January 11, 2017
By Mike Lillis and Rafael Bernal
The 2008 financial crisis is long over, but its damaging effect on Hispanic families lingers in a pair of grim statistics: More Latinos are choosing to rent than to buy a home, and Hispanic homeownership rates are still in decline even nine years later.
Homeownership, an important measure of wealth and middle-class status, has decreased 5 percent among Hispanics since its peak in 2007, according to a recent Pew Research study.
In 2007, 49.7 percent of Latino households owned their homes, compared with 47 percent today.
But mortgage originations — the number of Latino families actually submitting applications — have plummeted 74 percent.
While stricter financial regulations have made it harder for financial institutions to provide mortgages to low-income families, Democratic lawmakers say other factors have played a bigger role in pricing Latinos out of homeownership.
“Homebuyers are having a tough time competing with investors that are purchasing these properties,” said Rep. Norma Torres (D-Calif.).
Demand for new homes is outpacing supply, creating an attractive market for investors that has inflated prices.
“We need to address the issue of the shortage. We’re not building enough housing. For example, in California there’s a need for an additional 186,000 units, but yet in this next year we will only build about 80,000,” said Torres.
Torres said mobile homes could help alleviate the shortage, but many parks are in disrepair and loans for mobile homes are more expensive than mortgages.
“They’re part of the affordable housing solution, but yet in order for them to get a loan to purchase a new mobile home, there aren’t enough banks that make these types of loans, so the competition isn’t there,” she said.
With Latino populations concentrated in high-demand areas, the pressure of gentrification is also driving up costs.
Rep. Adriano Espaillat (D-N.Y.), whose district is among the most densely populated in the country and hosts the second-highest number of renters in the country, proposed an “anti-gentrification zone.”
The proposal would allow tenants a right of first refusal and create a relocation fund for people priced out of their homes.
Despite the high demand for housing, Americans across the board have applied for fewer mortgages since the crisis, and minority families have more often been forced to rent their homes.
“The aspirations for homeownership were fairly uniform across various demographic groups,” said Richard Fry, one of the authors of the Pew study. “Generally we saw financial obstacles were the most frequent reasons” for renting homes.
“Most renter households are financially challenged, particularly Latino and African-American,” he said.
The bar for successful mortgage applications was significantly raised after 2008, both through government regulation and internal processes in financial institutions.
While the new lending policies protected the financial system from the sort of predatory lending that helped fuel the crisis, it often made mortgages inaccessible to lower-income families, despite record-low interest rates.
Along with tighter rules for lenders, down payment prices spiked, leaving cash-poor families with no choice but to rent.
While the average white renter has about $4,700 in liquid financial assets — including bank accounts, investments and retirement savings — the average Hispanic renter has only $1,500.
“Relative to before the recession, you need to have larger down payments,” said Fry. “It used to be that lower credit score borrowers needed lower down payments — that has flipped since the recession.”
The focus on the housing debate might intensify this year on Capitol Hill, where Republican leaders — who control both chambers of Congress and will soon take over the White House — are vowing to roll back a number of banking reforms adopted by President Obama and the Democrats for the purpose of protecting vulnerable homeowners. Central to that effort was the Dodd-Frank Wall Street reform law, which included tougher standards for mortgage lenders and servicers.
Some Democrats are already warning that the Republicans’ effort to dismantle those protections could spark another housing crisis.
“If they pull all of that away, we’re going to see deja vu. We’re going to see millions of families, family members, out on the streets; we’re going to see a bunch of big, big corporations — banks, investors — who are going to hurt just for a little while, and then just get back on their feet. But the people who really suffer are the people who actually work for a living,” said Rep. Tony Cardenas (D-Calif.), head of Bold PAC, the Congressional Hispanic Caucus’s (CHC) campaign arm.
“We need to remind everybody what did happen — it was real; why it happened; and then why Dodd-Frank got put into place.”
Cardenas, who ran a brokerage firm for more than a decade before coming to Washington, said Congress could help Hispanic homeowners by providing stronger incentives for banks to provide financial education services to their customers.
“Every bank that ever meets with me talks about how committed they are to teaching American families about financial responsibility and knowing how money works,” he said. “What I’d like to see is that, since they’re telling all of us elected officials they want to do that, they want to do financial education, they should commit to doing it, and they should really do it. And that will solve a lot of problems.”
The housing issue has taken on a particularly partisan glint with the rise of Donald Trump, the president-elect who had practically cheered the arrival of the housing crisis for the profits he hoped to generate from it.
In 2006, two years before the bubble burst, Trump had said he “sort of hope[s]” the market crashes “because then people like me would go in and buy [foreclosures and] make a lot of money.”
Last May, stumping in New Mexico, he defended that position, saying any good businessman would have seized such an opportunity.
“I’m a businessman, that’s what I’m supposed to do,” Trump said.
The remarks were not overlooked by minority Democrats, who bashed the billionaire Republican for seeking to cash in on the economic misfortunes of others.
“We don’t need a parasite to be our president,” former Rep. Xavier Becerra (D-Calif.), a prominent CHC member, said at the time.
Yet some lawmakers believe regulations and access to capital for low-income families are not mutually exclusive.
“We have to take a look at this formula of how you access capital as a whole,” said Espaillat. “Banking institutions have not structured a criteria for applicants who have issues to be able to apply and access capital.”
Source: The Hill