It’s More than a House

The ongoing foreclosure crisis-foreclosures were up 65% in April from the April 2007 level and are undoubtedly headed higher, as house prices declined a record 14.1% in the first quarter from the first quarter of 2007-is teaching us a lot about the losses that extend beyond the loss of a house.

Take the community losses. Here are just a few examples. The Center for Responsible Lending estimates that each foreclosed property costs the jurisdiction in which it is located almost $20,000 in lost tax revenue and other related costs. Property values for houses near foreclosed properties will decline by almost $202 billion. This is already having an effect on city budgets: according to the National League of Cities, 33% of city officials reported that city revenues or revenue estimates have decreased over the past year. At the same time, demands on that revenue, for services ranging from increased police patrols to temporary housing, housing assistance and demolition of abandoned properties, have increased. And community losses are not just financial. The National League of Cities also reported that nearly two-thirds of city officials said it has become more difficult for low-income families to become homeowners in their communities.

Congress is currently considering legislation that has passed both the Senate and the House in different forms, to provide some assistance to states and localities to deal with the situation. This includes increased and enhanced tax-exempt bond authority and increased funds for housing counseling. The bills also include funds-$4 billion in grants in the Senate bill and a combination of $15 billion in loans and grants in the House bill-that would allow jurisdictions to respond to the crisis as needed in each jurisdiction. While the focus would be on purchasing foreclosed properties for affordable rental and ownership housing, communities would have flexibility to use the funds to meet needs that are not the same in Cleveland as they are in Las Vegas. It is essential that this neighborhood stabilization piece of the legislation be part of the law that is signed by the President-or enacted through a veto override.

Beyond the community losses, there are non-financial individual and family losses to foreclosure and forced moves that other research reminds us about. At a research session sponsored by the Center for Responsible Lending earlier this week, Marge Turner of the Urban Institute and Xav Briggs at MIT discussed their work on the results of the court-ordered Gautreaux desegregation program and the Moving to Opportunity demonstration. These experiences tell us a good deal about the impact of moves, forced and not, on family stability, health and educational success. The message is essentially that when forced to move, people strive for stability (such as keeping their kids in the same school even though they move out-of-district) and to keep social networks intact. When the move is from a neighborhood high in crime and low in opportunity, these tendencies can be counterproductive. But the foreclosure crisis is working in the opposite way-often forcing families from neighborhoods that had been strong and threatening family as well as neighborhood stability. Marge reported that homelessness experts at the Urban Institute fear a slow, downward spiral toward homelessness for many of these families.

These examples remind us how close we all are to the effects of the current crisis. It’s not just THEIR house, it’s ours too.