks America.  Each eligible CityLIFT buyer received $20,000 in down payment assistance funds, structured as a 5-year forgiveable grant, and fulfilled the below requirements:

  • Household income at or below 120% of the Area Median Income for the DC Metro Area
  • Qualified for a first mortgage loan from an approved CityLIFT lender
  • Attended an 8-hour homebuyer education course

The program had a substantial impact on area residents and neighborhoods, helping many traditionally underserved populations receive quality education on the homebuying process, stay and/or invest in neighborhoods, secure a safe mortgage and affordable payment, and begin to build an asset through their home. Consider the following:

  • About 77 percent of the borrowers were African-Americans and 10.3 percent were Latino;
  • Two thirds of the borrowers were female;
  • Low-income borrowers were 56 percent of the borrowers. The second largest group, moderate-income borrowers, received 29 percent of the loans.
  • Fifty one percent of the borrowers received government subsidy, such as DC HPAP loans and Prince George’s County My HOME loans. For every dollar in subsidy, most of which will be repaid, borrowers leveraged 10 dollars in private sector lending.

Previous columns have described how reckless and high-cost lending was a leading cause of the Great Recession that was the worst recession since the Great Depression. Some critics took to blaming the poor and working class for taking out irresponsible home mortgage loans. Others falsely blamed the Community Reinvestment Act, which was a subject of several columns on this webpage (http://www.federalreserve.gov/econresdata/notes/feds-notes/2015/assessing-the-community-reinvestment-acts-role-in-the-financial-crisis-20150526.html).

The truth is more complicated in that many if not most of the reckless lending was refinance loans, not home purchase loans. Moreover, ample evidence shows that responsible lower cost lending results in permanent homeownership. Hopefully, Manna has added its voice to the joyful chorus of studies showing that homeownership remains one of the most effective tools for reducing inequality and giving modest income families a shot at a comfortable and secure economic future.

Josh Silver is the Development manager at Manna, Inc. Prior to his time at Manna, Josh served as the vice president of research & policy at NCRC. Josh is an avid District sports fan and loves spending time with his daughter.

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Poverty and How It Affects The Mind

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The infancy years of childhood are some of the most critical for the development of the brain; a new study shows that poverty and its effects are some of the most detrimental to this critical development. Pat Levitt, a developmental neuroscientist at Children’s Hospital Los Angeles, has spent most of his career analyzing and studying the different dynamics that can affect the development process of the brain. One of his main studies was that of the 1990 crack booms, and the media panic of over “crack babies.” Levitt, along with many more scientists believed the dangers of cocaine exposure in utero were real but also overstated. With a group of researchers, Levitt spent two decades examining the effects of the drugs on the brains of rabbit mothers and their offspring, and his findings supported his claims of exaggeration. Recently, as the science director of the National Scientific Council on the Developing Child, poverty has interested Levitt as a major inhibitor to brain development. His work shows that conditions associated with poverty can be just as detrimental if not more than drug or alcohol abuse. Those factors include: overcrowding, noise, substandard housing, separation from parent(s), exposure to violence, family turmoil,” and other forms of extreme stress.
When stressed, the body releases hormones such as cortisol, which helps manage stress, but high stress over long periods of time can have disastrous effects. This hormone can penetrate the placenta, which not affects the development of the child in utero but also the child’s own release of the hormone later in life. In March, in the journal Nature Neuroscience, a group of researchers from nine hospitals and universities published a major study of more than a thousand children. They collected information on the children’s families such as income and education levels, DNA and MRI scans of the children’s brains. The results were very telling - families with more education and income produced children with more brain surface area. Children at the lower end of the income spectrum usually had about 6% less brain surface than their more affluent counterparts.
The results of this study continue to strengthen the argument for affordable housing and its need. A stable housing situation is one of the primary pillars of economic and social mobility, providing individuals with a sense of community, responsibility, and stability. Weve got work to do here in the District, putting historic affordable housing budget dollars to good use in the coming year and truly providing a continuum of affordable housing that allows people to move up. Its an issue that touches the potential of our children, our citys future.  
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Moving to Opportunity: Yes, but What do We do for Those Left Behind?

Exciting new research by Raj Chetty and Nathaniel Hendren of Harvard University examines the impacts of neighborhoods on future earnings. The findings suggest that low-income children should move at an early age from a highly segregated neighborhood riddled with crime to communities with less income inequality. While that makes intuitive sense and should be promoted, we also need to think about development strategies for lower income neighborhoods that are being left behind.

Chetty and Hendren’s results are startling and dramatic. In the list of the largest 100 counties, they record differences in adult earnings results of low-income children. Top on the list is Dupage County, Illinois. If a low-income child grows up there, he or she will earn 15 percent more at age 26 than if they grew up in the “average” place. Fairfax, VA ranks sixth among 100 counties and Montgomery County, MD ranks 9th. The District of Columbia comes in at 37th, with earnings just .5 percent higher than the average place. The City of Baltimore comes in last, with earnings of low-income children 17 percent lower as adults than if they lived in the average place. This is a particularly sad finding in the wake of the Freddie Gray injustice.

Chetty and Hendren find five characteristics that distinguish higher earnings counties from others: less segregation by race and income, less income inequality, better schools, less violent crime, and a higher share of two parent households. That higher levels of racial and income segregation is associated with lower earnings is likely related to concentrations of poverty. Commonsense also suggests that a place with high crime rates and low quality schools do not inspire children to aspire towards a better future.

In a companion paper, Chetty and Hendren confirm that using Section 8 vouchers to subsidize families moving to counties with the five favorable characteristics boosts earnings. It is my hunch that the findings on counties also translates to neighborhoods. If lower income and minority families move to less segregated neighborhoods with better schools, their children will perform better academically and earn more as adults. I bet you that this salutary effect occurs among the families the Manna has housed. Manna homeowners in neighborhoods like Shaw, Logan Circle, and Columbia Heights reside in communities that are gentrifying and are by definition less segregated.

A sensible development strategy would be for the nonprofit, public sector, and private sector to collaborate to provide opportunities for lower income families to move to integrated communities. City governments should use parcels they own through tax liens or via other means to provide opportunities for nonprofits to rehabilitate the housing and offer lower income homeownership opportunities like the District of Columbia has done in providing the 8th and T parcel in Shaw to Manna. Lending institutions should engage in an explicit strategy to provide loans to lower income and minority buyers in integrated neighborhoods. If they are not providing these opportunities, members of the public should use Community Reinvestment Act (CRA) process to encourage them to do so .

 

But what happens to lower income and segregated neighborhoods? Do we empty them out? Do we try to mix everyone into integrated neighborhoods? I think we pursue strategies of integration for families that want to move to integrated neighborhoods but that we also develop lower income and minority neighborhoods.

Ethnic enclaves have a long history in this country including immigrant enclaves like Chinatown in the District and New York City, Little Italy in New York City, and Jewish communities in the lower East Side in New York City in the early twentieth century that my grandparents knew. Under the right conditions, these communities can thrive, though it is not easy.

Manna, Inc. has pursued an East of the River Campaign promoting homeownership in Wards 7 and 8 that are more than 95 percent African-American. We are confident that development can succeed East of the River as well as in Northwest DC. Will it be easy? Of course not. It will require the cooperation and collaboration with other nonprofit such as Training Grounds and public sector entities that can promote better schools and job training opportunities. Perhaps the best evidence that development can work in tough and gritty neighborhoods is Manna and Rev. Dickerson’s own experience of starting a church and a nonprofit in the Shaw neighborhood in the 1990s when Shaw was overrun with drugs and violence.

Some may say that pursuing both strategies – moving to opportunity in integrated neighborhoods and developing lower income and minority neighborhoods – is Pollyannaish and not realistic given resource constraints. Cities and counties will decide upon their own mixes of moving to integration and/or developing in place. Economic conditions and political considerations will shape various development strategies, but the District of Columbia and Manna experience shows that a combination of both is possible.

Josh Silver is the Development manager at Manna, Inc. Prior to his time at Manna, Josh served as the vice president of research & policy at NCRC. Josh is an avid District sports fan and loves spending time with his daughter.

 

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The “What Is Affordable Housing” Tour

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This past weekend Manna’s Housing Advocacy Team hosted the “What Is Affordable Housing?” tour to educate individuals from all walks of life on what affordable housing really is. When I first began working at Manna, Inc. I knew nothing of local District politics or anything surrounding affordable housing. If someone was to ask me what affordable housing was, I’d probably say it was public housing. Over the past two years I’ve been submersed into a world of policy and advocacy focused around providing individuals with low to modest incomes opportunities at equitable housing in a very high priced city. When used, affordable housing is often touted as an umbrella term to represent cheap or low-income housing, but it is so much more than that. Affordable housing represents a very wide spectrum of possibilities. Some of those types of housing include transitional housing, affordable rentals, affordable homeownership, and public housing. Each type of housing comes with its own set of governing policies, varieties of financing and administrations.

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For instance, did you know that the District has programs that produce and/or preserve affordable units as well as help people afford to rent or own in DC, targeting those with very little income all the way up to 120% of the Area Median Income and that available units can be found on www.dchousingsearch.org? There is a whole host of information and programs offered by the city that very few know about. As the housing crisis in the District continues to grow, the amount of people needing this information will only grow.

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The tour also looked to highlight the stories of individuals who successfully transitioned through the various forms of housing, some even reaching homeownership. Each story not only highlighted the importance of affordable housing, but the impact it has on the lives of real people. Often time issues such as affordable housing or even living wages get so wrapped up in political rhetoric that we forget that those policy decisions have practical implications on the lives of real people.  Right now, the District is in the midst of a housing crisis, and the DC government recently passed a historic budget to try to address that crisis. As a city, we must continue to look at the programs and resources that work, those that help move people up the economic ladder. The continuum of housing is key- a system that meets people where they are, supporting them through various forms of affordable housing, with the goal of reaching economic stability and independence. It can be done, DC residents have done it and are doing it now, and we must renew our focus to create that kind of opportunity and goal on a macro scale.

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You are not Helpless to Prevent Bank Branch Closures

For many consumers, particularly modest income or older adults, a bank branch is needed in order to establish a bank account or conduct transactions. Small businesses also depend on bank branches in order to conduct routine transactions. A branch closure in a modest income neighborhood can be a devastating occurrence and can start a downward economic spiral.

Thankfully, you are not helpless if a bank announces it is about to close a branch in your community. You cannot force a bank to keep its branch open and the federal agencies likewise lack the power to compel a bank to keep its branch open. However, there are public notice procedures that you can utilize to persuade a bank to keep its branch open.

A previous column described disparities in bank branching by race and income of neighborhood. In particular, Wards 7 and 8 east of the river have a population that is about 95 percent African-American, and these wards have only 14 bank branches compared to 235 in the rest of the city. There is about one branch per 10,000 people East of the River and about 4 branches per 10,000 people elsewhere in the city. The scarcity of branches translates into fewer home and small business loans as described in the previous column.

Within the last year, one of the branches East of the River on South Capital St. closed in a census tract that was 98 percent minority and low-income. Forty eight percent of the people in the census tract was below the poverty level. In spite of the low-incomes, the bank branch had deposits of $19 million. Clearly, the neighborhood needed and depended on the branch and will be worse off economically without it.

In order to possibly avoid a branch closure, community organizations and neighborhood residents need to use the available public input procedures. A bank is required to send a notice to customers 90 days before a branch is slated to close and also post a closure notice in its lobby 30 days before closure (not sure why the notice in the lobby can be much later than the mail notice). If the branch is located in a low- and moderate-income census tract, members of the public can write to federal agencies identified in the branch closure notices and explain why the branch closure is harmful. The federal agencies have the discretion to convene a public meeting to explore alternatives to branch closures which could include another bank buying the branch or the bank donating its branch to a community-based credit union.

When I was at NCRC, NCRC and member organizations used this public input mechanism to ask federal agencies to convene meetings. The meetings were successful in halting branch closures in places as diverse as rural Mississippi and America Samoa. In the case of Mississippi, a Congressman showed up at the meeting convened by the federal agency and likewise the member of Congress from America Samoa was also involved.

The lesson is that campaigns to keep bank branches open work better when community organizations have organized important constituencies. These include elected officials, small businesses, and neighborhood residents who use the branch to explain why the branch is important. In addition, you need to do your homework and data analysis to demonstrate why the bank branch is important to the neighborhood.

If at the end of the campaign, the bank closes the branch, you should not feel that all is lost. If the bank was not responsive to community concerns and did not offer any alternative services or products, then you can comment on the next CRA exam of the bank or comment if the bank submits a merger application. The opportunities for commenting do not cease and there are many ways to hold banks accountable for serving communities.

There are no guarantees of success in obtaining alternative outcomes other than a branch closure. What is guaranteed, however, is that without public input and participation, the branch will close.

 Josh Silver is the Development manager at Manna, Inc. Prior to his time at Manna, Josh served as the vice president of research & policy at NCRC. Josh is an avid District sports fan and loves spending time with his daughter.

 

 

 

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A Bank Merger is Prime Time for Community Organizing

Most people do not know that when banks merge, they must seek permission from federal agencies for their merger plans. Most people also do not know that the public has a right to comment to federal agencies regarding whether the merger will be in the public interest.

Why are these merger rules on the books? The concerns about mergers and accumulation of market power go back to the days of Adam Smith. Smith was the brilliant English economist of the 18th century who generally lauded markets but worried that absent government intervention firms would get too big and that monopoly power would harm consumers. A recent example of these concerns occurred when Comcast called off its bid to acquire Time Warner. Although the government had not yet ruled on the merger, Comcast probably saw the writing on the wall in that the government would either not approve the merger or impose stringent conditions. There were significant concerns about monopoly power and rising prices for consumers.

Likewise, banks can grow too big, accumulate too much market power, raise prices, cut back lending, and close branches after they merge. Banks can grow so large that they can pose grave risks to the economy as we witnessed during the Great Recession. Currently, there are two banks with assets greater than $2 trillion and two banks with assets greater than $1 trillion. One of these banks is so large that they can no longer merge because federal law prohibits any one bank from holding more than 10 percent of the deposits in the country.

Due to concerns about economic harms of big banks, the Bank Holding Act of 1956 required federal agencies to consider whether bank mergers will result in public benefits. Federal agencies consider several factors in their merger reviews including the impacts on competition, the management of the banks, the safety and soundness of the banks, and the convenience and needs of communities. Community organizations and members of the public generally focus on the convenience and needs of communities. Is lending going to go up or down after the merger? What are the banks’ plans regarding their branches? Does one bank have a good Community Reinvestment Act (CRA) approach and the other bank, a not such good approach? Which approach will win out?

Banks have complained about the process, but community groups are quick to remind banks and the federal regulatory agencies that merging is a privilege, not a right. After all, the public, through federal and state governments, give banks the right to exist and be incorporated as responsible businesses. If mergers make them too powerful or risky to offer responsible products at reasonable prices, why should the public allow them to merge?

Mergers are rarely denied by federal agencies but the process has spawned an informal negotiation process between community groups and banks over the decades. In order to ensure public benefits from mergers, community groups started asking banks for plans or commitments to offer specific numbers of loans, investments, and services to low- and moderate-income consumers in the geographical areas they serve. These plans became known as CRA agreements. In the heyday of CRA enforcement during the 1990s (the last time the CRA regulations were updated), CRA agreements took off. Most of the $6 trillion in CRA agreements were negotiated between banks and community groups during the merger review process. Research by a Federal Reserve economist using NCRC’s library of CRA agreements confirmed that agreements increased the amount of lending in low- and moderate-income communities.

But then a not so good thing happened to the merger approval process. The Federal Reserve Board started adding a customary footnote in its merger approvals that bank regulations do not require the agencies to review and/or approve CRA agreements. This had a chilling effect. Banks concluded that CRA agreements were not necessary for merger approval. The number of CRA agreements dropped dramatically in the first decade of the 21st century.

A few years ago, NCRC tried a different tack. Instead of talking about CRA agreements, NCRC harped on the public benefits standard required by the Bank Holding Company Act. How could the public know if mergers would be beneficial if there was no plan or a commitment by a bank to offer specific amounts of loans, investments, and services, which should be greater than the amount offered by the banks before their merger? Instead of asking for specific dollar amounts, community groups asked for performance goals. For example, would the merging banks offer a percentage of loans to low- and moderate-income borrowers greater than the percentage of loans offered by their peers?

In the last few years, there have been instances of federal agencies issuing conditional merger approvals that require plans for bank improvements in lending, investing, and services after the mergers. There is still a ways to go, but the tide is starting to turn back towards public benefits enforcement during the merger application process. The only way to make this a high tide is for more community input during the merger application process.

You don’t have to be an expert in banking to comment. Focus your comments on whether the bank is a good partner with community organizations in counseling and/or housing and economic development. Send in comments about the availability and affordability of bank loans and checking and savings accounts. And remember: a bank merger is a privilege, not a right for the banks. If banks don’t serve the community diligently and responsibly, they should not be allowed to merge.

 Josh Silver is the Development manager at Manna, Inc. Prior to his time at Manna, Josh served as the vice president of research & policy at NCRC. Josh is an avid District sports fan and loves spending time with his daughter.

 

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