There are cracks in the foundation of our housing system
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Vanessa Bulnes and her husband Richard were homeowners in Oakland for nearly 20 years until they lost their home to foreclosure after the Great Recession and were forced to move into a rental. Now they put about 70% of their take-home pay toward rent each month — money that’s no longer building equity in a home.
When COVID-19 hit, putting millions of Americans out of work, the rent was no longer affordable for Bulnes and many like her — even on unemployment benefits. So she went on a rent strike.
“If nothing is done that’s a permanent solution, like rent forgiveness or cancelation, I can’t even describe what the world is going to look like,” Bulnes said. “It’s a scary thought.”
The pandemic arrived at a moment when the gap between rich and poor in this country had hit a record high, and 4 in 10 Americans said they didn’t have enough money saved to deal with an unexpected $400 emergency expense.
One place that inequality is most visible is in the neighborhoods where we live. Generations of discriminatory housing policy, and lending practices that favored white borrowers, have entrenched segregation in American cities.
An early example was the Home Owners Loan Corporation, a New Deal program that sought to reissue home loans to borrowers who were underwater after the Great Depression. The HOLC bought up bad loans from banks, for pennies on the dollar, and then reissued loans with better terms to borrowers.
But government inspectors, assessing different neighborhoods, started drawing lines on maps to indicate the areas they considered too hazardous to invest in because they were “threatened with Negro encroachment or infiltrated by Negroes,” according to Aaron Glantz, a journalist and author of “Homewreckers: How a Gang of Wall Street Kingpins, Hedge Fund Magnates, Crooked Banks, and Vulture Capitalists Suckered Millions Out of Their Homes and Demolished the American Dream.”
Glantz said, “some of these neighborhoods … had great access to transportation and good schools and were near jobs and the housing stock might have even been nice.” Still, the banks resisted investing in them. The practice came to be known as “redlining” and it had a very clear result: White borrowers got loans; black borrowers didn’t.
“The long-term impact of these programs by FDR can be seen very clearly and unfortunately, in our racial wealth gap,” Glantz said. “It set the foundation that everything has been built on since.”
Neighborhoods that are home to higher populations of people of color have lower tax bases and fewer services as a result, which has compounded disadvantages in the decades since then. These communities have long faced policing that’s more violent than in predominantly-white neighborhoods.
After the Great Recession, policymakers faced another housing disaster. This time, rather than buying loans from banks, the government provided banks with financial backing to support the loans they were granting. And in the years since, those loans have gone increasingly to corporate landlords and private equity firms that have bought up thousands of homes across the country and turned them into rentals.
In many neighborhoods, like Bulnes’ in Oakland, residents had trouble getting approved for home loans after the housing crisis, so they ended up renting from corporate landlords. And in the decade since, those companies have reaped the benefits of rising home values — rather than the people who actually live there.
“Because of the lack of access to credit on reasonable terms to American families over the last decade and the behavior of these big banks, we have really seen a diminution in the ability of the American family to buy a piece of the American dream,” Glantz said.
In eight years, Bulnes has paid rent to four different corporate landlords, as investors bought and sold swaths of rental properties. And the rent keeps going up.
Because she puts so much of her paycheck toward rent, Bulnes said, she doesn’t have a savings account.
Here are links for some the material we used in our research for this episode:
- Marketplace’s poll with Edison Research, which measures Americans’ economic anxiety and, most recently, the effects of the COVID-19 pandemic.
- APM Research’s reporting on black homeownership and the changing U.S. housing market in general.
- Along with his book, we used several episodes of the “Reveal” podcast Aaron Glantz worked on: “Homewreckers,” “Kept Out” and “After the Bubble Burst.”
- “Blackstone Moves Out of Rental-Home Wager With a Big Gain” from the Wall Street Journal
- The final report of the Home Owners Loan Corporation, from 1952.
- Audio of President Roosevelt from his presidential library.
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