Would returning to a speculative, boom-and-bust housing market help poor and middle-class Americans? Or is there a better way?
A Minneapolis family's fight to save their home has become a national struggle after police arrested 13 protesters, including hip-hop artist Brother Ali. Earlier police raids resulted in dozens more arrests as Occupy Minneapolis and activists in 18 other cities have called on the PNC Bank to renegotiate mortgage terms with the Cruz family and to rescind a foreclosure and eviction order. The family had been current on payments until a bank error caused a payment to be recorded as late, triggering extra fees.
The Cruz family is just one among millions that has faced uncertainty, eviction, and homelessness since 2008 when the economy began to unravel. The hardships faced by these families is one reason many in Occupy have joined a growing Occupy Our Homes movement.
But there's one part of the housing market that's remained stable, and it may offer a way forward. In community land trusts across the country, you won't find sheriffs dragging people's belongings out to the curb and arresting their supporters. No homes sit abandoned. Neighborhoods remain intact.
Community land trusts experience foreclosures at one-tenth the rate of U.S. housing overall, even though residents are mainly low- and moderate-income.
And here's another thing that isn't happening in land trust homes. No one makes a killing flipping them or using them to back exotic mortgage-based securities. No one gets multimillion-dollar bonuses for selling credit default swaps based on which securities might fail.
If community land trusts are one of the unsung heroes of the housing crisis, community banks are another. The FDIC reported last year that community bank borrowers had "far fewer" foreclosures than those who borrowed from big banks.
Their secret? Both local banks and community land trusts are locally rooted institutions that do what they were designed to do -- keep people in decent, secure homes at affordable prices.
The big banks and Wall Street financiers, on the other hand, make global bets with our homes and mortgages. When the bets pay off, they pocket the profits. When the bets fail, taxpayers bail them out. Either way, homeowners struggle to make inflated mortgage payments during booms and then struggle again when prices drop and their homes go under water.
And now, there's a new twist. Big companies and speculators are buying up foreclosed homes in bulk at fire-sale prices and renting them out to the growing group of people who can no longer afford to own. These speculators drive up prices and compete with ordinary people who are looking for affordable homes. If home prices go up again, it will be these companies -- not ordinary families -- that will get the windfall.
There are lots of good policy solutions to help homeowners stay in their homes. Instead of evicting residents and creating yet another speculative market for houses, mortgages for those underwater should be modified to reflect current market value. Those who lose their homes to foreclosures should be offered "the right to rent." Homes already foreclosed on should be sold not to speculators but to community land trusts and other nonprofits, or families looking for affordable homes.
The mortgage meltdown shows that a speculative housing market is no way to keep American families in affordable, stable homes. Community land trusts, local banks and credit unions, and other institutions that are designed to house people in stable and sustainable communities offer a far better choice.
Sarah van Gelder wrote this article for Making it Home, the Summer 2012 issue of YES! Magazine. Sarah is co-founder and executive editor of YES! Magazine.
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