Category Archives: Advocate’s Corner

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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.

The Housing Advocacy Team: “Bigger and Better Each Year”

Several weeks ago in the sweltering July heat, a group of people with a common interest in affordable housing gathered at MANNA’s headquarters in Northeast DC. They shared a couple pizzas, celebrated their recent First Annual Homeownership Town Hall, and talked about the issues facing their city: housing prices, evictions, racism.

It was a low-key event, lacking the fine dining and press coverage of many District political meetings. Mayor Bowser’s recent pitch to Republican leaders in Cleveland, for instance, featured salmon with a side of national media attention.

But given the group’s record, the press might have been wise to also snag a slice in Northeast.

That group is the Housing Advocacy Team, or HAT, a collection of individuals who are passionate about making DC homes affordable. Many of them became connected with HAT through MANNA’s homebuyer program. Others turned to HAT for help in tricky situations and then decided to stick around.

Together, the group has helped support some of the biggest wins DC has seen in affordable housing.

Through their work with the Coalition for Non-Profit Housing and Economic Development (CNHED), the yearly Housing for All rally has grown from just dozens of participants at its inception to over 1,000 people this year.

The Housing for All Campaign’s success is reflected in the $100 million directed to the Housing Protection Trust Fund in both 2015 and 2016. That money will expand the impact of the Trust Fund, which has supplied funding for projects that currently house over 18,000 District residents.

HAT and the Housing for All Campaign saw another win this spring, as their push led to the Home Purchase Assistance Program (HPAP) receiving a massive funding increase. HPAP, DC’s first time homebuyer loan program, got a bump of $6 million—a more than 60% raise. The money will go to interest-free loans as high as $80K for first time homebuyers.

But the Team has no interest in resting on its laurels. HAT will be meeting soon to decide on priorities for the next year’s advocacy cycle, and there will be an event in the second week of September for people unfamiliar with HAT to learn more and become involved.

“I hope [HAT] is around forever,” says Victoria Palacio, a HAT member. “Well, as long as it’s needed. If HAT can continue to address the problem to where there’s no longer an affordable housing issue in DC, that would be great. But as long as there is a need… [we’ll] continue to have events that are bigger and better each year.”

Although there are still no plans for salmon at the meetings, reporters would do well to mark those words. HAT hasn’t been in the business of empty promises.

 

If you’re interested in learning more about affordable housing and the political process in DC, follow @hatdc on twitter and the Housing Advocacy Team on facebook. And look for specifics on the event in September!

New Accountability Tool – Consumer Complaint Database

bills

 

Do you feel powerless to resolve a debt payment issue, a credit report mistake, or a mortgage servicing issue? Does the financial company promise to resolve the problem, you make repeated calls over several months, and the problem does not get resolved?

Fortunately, you now have one more accountability tool in your toolbox. The Consumer Financial Protection Bureau (CFPB) was required by Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 to handle and help resolve consumer complaints. The CFPB also did a smart thing: it publishes the complaint data on the internet. Of course, financial companies hate this and complain, but my bet is that the publicly available data has reduced the number of problems and helps resolve complaints faster than they were fixed before. If you feel you need help on an unresolved issue, you can go to http://www.consumerfinance.gov/complaintdatabase/ to file a complaint and also to view other complaints about mortgages, bank accounts, debt collections, student debt, and more.

The CFPB has started issuing monthly reports that will help consumers and counselors understand trends and pinpoint emerging issues. Since 2012, the CFPB has received 650,700 complaints. For June of 2015, the CFPB reports that the top three products/services in terms of complaints in descending order was debt collection, mortgages, and credit reporting.

The database can be sorted by state, issue, company, and resolution status. When looking at Washington DC, complaint volumes increased 10 percent from April through June compared to a year ago (http://files.consumerfinance.gov/f/201507_cfpb_monthly-complaint-report-vol-1.pdf).  Complaints in DC now run about 577 complaints per 100,000 people which is a higher rate per capita than all the other states! Maryland also has a high per capita rate of 333 per 100,000.

A new feature of the complaints database is consumer complaint narratives. The individual consumer is not identified in order to protect privacy, but the narrative appears (if the consumer wants the narrative displayed). Looking at a couple of narratives reported from consumers in Washington DC shows typical complaints. In one case, a debt collection company kept contacting a consumer about debt his brother owed. In another case, a credit reporting company kept records of medical debt owed even though the consumer reports that the insurance company paid the bill.

It is hard to judge a company’s performance definitively on this database without some additional analysis. The companies that show up frequently are large companies, which by their unwieldy nature, will have some staff or divisions that do not do a good job. An analyst needs to “normalize” the data or figure out complaints per loans or complaints per assets or some other measure like this. The CFPB is currently taking comments on how to “normalize” the data. While consumers should certainly use this database to hold companies accountable, they should also be careful in labeling a company bad until additional analysis is conducted. The CFPB itself scours the database to help companies identify issues or bad offices and in some cases to pursue legal enforcement if misbehavior is due to a systematic pattern or practice.

Overall, the CFPB complaints database is a powerful accountability tool for consumers and counselors. Use it!

 

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.

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.

The Banks Are Back At It

Here we go again! Banks are back at it, crying foul to new regulations, in return telling some of their largest clients to take their money elsewhere, or be slapped with huge fees. The large financial institutions, including J.P. Morgan Chase & Co., Citigroup Inc., HSBC Holdings PLC, Deutsche Bank AG and Bank of America Corp, have stated that the new regulations have made some of these deposits less profitable. For most banks, deposits have been the usual catalyst for driving growth: more deposits allow banks to loan out more money and bring in more profits. However, with tighter regulations and a smaller amount of loans being generated, banks are beginning to see large deposits as dead weight. This mindset has led to these decisions, decisions that have taken a turn away from some of the fundamental principles and actions typically associated with banking. First and foremost, deposits have usually been seen as the key driver for banks since there is a lower interest rate on money kept in-house and then loans can be made at a higher interest rate. The new rules given by regulators to make our financial systems safer require more cash on-hand so that banks are more resistant to shocks like those seen during the financial crisis of 2008. Many banks feel as if these regulations carry too much liability.

Historically, banks’ fundamental purpose was to serve the credit and banking needs of local communities. While things have changed such as the services offered or the speed of these services, the principle responsibility still remains. Banks put a community’s surplus funds (deposits and investments) to work by lending to people to buy homes and cars, to start and expand businesses, to put their children through college, and for countless other purposes. While times have changed, the central focus shouldn’t. We must develop comprehensive strategies that allow maximum community development, while ensuring our communities are safe guarded from predatory practices or financial crises.

Last week, the Community Development Amendment Act of 2013 passed the District Council; this bill encourages banks who do business with the District to make plans to meet the banking needs of all District residents. There will be a chance for the public to weigh in on banks’ plans and progress once implementation begins in early 2016. We hope for good faith banking partners in the District and a chance to champion improved banking services and products for District residents and neighborhoods that need it the most.

An Absence of Community Development

Do you have a bank branch in your neighborhood? Do you use it to make deposits and shop for bank products? Do you talk to branch personnel about loans?

In Manna’s immediate neighborhood, we see a Bank of America and TD Bank branch on or near Rhode Island Avenue as we walk to and from work.

Bank branches are important anchors of commerce and business activity. Small businesses place thousands of dollars of deposits in branches on a weekly basis. Neighbors place deposits and take out money at ATMs and work with tellers on more complex transactions. When a bank closes a branch and pulls out, this sends a devastating message to a neighborhood. It says the bank has lost confidence in the neighborhood as a place to do profitable business. Without bank branches, a neighborhood will decay and deteriorate…businesses will find it harder to do business and residents will find it harder to get loans.

That’s why we must tell federal agencies that bank branches are important. The federal agencies oversee a law called the Community Reinvestment Act (CRA). CRA requires banks to serve the credit and banking needs of communities, particularly low- and moderate-income communities. Under CRA, three federal agencies (the Federal Reserve Board, the Federal Deposit Insurance Corporation, and the Office of the Comptroller of the Currency) evaluate bank performance in serving communities and give them a “grade” or rating in a publicly available report card called a CRA exam. You can look up a CRA exam on the internet for any bank in the country – go to http://www.ffiec.gov.

The three federal agencies are proposing changes to a document called the interagency CRA Question and Answer (Q&A) document that would diminish the importance of bank branches on CRA exams. Their idea is that alternative means of delivering bank services such as through the internet has become more prevalent. We at Manna believe that this elevation of alternative service delivery and the demotion of bank branches pose a big problem for low- and moderate-income communities. On a daily basis, we see many hard-working clients trying to get home purchase loans and understand banks. We provide hundreds of hours of counseling to clients. It is naïve to think that hard-working people who are not familiar with banking will use the internet to shop for bank products. They need in-person assistance…whether that is at nonprofits or at bank branches. It is hard enough for anyone to understand the plethora of loans and bank products – and that includes staff at Manna who have been doing this work for years!

Tell the regulators that bank branches are important and that the agencies should not diminish the weight of bank branches as a factor on CRA exams! You can comment by sending an email to: comments@fdic.gov and using the subject line CRA exam Q&A. And you can read Manna’s comments and others via https://www.fdic.gov/regulations/laws/federal/2014/2014-community_reinvestment.html. If you can, comment by Monday, November 10 – the official end date for comments.

Finally, the agencies are doing one good thing: they are saying that community input on CRA exams will receive more weight. Congratulate them on that! And tell us your stories about the importance of bank branches and what happens when they are not in neighborhoods.

 

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.

Ownership is still cheaper

According to recent data released by Trulia it is still significantly cheaper to own in the DC region then to rent, 34% to be specific. This has been consistent all year and is slightly below the national average of 38%. Jed Kolko, chief economist for Trulia provides in-depth analysis providing further breakdown. For instance, it is 25% cheaper to own in Fairfax, VA than it is to rent, while it is 33% cheaper to own in the District of Columbia.

Trulia calculates this by using several factors, which includes average utility bills and tax deductions amongst other things, but one very important factor that was discovered was that the owner must remain in their home for at least 7 years. Trulia used many different variables to make these calculations like changing the length of the mortgage or type of loan, and every time ownership beats out renting.

This data lends significant strength to the solution of homeownership as a vehicle to help low-to-moderate income individuals achieve economic mobility. The District of Columbia already has programs in place to help lower income individuals purchase homes, like the HPAP program and development subsidies, but more can be done on the side of our financial institutions. A piece of legislation, the Community Development Amendment Act of 2013 would incentivize community development by evaluating the community development plans of financial institutions that apply for financial contracts with the city, and assigning contracts partly based on those plans. Now is the time for the city to lead the way in promoting economic mobility and holding financial institutions accountable!

Failure By Flagstaff

In recent months many factions of the financial industry have been penalized for the participation in the mortgage crisis of 2008, but in recent news the Consumer Financial Protection Bureau has narrowed its scope and taken aim at the mortgage servicing firms who play a large role in whether struggling individuals either lose their home or receive extra time to rectify their situations.

In its first act of enforcement under new mortgage servicing rules that began this year, the consumer financial regulatory bureau and Flagstar bank reached a $37.5 million settlement because of accusations the bank prevented thousands of people from accessing tools that would have helped them escape foreclosure. Flagstar has been accused of withholding information from clients, stringing clients along for months, then wrongfully denying them loan modifications, they also failed to inform clients that documents critical to the approval of their modifications were needed. Richard Cordray, the director of the consumer protection bureau said “Flagstar took excessive time to process borrowers’ applications, did not tell them when their applications were incomplete, denied loan modifications to qualified borrowers, and illegally delayed finalizing permanent loan modifications”

One of the biggest concerns generated from this situation is the lack of options or even community oriented departments in these large financial institutions, focused on helping clients find the best option. Here in the District we have an opportunity to provide an incentive to some of these financial institutions. The Community Development Act of 2013 would incentivize more community development from financial institutions, by evaluating their community development plans and factoring those evaluations into which banks secure financial contracts with the city. This latest settlement by Flagstar shows our financial institutions need a little push in the right direction; a Responsible Banking Ordinance seems like the perfect start.

Financial Crisis Conundrum

There have been many long term consequences following the financial crisis of 2008, but recently, one that has taken the forefront of the discussion is the growing divide between economic classes and the disappearance of diverse communities. One of the largest contributors to this issue is the severe credit crunch that followed the crash. Today, black homeowners in America are so likely to return to renter status that all the gains made by blacks in homeownership since the 1970s have been wiped out. Black and Hispanic households have gained the least from the recovery, making it all but one-sided.  While the credit squeeze has significantly contributed to the overall problem, individuals of color already lagged behind due to factors like lack of access to good schools, which in large part reside in more affluent communities, etc. This greater economic stratification has only widened the gap.

 

In a paper released earlier this year, researchers Amine Ouazad and Romain Rancière show that the credit boom leading up to the crash allowed many families of color to move into more mixed-income and culturally diverse areas, but that also caused white borrowers to move out as well, which lead to more isolated black communities. The paper details how people of color tend to become homeowners in their current neighborhoods or diverse communities, while white individuals usually use homeownership as an opportunity to move into predominately white communities.

 

The District is very special in this regard. Due to a cultural and economic boom, the city has become a melting pot filled with homeowners from all walks of life. However, in order to maintain diversity, the city must be very strategic and targeted with its resources, ensuring an adequate amount of affordable housing is available. In an article written by Cheryl Cort for Greater Greater Washington, the author speaks on the city’s history of using public land for affordable development, and how this practice has waned. She references a current development proposal that would require no affordable development in a more affluent area of the city, but allow the developers to produce the units in a more distressed area of the city. While this allows the developer to develop more affordable units, it strips potential affordable owners of the access to transit, employment, and education opportunities that are more plentiful in more affluent areas of the city, and are critical to economic mobility. The choices in this situation are not easy, and the District also needs to be mindful of enacting policies that allow lower income and minority homeowners to have access to good credit as well as access to growing equity in their homes. The District is in a great position and must leverage all of it resources to produce as much affordable housing as possible. If not, it runs the risk of ending its cultural and economically diverse renaissance.

The Future of Community Wealth Building

Since the financial crash of 2008 many low-to-moderate income families have had a hard time getting back on their feet during these years following. One city is taking an innovative approach to helping families in their community build wealth. Founded on the rich legacy of Maggie Lena Walker, the first woman of any race in the nation to charter a bank, the City Richmond is trying an innovative approach called the Maggie L. Walker initiative for Expanding Opportunity and Fighting Poverty. The main focus of the program is developing an Anti-Poverty Task force comprised of key administrators, issue experts, non-profit and business stakeholders, and community leaders to oversee the development and implementation of programs such as an Affordable Housing trust fund for the development of more affordable housing and a revamped workforce development program. There will also be a focus on developing rapid bus transit and the establishing of a citywide scholarship program to increase the access to college and vocational education. A Citizen Advisory Board will also be assembled to ensure poverty stays at the top of the agenda and that persons living or working in or near poverty have a seat at the table.

 

According to columnist Michael Paul Williams, this innovative approach aims to “undo centuries of Richmond history, including a poverty infrastructure built by ill-advised or malevolent public policies and sustained by latter-day indifference.” Policies like redlining and discriminatory housing covenants made it difficult for people of color to become homeowners following WW!!, hampering their wealth creation. Although this initiative has yet to fail or succeed, fresh ideas like these are needed to truly combat the current economic crisis. The District of Columbia is currently facing a homelessness crisis, as well as an affordable housing crisis. In addition to common sense policies focused on wealth generation for low-to-moderate income families and the development of more affordable housing, fresh ideas like the ones in Richmond are key to addressing these crises. DC is way ahead financially and programmatically (we have a huge Trust Fund, Workforce Development programs funded, etc.), but what’s unique is a stated focus on wealth building and the connection between all of the issues and a board of leaders and citizens to push the initiative forward. The resources are in place, but a commitment to fresh ideas and community development are needed to ensure the District’s sustained economic and cultural boom.