"UNDERWATER AMERICA" NEW REPORT: Housing Crisis Far From Over

FOR IMMEDIATE RELEASE: May 8, 2014
Contact:
Saqib Bhatti, Nathan Cummings Foundation (312) 860-9917; saqib.bhatti@nathancummings.org
TJ Helmstetter, Center for Popular Democracy (973) 464-9224; tjhelm@populardemocracy.org

Download report: http://diversity.berkeley.edu/underwater-america-report

"UNDERWATER AMERICA"

NEW REPORT: Housing Crisis Far From Over; Study Ranks Top 100 Cities Hardest Hit
Authors Recommend Principal Reduction Strategies Including Reverse Eminent Domain

(NATIONWIDE) — A new report shows that the problem of widespread “underwater mortgages homeowners stuck in loans for more than their home is worth--persists in many communities across the country.

The report “Underwater America: How the So-Called Housing ‘Recovery’ is Bypassing Many Communities” published on Thursday, May 8th, by UC Berkeley’s Haas Institute for a Fair and Inclusive Society identifies the nation’s most troubled hot spots: the cities, metro areas and communities where the highest proportion of homeowners still have negative equity, or are “underwater.” The report’s authors argue that market forces alone will not bring the recovery to these severely impacted communities, and call for local or federal intervention to reduce mortgage principal.

In the first report of its kind, the authors analyze negative equity and foreclosure data together with race and income data, at a zip code level, as well as city and metropolitan area. The report uncovers the depth of the housing problem that persists in these hard hit communities, as well as how the legacy of predatory lending has meant a disproportionate negative impact on African American and Latino communities. One in ten Americans lives in the 100 hardest hit cities where the number of underwater homeowners range from 22% to 56%, the report says.

"'America Underwater' demonstrates that neighborhoods in all regions of the country – from Milwaukee to Memphis, Atlanta to Las Vegas, and beyond – are continuing to suffer with more than one fifth of homes currently underwater in the 15 hardest hit metropolitan areas with populations over one million," said Professor Gregory Squires, one of the five authors of the report and the chair of the Department of Sociology at The George Washington University. "The failure of a wide array of federal programs to stem this tide has caused many desperate local communities to consider bold action, including the use of eminent domain, to purchase these loans at current market value and refinance them to help millions of at-risk families to save their homes. These local laboratories of democracy may well signal a nationwide social movement that will put the financial crisis behind us.”

Industry data show that many American homeowners are still severely underwater and at risk of losing their homes. Despite home prices rising in many parts of the country, the total value of owner-occupied housing still remains $3.2 trillion below 2006 levels. At the end of 2013 more than 9.8 million American households, representing 19.4% of all mortgaged homes, were still underwater on their mortgages. Underwater homeowners are significantly more likely to default on their mortgages than homeowners with positive equity.

This report identifies where these homeowners are concentrated and which zip codes (identifying 395 zip codes in 23 states), cities and metropolitan areas are hardest hit.

The Ten Hardest-Hit Major Cities

City Percent of Homes Underwater

# of Homes in Foreclosure or Default in 2013*

Hartford, CT 56% 723
Newark, NJ 54% 1346
Elizabeth, NJ 53% 567
Paterson, NJ 49% 858
Detroit,MI 47% 4830
Warren, MI 44% 927
Dayton, OH 43% 3399
Miami Gardens, FL 43% 726
North Las Vegas, NV 43% 2648
Bridgeport, CT 42% 1571

 

The 15 Hardest-Hit Major Metropolitan Areas

Metropolitan Area Percent of Homes Underwater
Las Vegas, NV 35%
Atlanta, GA 35%
Jacksonville, FL 34%
Orlando, FL 30%
Chicago, IL-IN-WI 30%
Tampa, FL 29%
Detroit, MI 28%
Miami, FL 27%
Memphis, TN-MS-AR 27%
Virginia Beach, VA-NC 25%
Riverside, CA 24%
Kansas City, MO-KS 24%
St. Louis, MO-IL 24%
Cleveland, OH 24%
Milwaukee, IL 23%

 

RECOMMENDATIONS FROM THE REPORT
1. Loan holders—banks, government sponsored enterprises (i.e., Fannie Mae and Freddie Mac, which are regulated by the Federal Housing Finance Agency, FHFA), and investors—should reduce the principal on underwater mortgages to current market values.

2. If loan holders are unwilling or unable to reduce the principal on underwater mortgages to current market values, they should allow these loans to be purchased by publicly-owned or nonprofit entities that are willing to restructure them with fair and affordable terms.

3. Local municipalities should use all options at their disposal to facilitate the goal of resetting mortgages to current market values, including the use of “reverse eminent domain” (the program proposed in Richmond, California and elsewhere) to acquire mortgages in order to restructure them with fair and affordable terms.

4. Banks, government sponsored enterprises like Fannie Mae and Freddie Mac, and investors that own vacant homes that have already been foreclosed upon should sell them to publicly- owned or nonprofit entities that can convert them to affordable housing units for residents of the community instead of selling them to speculators.

5. Local municipalities should use all options at their disposal to facilitate the goal of turning vacant, foreclosed homes into affordable housing. This includes the use of “reverse eminent domain” to acquire properties in order to convert them to af- fordable housing units for residents of the community and to prevent them from being purchased by speculators.

United States Representative Mark Takano of California commented on the report in a statement:

“I applaud the Haas Institute for Fair and Inclusive Society for looking at the communities like mine that are getting left behind by the housing recovery. Southern California’s Inland Empire was hit particularly hard by the housing bubble and it’s no surprise that Riverside ranks as one of the metro areas with the highest proportion of homeowners still underwater on their mortgage. While housing prices are beginning to rebound, we must ensure that the recovery is driven by sustainable forces that give families a pathway to homeownership not outside actors looking to exploit the mortgage crisis. It’s only by understanding the factors at work that we can build a housing recovery that reaches every community.”

Report Authors:
Peter Dreier, Professor of Politics and chair of the Urban & Environmental Policy Department at Occidental College;
Saqib Bhatti, Fellow at the Nathan Cummings Foundation;
Rob Call, graduate student in urban planning at the Massachusetts Institute of Technology;
Alex Schwartz, Professor of Urban Policy at the Milano School of International Affairs, Management, and Urban Policy at The New School; and
Gregory Squires, Professor of Sociology and Public Policy & Public Administration and chair of the Department of Sociology at The George Washington University.

The Haas Institute for a Fair and Inclusive Society at UC Berkeley brings together researchers, community stakeholders, policymakers and communicators to identify and challenge the barriers to an inclusive, just and sustainable society and create transformative change. The Institute serves as a national hub of a vibrant network of researchers and community partners and will take a leadership role in translating, communicating and facilitating research, policy and strategic engagement. The Haas Institute advances research and policy related to marginalized people while essentially touching all who benefit from a truly diverse, fair and inclusive society.

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