It's been almost six years since the housing bubble burst, foreshadowing the near-collapse of the American economy. Since President Obama took office, his administration announced and implemented a range of measures to help "responsible borrowers" stay in their homes. But until now, there's been little evidence that they have been able to stem the tide of foreclosures. Only one in four homeowners who applied for government-sponsored loan modifications got help. Less than ten percent of the $50 billion promised to homeowners as part of the bailout has been disbursed. And the federal agency overseeing mortgage giants Fannie Mae and Freddie Mac has refused to consider a basic demand of everyone from housing activists to Treasury Secretary Timothy Geithner -- reducing the principal on underwater mortgages. Meanwhile, nearly one in three borrowers owe more on their mortgages than their homes are worth.
Earlier this summer we traveled to Chicago and California to get a sense of what the housing crisis looks like on the ground. What emerged was a bleak portrait of communities in crisis.
In Chicago, it's not just gun violence that's on the rise, but foreclosures are also surging here. In the ravaged Southwest Side at least half the homes on every block are boarded-up, bank-owned properties. Foreclosures began here in the late 1990s, but nationally few paid attention to what was unfolding in this and other working-class neighborhoods across the country. David McDowell of the Southwest Organizing Project (SWOP), which has been tracking foreclosures in this area since 2007, told us he's seen an 80 percent increase in the addresses getting foreclosure summons this year. Most of the foreclosure cases they are getting today are due to the intransigence of the large bailout banks in dealing with people desperate to renegotiate mortgages, he said. The promised support from the celebrated $26 billion settlement with five of the largest banks this February is yet to trickle down into this community.
Robbie Clark, a housing organizer at a community group in Oakland, California, called Causa Justa/Just Cause added that persistent unemployment is another factor in the recent foreclosures. But in both Chicago and Oakland, community leaders agreed that there was one overwhelming factor behind the first tidal wave of foreclosures: predatory lending. They pointed to the aggressive marketing of subprime mortgages to African-Americans, Latinos, new immigrants and the elderly, which ultimately led to far higher foreclosure rates among these communities. California State Representative Mike Eng, who cosponsored the Homeowner Bill of Rights that was signed into law in July, compared storefront mortgage lenders to fast-food restaurants -- omnipresent in poor neighborhoods, peddling their lethal wares on every block.
In Stockton, California -- not too long ago a booming bedroom community for Bay Area professionals -- over 60 percent of the homes are now underwater. In July it became the largest American city to file for bankruptcy and tops the nation in foreclosures and unemployment. We met 86-year-old Eileen Rivara, a longtime Stockton resident who is now renting a house after she was foreclosed upon. Two years ago she suffered a stroke when a real estate agent showed up at her home of 45 years to say it had been sold at an auction without her knowledge. He offered her "cash for keys," a few thousand dollars as an incentive for her to move out quickly. When her family fell on hard times, Eileen had used her home as collateral to get an equity loan. In an era of low savings and rising home values, the only source of wealth for millions like Eileen was the equity in their homes. But when the housing bubble burst, everything went under.
Stockton's sole thriving business seems to be the daily auction of foreclosed homes at the county courthouse. The bidders here don't like to be called "vulture investors"; they see themselves as reviving a dead housing market, not making quick money off a vast landscape of loss and shame. "I have to pay my mortgage, so everybody else has to," reasoned investor Amy Chen. "Personal responsibility is a big thing, it's what creates opportunity" investor Peter Westbrook told us as he questioned why he should have to pay the price for someone else's irresponsible borrowing.
Owning a home has long been the cherished centerpiece of the American dream. Since the 1930s, homeownership was actively encouraged by the federal government through incentives like the home mortgage interest deduction and institutions like Fannie Mae, and later, Freddie Mac. In addition to its powerful cultural connotations, promoting homeownership also made economic sense for a rapidly expanding post-war American economy that was centered on housing, urbanization, and consumerism. As City University of New York professor David Harvey explains, "In the United States, we get out of recessions by building houses and filling them with things." This worked as long as incomes rose, but since the 1970s real wages for most Americans have remained stagnant and clients for the houses started to run out. However, bankers and federal regulators found a way out; they simply made it easier for people with very low incomes to get a mortgage. The rise of the subprime industry, Harvey explained, was sold to the public in terms of expanding the dream of homeownership to communities that had long been discriminated against in the mortgage market or unable to qualify for traditional mortgages. But when the housing market crashed, foreclosed homeowners suddenly found themselves on their own; labeled as irresponsible and blamed for borrowing beyond their means.
For Americans emerging from the foreclosure crisis, the firm line that once separated the security of homeownership from the insecurity of homelessness was suddenly blurred. "Back in the 30s, they created public housing to catch people who could become homeless because of the foreclosure crisis. Today, we're in a similar time, people need a safety net but it doesn't exist anymore. It used to be public housing," said Willie JR Fleming, with the Chicago Anti-Eviction Campaign. For twenty years he lived in Cabrini Green, perhaps Chicago's most notorious public housing development, before he and thousands of others were evicted. Over the past decade, most of the city's public housing stock has been demolished or shuttered as part of the Chicago Housing Authority's (CHA) "Plan for Transformation." The CHA's justification for tearing down nearly 20,000 public housing units revolves around the crime and violence allegedly concentrated in public housing and the disrepair many of the units had fallen into, but Chicago's few remaining public housing residents take a more cynical view. They argue that the city's plan for urban renewal has more to do with the rising property value of the centrally located public housing projects and the desire to transform them into profit-generating mixed-income units. "This right here is a gold mine, a lot of people feel in the end they are just going to kick us out to build condominiums" said Noreen Castanon, who lives in Julia C. Lathrop Homes, one of the city's oldest housing developments, built in 1938.
From Chicago to California, the devastating combined impact of Wall Street's dangerous bets and a rapidly gentrifying landscape is hard to miss. Millions of Americans are struggling to find a place to call home. But it's not for lack of houses. Nationwide there are five times as many vacant properties than there are homeless people. Poor neighborhoods of color across the country are awash with rows and rows of boarded up homes; most of these are bank-owned foreclosed properties. Many have been abandoned for months on end, contributing to the blight and insecurity in these neighborhoods. "You have all these empty houses in the midst of a large population that has a real need for decent housing, but you cannot put the two together, because the income stream you have isn't sufficient to satisfy the banks," Harvey explained.
In the absence of effective federal or state support and a growing outrage over the impunity of the banks, some activists have developed a creative response to the crisis. The Chicago Anti-Eviction Campaign and the Take Back the Land movement are working with communities and homeowners to identify, break into, and clean up these vacant properties. Foreclosed homeowners or homeless families are then moved into these homes -- all at the apparent personal cost of the volunteer activists. "We, the taxpayers, bailed out the banks and so we consider these abandoned bank-owned properties to be taxpayer housing," said Nell Myhand, a foreclosed homeowner and organizer at Causa Justa/Just Cause in Oakland. "When we take over these properties, we're recreating public housing," said Fleming. Nationwide the Right to the City alliance is launching a "Take Back the People's Banks" campaign specifically urging the federally overseen Fannie Mae and Freddie Mac -- which own or guarantee more than half the mortgages in the country -- to convert their vacant properties to affordable housing.
Fleming and the other activists aren't worried about running afoul of the law; for them, the struggle over the right to housing is akin to the battle over civil rights. "It was illegal for blacks and whites to eat together, to dine together, to sit together, to walk together, to talk together," said Fleming. "But it was something that was morally right. So people tell us it's illegal for us to occupy our homes. It's illegal for us to take back the land. They're right. It is illegal, but it's morally right."