Homeowners Struggling More With House Payments

The Center for Housing Policy, a subsidiary of the National Housing Conference, released a study that found a significant rise in working families who spend more than half their income on housing. Coming from a similar angle, a report on high-cost lending released by the Association of Community Organizations for Reform Now (ACORN) found that racial and income disparities in lending have increased in the past two years, and predatory lending is alive and well.

In just two years, the number of working families who spend more than half their income on housing rose 30%, according to the Center’s “America’s Working Families and the Housing Landscape” study, an analysis of federal data from 1997 to 2001. The four-year time span showed a 60% rise in working families who have critical housing needs, such as spending half their income on housing and/or living in physically poor housing.

Working families were defined in the study as having low to moderate income and working the equivalent of a full-time job. They also earn between the minimum wage of $10,712 a year and up to 120% of the median income in their area.

These families were found in both cities and suburbs, with the Northeast and West showing the greatest housing needs. The area with the most rapidly growing number of such working families were located in the Midwest, however.

The study dispelled any notion that critical housing problems mainly affect renters. In 2001, 53% of working families with such problems owned homes and 47% were renters.

“Many Americans are finding it increasingly difficult to purchase, maintain, or rent decent, affordable housing, including those that hold vital community positions, such as police officers, firefighters, and teachers,” said Michael Pitchford, president of the National Housing Conference.

Despite the economic good times between 1997 and 1999, the total number of families with severe housing problems remained almost unchanged at 13 million, a figure that includes non-working, marginally employed, and working families. However, the number rose in 2001 to 14.4 million, or one in seven Americans.

The Center said these trends have a profound impact on the economic and social well-being of the nation.

“Our research underscores the need to act now to increase the current supply of affordable housing across the nation,” Pitchford said.

Scott Smith, deputy director of Peoples’ Self-Help Housing (PSHH), reiterates that there simply isn’t enough housing. Based on the Central California coast, PSHH develops affordable housing and community facilities for low-income and special needs households.

Affordable housing is a huge problem in California, where incomes are not that high and the average home in Santa Barbara County starts at $600,000, Smith said.

A major barrier to the development of affordable housing in the state is that there isn’t enough land zoned for housing, especially for the burgeoning population. Once zoning issues are addressed, at least part of the problem could be alleviated.

“Here, it’s not just a low income issue, it’s a middle class issue, too, at this point,” he said.

The ACORN study echoes the needs revealed in the Center’s report, but focuses specifically on racial and economic disparities in the lending process. The report analyzes the lending activity of more than 7,600 institutions covered by the Home Mortgage Disclosure Act.

The “Separate and Unequal: Predatory Lending in America” report found that in 2000, blacks were 2.8 times as likely as whites to receive a subprime loan, said communication director David Swanson in regard to the study. In 2001, they were 4.4 times as likely.

Latinos in 2000 were 1.5 times as likely to receive a subprime loan, but in 2001 they were 2.2 times as likely, according to the study.

An increase of economic disparity was shown in an example of white borrowers. In 2000, low-income whites who refinanced were twice as likely to receive a subprime loan as upper-income whites. In 2001, they were 2.4 times as likely.

The study did find that the percentage of loans eligible for low rates increased for all groups in 2001, but it was mainly due to a rush of low-rate refinancings, and minorities benefited less than whites, it said.

The study states that while not all subprime lenders are predatory, almost all predatory loans are subprime. It also cites a Freddie Mac estimate that as many as 35% of borrowers who received a subprime loan could have qualified for a prime loan — that’s about $200,000 in payments over a loan’s 30-year life, according to the estimate.

Formed in 1931, the National Housing Conference says it’s the nation’s oldest public policy and housing advocacy organization. ACORN was formed in 1970 and says it’s the nation’s largest community organization of low- and moderate-income families.