1. THE HOUSING
CRISIS, FORECLOSURE
AND RACE:
IMPACTS AND CHALLENGES
Jason Reece, AICP
Senior Researcher
Kirwan Institute for the Study of Race & Ethnicity
The Ohio State University
Department of City and Regional Planning, The Ohio State University
Columbus, OH, December 5th 2008

2. Race and the Credit, Housing,
2
Foreclosure Crisis
 Race, community development and the
crisis, where are we now?
 Trends, numbers and impacts
 How did we get here?
 From redlining to reverse redlining
 Global phenomena and disparate outcomes
 What’s next?
 Systemic problem, requires complex solutions
 Deflecting attacks on equitable policies
 From crisis to opportunity?

3. Housing and
Neighborhoo
d
Revitalization
:
What are the
Challenges?

4. Housing Challenges
 Challenges
 Pre-existing
 Affordability
 Concentration
 Subsidized Housing
 Affordability
 Steering & Discrimination
 Lending
 From Redlining to Reverse Redlining
 New
 Foreclosure Epidemic
 More to Come
 The Future: A New Wave of Redlining

5. Neighborhood Revitalization
5
Challenges
o General Issues/Concerns in all Projects
o Common challenges
o Concentrated poverty, limited opportunity, disinvestment
o Larger market forces are critical
o Movement back to the city; gas prices and urban living (+)
o Housing market trends & foreclosures (-)
o Geographic context is critical
o Both within the city and when thinking about the region
o Language, Framing and Definitions are Important
o Avoid the terminology-concept of gentrification
o We still need to define successful (and equitable)
revitalization

6. Neighborhood Revitalization
6
Challenges
o General Issues/Concerns (continued)
o Limited public resources
o Must be strategically used
o Must catalyze private investment/individual action
o Social/Organizational/Human capital critical
o Neighborhood leadership and technical capability
o Issues outside of the direct influence of
neighborhood planning are critical
o Public safety (crime) and educational opportunity

7. Neighborhood Revitalization:
7
Challengs and Opportunities
o General
Issues/Concer
ns (continued)
o A combination
of elements
provide the
best
opportunity for
revitalization

8. Emerging
Challenges
8
 The escalation of the
national
housing/foreclosure
crisis is going to
create new
challenges in many of
these neighborhoods.
 Hitting “on the fence”
neighborhoods
 Undermining re-
investment/spurring
vacancy
 Undermining
community
organization/capacity

9. Foreclosure Trends
Foreclosures in U.S. by Loan Type: 2006 – 2008
12
10
% of Loans in Foreclosure
8
6
4
2
0
1Q06 2Q06 3Q06 4Q06 1Q07 2Q07 3Q07 4Q07 1Q08
Subprime FHA VA All Loans Prime
Source: Mortgage Bankers Association, National Delinquency Survey, First Quarter 2008.
9

10. Institutionalized Disinvestment:
Redlining Map of Philadelphia
10

11. From Redlining to Reverse
Redlining:
A historical view of redlining
zones in Philadelphia and
areas of foreclosure in
minority communities.
11

13. High Cost Loans & Vacant Residences for
Cities with the Highest Foreclosure Rates in
the Detroit MSA
80.0%
Source: HUD
70.0%
60.0%
50.0%
40.0%
30.0%
20.0%
10.0%
0.0%
Hamtramck Eastpointe Harper Melvindale Pontiac Ecorse River Inkster Detroit Highland
Woods Rouge Park
Foreclosure Rate Vacant Residence Rate High Cost Loan Rate

14. The Result
14
 Surge in foreclosures
 Nearly 900,000 homes repossessed by banks in just the
last 12 months; more than 80,000 in September 2008
 More than 265,000 foreclosure notice filings in September
2008 alone
 At least 7 million homeowners now owe more than their homes
value
 A global crisis with racially disparate impacts
 Nearly half of all subprime loans went to African American
and Latino borrowers
 “Equity Rich, Cash Poor” – less than 10% of subprime
went to first time homebuyers and half of subprime loans
were for refinancing
 People of color were 30% more likely to receive subprime
 30% of subprime borrowers qualified for prime loans

15. Baltimore: Foreclosure
&
Race/Income
15

16. Cleveland: Foreclosure and Race - Same
Trends
16
Maps: Produced and
adapted from Charles
Bromley, SAGES
Presidential
Fellow, Case Western
University

17. Connecticut
17

18. Columbus
18

19. The Impact of Concentrated
Foreclosures in a
neighborhood
 Foreclosures pull
wealth/equity and assets
out of the neighborhood
 Widespread
displacement of renters,
homeowners which rips
the neighborhood’s social
fabric and creates
instability for school age
children
 The growth of vacant
property encourages
crime, disinvestment and
public safety risks
 Challenges which 19
eventually ensnare all
residents (even those
who were never

20. Slide Adapted from
Presentation by: Solomon
Greene,
The High Cost of Foreclosure Open Society
Institute, Neighborhood
Stabilization Initiative
20
Source: “Sheltering Neighborhoods from the Subprime Foreclosure Storm.” Special Report from the Joint Economic Committee. April 2007.

21. Impacts
21
 Communities of color further inundated with
vacant properties
 Mortgage applications for African Americans and
Latinos dropped approximately 40% from 06 to 08
 Compared to 19% for White’s
 African American and Latino homeowners are
expected to lose more than $250 trillion in assets
due to the crisis
 Compounding the existing 900% racial wealth gap
 Research in Boston has identified additional “asset stripping”
for borrowers of color who are drawing down 401K accounts
and other savings to avoid foreclosure

22. Why is the growing
foreclosure problem
causing problem in
communities of
More than Just color?
Foreclosures and a -Lenders targeted
Few Bad Borrowers: communities of
color with subprime
Understanding the loans
Credit Crisis Impact in
-Lack of load
Communities of Color information or
understanding for
consumers in many
Why Were Subprime of these
communities
Loans Concentrated
in These -Communities were
historically starved
Neighborhoods? of credit
-Mortgage
securitization and
the growth of the
subprime industry
created incentives 22
to target new
markets with
mortgages

23. Institutionalized Disinvestment:
Redlining Map of Philadelphia
23

24. Foreclosure Outlook: Rate
Resets
Monthly Mortgage Rate Resets (in billions of dollars)
Source: Credit Suisse Slide Adapted from
Presentation by: Solomon
Greene,
24Open Society
Institute, Neighborhood

25. The Credit and Foreclosure
25
Crisis
 The current global credit and national
foreclosure crisis is a powerful example
of our interconnected world
 Securitization and the growth of global
investment capital fueled poor lending
behavior
 Which caused a surge in foreclosures, an
unstable housing market
 Producing negative impacts on the
local, national and global scale
 A two way relationship – global economic
activity impacts us; we impact the rest of the
world
 A paradigm shift
 Risk becomes a public burden
 Profit is distributed privately (and globally)
 How do we do community development in a
global economy? Where forces outside of
our control may impact our communities?

26. Opportunities Amid Crisis
 What is the response?
 Crisis – danger and opportunity
 The Housing market and neighborhoods will
be reshaped
 Are neighborhood interests/urban interests taking
part in that reshaping (have a seat at the table)?
 Are we planning for the future are acting in
“triage” mode?

27. Small Scale and Big Picture
Issues
 Many Important Issues
 Strategically using HUD money?
 Still need for foreclosure prevention
 But we also need to think big picture
 How can we reshape neighborhoods?
 How can we use this crisis to address future affordable
housing challenges?
 What are strategies for assuring sustainable credit and
credit providing institutions are offered and active in these
communities (prevent another era of redlining)
 Look for strategic action points, leverage actions and
resources

28. What’s Next? (Big Picture)
28
 Systemic problem, requires complex solutions
 Need more than just changing Wall Street, we also must provide
funds for communities, while changing the rules which produce
disparate lending outcomes
 Deflecting attacks on equitable policies
 Attacks on CRA and first time homebuyer programs are misguided
and inaccurate
 A response should not starve communities of color of sustainable
credit options
 From crisis to opportunity?
 Can the federal government utilize its new leverage over Fannie
and Freddie to provide more sustainable credit (expanding scope
of the Fair Housing Act)
 New federal resources to confront the long term vacant property
challenge facing urban communities?
 Can the challenge open new affordable housing opportunities (in
the long term)

29. To Learn More about
the Kirwan Institute:
www.kirwaninstitute.org
For more information
about the racial impacts
of the foreclosure
crisis, visit our http://www.kirwaninstitute.org/events/archiv
convening web site at: e/subprime-convening/index.php
Questions or Comments:
Reece.35@osu.edu