Whose Home Gets to Be a Castle?

Ray Suarez
Senior Correspondent, The NewsHour; Public Broadcasting System

November 20, 2002
For the Neighborhood Reinvestment Corporation

Ray Suarez presented this speech at the NeighborWorks Campaign for Home Ownership
Celebration and Symposium—Changing the Face of Home Ownership—at the National Press Club in Washington, DC. Suarez, a Washington-based senior correspondent recently published The Old Neighborhood: What We Lost in the Great Suburban Migration: 1966-1999 (Free Press).

I’m grateful that you considered me to give this address this morning. The topic of how to intervene, whether to intervene in the operation of the private market in housing in order to open up affordability and encourage grass-roots investment in shoring up neighborhoods is one I’ve been giving a lot of attention to lately. It’s a tough time to be addressing this topic. Unemployment and underemployment is high among the working poor and people making below the median income. It is among those workers that the brunt of the manufacturing recession, and the softness in the service economy has been felt. Personal bankruptcies were already running high before the economy began to soften, but things have gotten worse in the meantime… delinquencies and foreclosures have been rising even as interest rates have dropped to their lowest levels since the Eisenhower Administration, and 30-year mortgages are averaging at about 5.9 per cent. Cities that had finally put together enough good quarters in a row to address old nagging problems AND start investing in the future now can’t depend on their strapped states for help. Places like Washington Pennsylvania, just outside Pittsburgh, Buena Vista Township Michigan, find their small budgets strapped, in deficit, and no help likely from their also revenue-short states. Low wage workers who had been among the last to finally see their wages rise, to see the benefits of a tight labor market in steady work and steadily rising wages now are back in that familiar boom and bust cycle. But even with all those less than optimal factors in play… it’s also a time where housing affordability programs are incredibly important.

This week a study was released that showed the number of low- and moderate-income working families spending more than half their earnings on housing rose by over 67 percent between 1997 and 2001. Now over four million households spend more than half their income on housing, far outside the tolerances and underwriting guidelines you use to underwrite loans. In many places in the country, there’s a full-fledged affordability crisis under way. In a country where there is often very little sympathy for struggling, low-wage working families, there is an odd and unexpected similarity between the stories of families below the national median trying to jump through the hoops involved in qualifying for a mortgage… and the stories of families that once thought of themselves as well-off, finding themselves unable to afford a house. Around Boston, where house prices have doubled in the last five years, a family making the local median income of $61,000 can afford the monthly payments on a house worth only half the median price of $395,000. In the mid-1990's, a median income allowed the purchase of nearly a median-priced house. In the intervening years, it hasn’t only been Boston, but SAN JOSE, SAN FRANCISCO, ORANGE COUNTY, OAKLAND, SAN DIEGO and HONOLULU have all seen the median income household falling further and further behind in the struggle to buy a house. This is of course leave low and middle income families even further behind… pushes renters out of gentrifying areas, and pushes families below the median wage into spending persistently high fractions of the family budget on shelter. These same families often find a tepid welcome outside the historic urban core… with so many suburban municipalities that limit or forbid the construction of multiple dwellings, rental housing, lower-cost housing, small lot sizes, and small floor plans… the very housing forms those families in search of opportunity might have been in the market for. The forces that make affordable housing hard to build in so many jurisdictions is a form of market manipulation… so we shouldn’t wring our hands too too much about lenders, developers, and the big mortgage clearing institutions intrude in the marketplace as well.

Community Development Corporations, Land Banks, block stabilization policies, banks doing social investing, and banks afraid of the Community Reinvestment Act cudgel doing the right things for reasons of their own all had a part in a home ownership boom in the nineties… there has been widespread agreement across the political spectrum and among public, private, and non-profit institutions that home ownership is a strong antidote to the economic problems that plague so many individual families and whole communities. In their landmark study of the accumulation of family wealth, Oliver and Shapiro’s Black Wealth, White Wealth, demonstrated that the ability to use real estate as a leverageable, appreciating, equity building asset makes the largest single component in the differences in wealth accumulation between black and white families of the same annual household income. Real estate is a formidable repository of value, and lack of access to home ownership has, in the places where the real estate market has been the strongest in recent years, created two classes even among people of all races of very similar educational level and annual income… if you were in a house… even, as it turns out, what you might have considered a marginal property years earlier… if you were in a house for the runup in values, you are significantly ahead of renters of similar income in wealth accumulation. Yeah, obviously, but I’m making a point here… So, sure… at the risk of stating the obvious, getting low to moderate income households into real estate, getting minority families into real estate, is their only shot at the tax advantages, the equity growth, and the community-building possibilities inherent in home ownership.

Recently, when I was in Philadelphia preparing a story on strategies for reversing urban decline, I visited a neighborhood that’s had the bottom drop out: Strawberry Mansion, northwest of downtown, near Fairmount Park. Everything that could have gone wrong in a neighborhood has gone wrong there. Disinvestment, badly planned and executed redevelopment schemes, loss of the employment base, dereliction, abandonment, vast clusters of abandoned housing and abandoned lots. I sat on Gladys Meade’s porch on a hot day in July, and looked at her block. It was a tight collection of two story row houses, each the same… a tiny patch of green in front of the brick porch… remarkably, surrounded by blight, this block had only two abandoned houses, in a neighborhood that was in other places nearly empty. I walked down the street with the 81 year old woman, who had bought the house with her late husband in the early 50s, as she greeted everyone along the block… young old, and in between. Gladys Meade had bought a building out of her own pocket to try and start a community performance space. She took me one block over to see the building, a former church. In walking that one block, the whole world looked different. Maybe a half dozen units on the two long sides of a rectangular street lined with small four-flats were still occupied. People were living in scorched-brick, boarded up, busted window housing. I asked Gladys why this block looked so different. She said that owner-occupiers had once lived on the street along with the renters, but once it became all rental the block’s fortunes plummeted. It was a stark lesson in bricks and mortar—and broken glass--about social capital, about preserving intact streets, about what owners, even in a troubled neighborhood, can accomplish. But for those of you in the affordable housing world, a place like Strawberry Mansion also teaches some cautionary lessons. For her meticulous care for her house… for the loving tending of her garden, for the faithful paying off of a mortgage, Gladys Meade now lived in a house that was worth little more than she paid for it half a century earlier. In too many places in this country home ownership has not been the boon it was promised to be… tens of thousands of minority families bought in to neighborhoods whose best years were behind them, and found they were maintaining an asset of declining value. A brick bungalow on one side of a major North-South avenue in a rigidly segregated city like Chicago, same age, same building materials, same level of maintenance, may end up being worth twice as much as another for no more complex reason than that white people live in one and black people live in another. In the neighborhoods of north Philadelphia I visited, a terrible life and death cycle had taken hold… population decline had weakened demand and weakened municipal government… slack demand meant declining home values… declining values meant dwindling equity, and in rental properties, diminishing market power to demand sustaining rents. Declining values and renting populations meant declining maintenance… and then comes the day when the property can’t even generate enough income even on a fully paid up property to pay the taxes and keep the heat on. The owner walks away, and the building eventually joins 25 thousand abandoned buildings, and later, 31 thousand vacant lots.

Philadelphia has the highest rate of home ownership of any big city in America. Not surprisingly, it also has incredibly low housing prices. But in much the same way as a little inflation acts as a lubricant in the macroeconomy, a little housing price inflation, the pressure of rising values, or the belief in rising values, spurs people to invest in the future of housing. In Philadelphia, I saw people walk out the front door of 25 thousand dollar homes and drive away in 35 thousand dollar SUVs. The information that pricing gives to the market was so out of wack that it didn’t make sense for people in big chunks of the city to invest in the future economic viability of their own home. Home ownership is one powerful tool in the urban redevelopment kit, but it’s not a cure-all. The strategies brought to bear in encouraging home ownership in struggling neighborhoods must recognize that other variables… public safety, local economies, public schooling, transportation, must all be part of the way we look at a place we want to boost by creating more opportunities to own a home. Those variables have a mirror effect on each other… they effect a homeowner’s future… but community organizing around these issues is easier when there are homeowners to work with. The home ownership classes are great… they help avoid what faced first-time buyers in center cities when FHA mortgages finally became available for black buyers in the 60s… some people squeezed through the doors and got past closing day only to be undone by the first major mechanical failure, or the need to replace a roof. The counseling, the follow-up, the monitoring, the equity protection insurance schemes, all take some of the terror, mystery, and uncertainty out of buying a home… and takes an edge off the risk-aversion toward buying a home in a neighborhood that has seen bad times. Suddenly that homeowner is an investor who has an equity stake in the trajectory of the block… moving isn’t as easy at it was in the face of bad news as it was when you had a lease instead of a deed. Your decision to stand and fight can be decent and brave, but thanks to the work you do before purchase that decision may also may be informed by how much you have riding on that house remaining a repository of value… a place you can borrow against to fund a college education, start-up money for a small business, or simply a less horrifying retirement. But in metropolitan areas where the last forty years were years of abandonment, decline, and federally funded demolition, or, paradoxically, areas that have seen the wackiest rise in prices, low and moderate income buyers face housing choices that can see them buying in to neighborhoods that are not increasing in value. We have to be honest about that possibility, and address the wider problems effecting those neighborhoods. The worst thing we could do is dangle that promise of future wealth in front of people only to have them end up like Gladys Meade, old, less able to relocate, and the paid up owner of a house that’s not worth much.

But for stories like Gladys’ in Philly there are so many other happy endings… in neighborhoods like Edgewater in Chicago, in Dudley Triangle in Boston, in Visitacion in San Francisco. A base of low and moderate income homeowners built with a raft of public and private incentives, subsidies, and education, was on hand when the good years took off, meaning that instead of only being the victims of gentrification, watching the wealthy and their own landlords reap the benefits of their having kept the neighborhood a decent place to be, and to live, homeowners can be a part of the rising attention paid by municipal governments, can benefit from the attention to streets and safety, and find themselves the owners of healthy and growing assets.

Puerto Ricans in Bucktown and Logan Square, two neighborhoods north of downtown Chicago, and west of the expressway as you head to OHare, held on through some very tough times for el barrio. Social capital was created in churches and fraternal organizations and sports leagues, but it was proximity to downtown and the willingness of thousands of college educated young couples who, just a decade earlier would not have wanted to live in the city, that made these neighborhoods a place to stay instead of run away from. Ownership is powerful for people who don’t have a lot in their portfolios besides the place they live. It provides the anchor even for blighted neighborhoods, like a dentist that needs an intact tooth to build out a bridge, successful new construction has come to outwardly troubled urban neighborhoods where an intact community gave developers something to work with, something to anchor to, when reconnecting a part of the urban body back to the rest of the city with businesses, tax revenue, the economic activity that allows enterprises like cities to stay solvent. The home ownership strategies advanced by many of you in this room have made countless communities both a better bet for subsequent private market investment, and less vulnerable to the downturn and decay that can follow good years. It would be nice there was more continuity of choice for people of all races and all incomes when they looked at urban housing markets especially… cities had always been the places where the changes in your life, and the changes in need made it easy to switch housing form without having to change region… inside the city you could go to a first adult apartment, a studio or an efficiency… to a place to share… to a place to raise a family, to a smaller place again once your housing needs or preferences change as an empty-nester, or a widow. But redevelopment projects in historic urban cores don’t always want to win the way cities always have… scratching out the runs with single, single, single… instead they want development home runs, and build single form projects, residential monocultures that rob the city of one of its greatest strengths: a really subtle, fine-grained, diverse housing market. Do cities want to flatten out like the suburbs? Or should cities be a more potent influence to suburban housing policies, so that low and moderate income households could more easily follow the jobs to fast-growing suburban centers, and not have to make the choice between a house they really can’t comfortably afford, or a 90-minute commute to the nearest city with rents or purchase possibilities they can afford?

From what I’ve seen in all regions of the country… from the most crowded center city housing market, to the most compromised market in declining cities, opportunities exist for families willing to take the gamble, but to risk their family’s savings in an eyes-open way, aware of the potential pitfalls and rewards. It is that ability to live with risk that brings some neighborhoods that had been totally written off, given up for dead, back into full connection to the life of the wider community. People ready to roll the dice have a habit of attracting businesses, in addition to starting them up themselves. Investment dollars follow people with dollars of their own to spend. Will Cleveland ever have 900 thousand people again? Will Detroit have 2 million and Philadelphia 2-1/2? It’s very unlikely… but they can be good places to live… they can give families the chance to build lives of security and coherence under their own roofs… they can anchor the kind of development that brings them company, and makes the neighborhood seem a little less like a risky place to invest your money and invest your own future. We’ve got a lot to do, they’ve got a lot to do in the places that millions of low and moderate income Americans live in 2002. Your creativity, willingness to find new ways of teaching, lending, building are turning around individual life chances, and forcing another look at whole communities. There is an element of self-interest in it for us all, taxpayers, homeowners, institutions… but that doesn’t change the fact that in many cases you just didn’t have to do the smart work you’ve done to change so many lives. Thanks for doing it… and thanks for having me with you today.