Housing News Roundup: January 5, 2017
Opinion: Weak Protections for Rent-to-Own Occupants Harm Health and Financial Security
Investors in foreclosed homes have used weak consumer protections, putting families into costly contracts for uninhabitable properties, according to the New York Times editorial board. Foreclosures sold by Fannie Mae included tens of thousands that were uninhabitable because of conditions such as dangerous mold. But the government-sponsored enterprise sold them to investors who returned them to the market, without improvements, through “rent-to-own” deals and other installment contracts. Under these contracts, the consumer pays a nonrefundable deposit, makes monthly payments to the investor, and assumes all responsibility for repairs. The contracts operate in a “legal gray area,” in which investors act as landlords but without taking responsibility for property conditions (e.g., lead abatement and disclosure) and without having to return a security deposit. Often, repair costs become too burdensome, and residents move out empty handed, allowing the investor to start the cycle again with a new occupant. The editorial board calls for federal action to require dispositions to advance public policy objectives, eliminate lead hazards in government sales, and strengthen the Consumer Financial Protection Bureau.
Source: New York Times
Low-Income Parents Strapped by Disappearance of Low-Cost Housing in the Twin Cities Area
While children’s economic trajectory is better in the Midwest’s small towns and rural areas, the region’s jobs and adult educational opportunities tend to be in larger towns and cities, creating a dilemma exacerbated by housing costs. As a substitute teacher, full-time student, and single father, Kendrick Bates struggles to find affordable housing in the Twin Cities region that fits his family’s needs. Having grown up in poverty, Bates is looking at moving outside the metropolitan limits. “I’ll sleep in my car before I live in somebody’s project,” says Bates. “Worked too hard to get out of that situation.” Rental housing demand in the Twin Cities is on an upward path, leading to sharp rent increases and the loss of options formerly affordable to low-income households. According to data from the Urban Institute, nearly 40 percent of the subsidized rental stock in the metro area will see its restrictions expire this year. This will allow owners to opt out of the subsidy program, upgrade developments, raise rents, and price out low-income tenants. When the Crossroads Apartments in Richfield opted out and became the Concierge, the rent increase was accompanied with a rule change—the building now has a maximum household size of two people, leaving families behind. According to Alan Arthur, CEO of the nonprofit developer Aeon, “Landlords can do away with affordability with a single piece of paper after 20 years. And they do when the market is hot, and the market is very hot right now.” The article is the third installment in a series on poverty. A related opinion piece, “Poverty Series Highlights Importance of Affordable-Housing, Community-Building Strategies,” recommends policy solutions.
Report on the Aging Population in the United States Prompts a Call for Action
A report by the Harvard Joint Center for Housing Studies finds that the population of people ages 65 and older will increase by over 30 million people by 2035, but much of today’s housing stock is not suitable for aging in place. Only 1 percent of the current housing supply has universal design elements like wide halls and doorways for wheelchair access. “Homeowners with limited means will likely face challenges affording needed modifications,” says Jennifer Molinsky, lead author of the report. “Meanwhile, renters may lack both financial resources and control over their units to make those changes.” A few programs assist with aging in place, but have limited reach, such as the CAPABLE program and tax credits for home modifications. “The public, nonprofit, and private sectors will be key to increasing the housing options and health and supportive services that enable people to live a high quality of life at older ages, particularly for the millions who will have low incomes and little wealth,” says Molinsky.
DC Has Highest Homelessness Rate of 32 Big Cities
The United States Conference of Mayors analyzed point-in-time homelessness data and surveyed mayors of 32 large cities in 24 states, finding that Washington, DC, had the highest rate of homelessness at 1.2 percent of city residents. This rate is more than double the national average. Researchers and homelessness advocates attribute the cause of this crisis to the city’s lack of affordable housing. Michael Ferrell of the Coalition for the Homeless says, “The housing that’s being created today in the District is not for the working-class people.” Analysis of census data by the DC Fiscal Policy Institute shows that while the median rent in the city is more than $1,300 a month, two-thirds of the city’s 26,000 “extremely low income” households cannot afford anything more than $200 a month.
Source: New York Times
Opinion: How to Promote School Choice for All Families
Poor families are the only Americans lacking the ability to choose their schools by moving to a different school district or attending private schools. According to the editorial page editor Fred Hiatt, the Trump administration should “encourage choice for the children who today have none, while not diverting resources to people who do not need the help.” Hiatt recommends using a few cities as laboratories where the federal government could fund families instead of schools. Each student would be associated with a certain amount of federal funding, with higher-need students being linked to more, causing schools to compete for “less-attractive” students. By enacting this plan, Hiatt envisions only the best schools surviving while poorly performing schools shut down, mimicking the outcomes experienced in Washington, DC, from the city’s charter school reform. According to Hiatt, “Poor parents, so often ignored and disrespected by public school bureaucrats, suddenly would find themselves being wooed and treated as valued customers.” Regardless of the administration’s approach, “what it should not do is fly the banner of reform to help families who already enjoy school choice.”
Source: Washington Post
The Middle Class Urban Affordability Crisis
Rising rents, home price increases in major cities, and income inequality have led to cities losing their middle class. While subsidized housing allows some low-income people to remain, the cost of living in the city is otherwise only within reach for the wealthy. In San Francisco, a broker’s fee, first and last month’s rent, and security deposit could require a cash payment of $12,000 to get a lease for an average-priced ($3,500 a month) apartment. While this demonstrates demand for city living, it can push out its essential workforce. Affordable housing options also face opposition from “NIMBYism” (i.e., “not in my backyard”), as neighboring homeowners work to maximize their home values. “Housing issues are a product of economic growth in the city bumping up against strict zoning constraints. That’s what leads to the unaffordability problem,” says David Shulman, a senior economist at the University of California, Los Angeles. The problem can be exacerbated by “the AirBnB effect,” which allows owners to charge significantly more for short-term rentals, instead of renting housing to longer-term occupants.