No silver lining yet in foreclosure crisis
Here’s a story that went online Saturday night at Finance and Commerce, about the Congressional subcommittee hearing that took place earlier in the day at Minneapolis’s Central Library.
No silver lining yet in foreclosure crisis
by Anna Pratt
Special to Finance & Commerce
It isn’t just about people losing their homes.
Ripples from the long-running foreclosure crisis, experts told an audience in Minneapolis on Saturday, are spreading throughout the U.S. economy, affecting even those who, intuitively, might be expected to benefit.
“One would think the silver lining is lower prices for renters,”said U.S. Representative Maxine Waters, D-Calif., who led the hearing on behalf of the House Subcommittee on Housing and Community Opportunity. But she added that the falling rates of rent can’t keep up with the ever-growing number of foreclosures, which in Hennepin County rose 800 percent from 2002 to 2008.
“There are devastated neighborhoods all across the country,” said Waters, one of numerous speakers at a Congressional subcommittee hearing on various government programs addressing the problem.
More than a dozen elected representatives, government officials, nonprofit workers and private citizens testified during the hearing, at Minneapolis’ Central Library.
Much of the testimony centered on the pros and cons of the Neighborhood Stabilization Program (NSP), a national anti-foreclosure program established through the Housing and Economic Recovery Act of 2008. NSP enables states, local governments and nonprofits to purchase and redevelop foreclosed and abandoned homes.
The Department of Housing and Urban Development (HUD) recently announced that $2 billion was authorized for NSP through the American Recovery and Reinvestment Act (ARRA) of 2009.
Minneapolis, Hennepin County and Brooklyn Park are jointly receiving nearly $19.5 million for NSP, according to information from Waters. St. Paul received $18 million, the Minneapolis Public Housing and Economic Authority (MPHA) received $18.2 million for “shovel ready” public housing repair projects, while Hennepin County and the city of Minneapolis received $6.5 million specificaly to deal with the increase in homelessness.
A prepared statement from Waters adds that in December 2009, she led a group of Congressional Black Caucus lawmakers in securing an additional $1 billion for NSP phase three, under the Wall Street Reform and Consumer Protection Act of 2009, which has has passed the House of Representatives but is pending in the Senate, it reads.
There was a consensus among panelists that the recovery efforts haven’t helped as quickly as many had hoped, and that some government restrictions are too prohibitive to homebuyers. Hennepin County Commissioner Gail Dorfman voiced concern about meeting the Sept. 30 deadline that the county and others have to acquire properties through NSP.
While they’re able to easily identify families who need housing, when it comes to acquiring and rehabbing properties, “We’re scrambling,” Dorfman said.
The explanation for that, according to ccording to Tom Streitz, director of housing policy and development for the Minneapolis Department of Community Planning and Economic Development, is that NSP homebuyers have to go through a bunch of hoops: They’re competing with investors who are offering cash for properties, many people won’t sell homes for a discount (an NSP requirement) and sellers also don’t want to endure the month-long wait on NSP’s required environmental assessments.
Many of the investors who are snatching up properties live elsewhere and don’t maintain the homes: “We have people who are sending their rent checks to Puerto Rico,” Streitz said. “They have no one to contact.”
The rental market is being thrown off-kilter, as well. As anecdotal evidence of that, Marion Anderson talked about how he and other renters of a North Minneapolis fourplex apartment were abandoned by their landlord after the building went into foreclosure.
Another witness, Christina Lauden, who lives in Section 8 affordable housing, is a single parent who’s trying to provide for her two children. Lauden, who is also coping with disabilities related to a car accident, said she’s glad to finally have a place she can afford, but noted that she was on a waiting list for six years.
Richard Amos, a staffer at St. Stephen’s Human Services, a Minneapolis shelter which works to counteract homelessness, stressed that it saves taxpayers to get people into permanent housing.
Mark Ireland, a staff attorney for the St. Paul-based Housing Preservation Project, a nonprofit that strives to increase affordable housing, urged legislators to invest in rental properties, expand the Section 8 voucher system and create more affordable housing.
“A lot of nonprofits want to do that, but we need access to capital,” he said. “We need to bring houses into affordable programs in areas that are close to jobs and transit. We need to raise the standard of living for renters.”
Further, he said, “There’s the issue of race. No one talks much about the disproportionate impact of the economic crisis on communities of color. It’s a conversation that’s long overdue in Minnesota, the Midwest and the country.”
Congressman Keith Ellison, D-Minn., who characterized the day’s panel discussion as a sort of listening session for legislators, said that the priority is to “smooth out problems with NSP so that NSP buyers are on equal footing with the cash buyer.”
Waters agreed, saying, “The investors have a leg up. They’re paying less and not rehabbing homes or doing shabby work. We need to deal with that and make it cost-effective for homeowners to get the homes and not investors exploiting them.”