Recession will hurt renters in inner city

Across the nation, something is brewing, something big.

Before you roll your eyes again, be assured that the phrases "health care," "tea party" and even "global warming" will not roam beyond the confines of this sentence. No Great American Institution will be declared dead. No conjectures about the rise or fall of some political party will be offered.

An alarm, however, will be sounded, about a coming problem no one seems to be talking about: a critical transformation of the urban housing landscape.

This transformation has to do with a redistribution of property ownership. And it is being driven not by the foreclosure crisis per se but by the way urban housing markets are pulling themselves out of the muck. When the transformation is complete, it most likely will prove detrimental to the lives of poor renting families.

Hardships attributed to the current economic downturn — unemployment, homelessness, financial vulnerability — are nothing new to those who long have survived on the knife-edge of economic and psychological subsistence, far below the poverty line. Theirs has been lifelong recession; for some, a recession of generations.

And there, many of them will remain, long after the rest of the country lifts itself out of this slump.

If I can be permitted a brief foray into what Daniel Bell, the great sociologist and a professor emeritus at Harvard University, once termed "social forecasting" — perhaps unfortunately, we sociologists today have grown allergic to prediction (economists aren't similarly afflicted) — here's what I believe is in store. By the time the economy rights itself again, the urban housing landscape will have undergone a consequential realignment, one impelled by three coalescing factors.

First, small-time landlords are losing properties to foreclosure. The effect of the foreclosure crisis on rental properties is sizeable — in some states, as many as one out of three foreclosures are rentals — and, as Ralph "Skip" Schloming, executive director of the Small Property Owners Association in Cambridge, Mass., put it to me, "There's no question that small property owners are affected the most."

Second, the foreclosure crisis has resulted in a colossal depreciation of property values. A recent study estimates that properties decrease in value by 1 percent for every foreclosure within an eighth of a mile. Especially in small-sized cities' low-income neighborhoods (and not just Detroit's), there are unprecedented deals to be had.

But — here's the third factor — banks fearing insolvency have turned into miserly lenders, sometimes requiring prospective borrowers put down 30 percent. Who has that kind of cash these days? Established landlords and large real estate firms, that's who. Largely insulated from the crash, their coffers remain plump. These parties are primed to buy up blocks of property on the cheap. Today, many large-scale landlords, in the words of April Hartman, a housing lawyer in Milwaukee, are "on a shopping spree."

The result of these three factors working in tandem will be this: Housing stock will become concentrated in fewer hands; big landlords will get bigger as smaller ones are squeezed out. Less competition between landlords will decrease housing access and drive up rents, placing poor families already crushed by the high costs of housing in an impossible financial situation.

The likely hardening of rental markets — call it the Wal-Martization of urban housing — is not inevitable. Steps could be taken to prevent it. Foreclosed properties could be redistributed to low-income families through interest-free loans; foreclosure protection could be beefed up for small property owners; and further incentives could be developed to relax banks' grips. At the very least, we need to begin closely monitoring who is buying up foreclosed properties in poor neighborhoods.

If we do nothing, however, then once the recession is pronounced over, struggling families may find themselves worse off than they were before — and, yes, even during — the recession. For them, the recession may be the easy part.

Matthew Desmond is a Ford Foundation fellow in the sociology department at the University of Wisconsin at Madison.

via chicagotribune.com

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