By David Dayen, a lapsed blogger. Follow him on Twitter @ddayen.
Several commentators picked up on the relationship between the events in Baltimore and the dearth of economic opportunity that leads to a sense of hopelessness. But precious few added the component of the foreclosure crisis, a dislocating event that has few parallels in American history. A new paper in the American Sociological Review by Matthew Hall (Cornell), Kyle Crowder (University of Washington) and Amy Spring (Georgia State) puts numbers to this, and shows that we really had a small-scale version of the Great Migration, the shift of African-Americans from the rural south to the big cities of the north. This migration hollowed out and segregated African-American and Latino communities to an even greater degree than where they already were.
Those of us who have observed the foreclosure crisis since the end of 2006 already had a recognition of this. We knew that poor neighborhoods in Cleveland or Jacksonville would suddenly have loan brokers going door to door, usually to houses where the resident had equity, on a quest to steal it. They saddled them with high-cost mortgages or home equity lines of credit, and when everything crashed the lenders provided little to no relief, to say nothing of the government. I remember stories around the 2010 election of candidates sending out volunteers to walk precincts, and they would only find one or two occupied homes on a street. There are parts of this country that looked like ghost towns. And the burden wore heavily on people of color.
Unfortunately, only the abstract of the paper, “Neighborhood Foreclosures, Racial/Ethnic Transitions, and Residential Segregation,” is available without a subscription. But it gives a decent sense of their work:
In this article, we use data on virtually all foreclosure events between 2005 and 2009 to calculate neighborhood foreclosure rates for nearly all block groups in the United States to assess the impact of housing foreclosures on neighborhood racial/ethnic change and on broader patterns of racial residential segregation. We find that the foreclosure crisis was patterned strongly along racial lines: black, Latino, and racially integrated neighborhoods had exceptionally high foreclosure rates. Multilevel models of racial/ethnic change reveal that foreclosure concentrations were linked to declining shares of whites and expanding shares of black and Latino residents. Results further suggest that these compositional shifts were driven by both white population loss and minority growth, especially from racially mixed settings with high foreclosure rates. To explore the impact of these racially selective migration streams on patterns of residential segregation, we simulate racial segregation assuming that foreclosure rates remained at their 2005 levels throughout the crisis period. Our simulations suggest that the foreclosure crisis increased racial segregation between blacks and whites by 1.1 dissimilarity points, and between Latinos and whites by 2.2 dissimilarity points.
The press release at Eureka Alert has more, and the data on racially integrated communities is in many ways the most interesting. The “dissimilarity points” correspond to a 50 percent increase in racial segregation between Latinos and whites, and about 20 percent between blacks and whites. The study finds that white people would simply pull out of distressed areas, while minorities would move in.
This makes some sense. More families of color had the overwhelming majority of their wealth tied up in their homes; they had no escape route once the economy crashed. Whites, at least according to the study, clearly did: they were the first to leave areas with high foreclosures. They were more likely to actually contest foreclosures, too, perhaps because of greater access to the justice system. Black and Latino families simply got foreclosed on more quickly; white homeowners had more wherewithal to get out from under the carnage.
Examining virtually all urban residential foreclosures from 2005 to 2009, Hall and co-authors find that mostly black and mostly Latino neighborhoods lost homes at rates approximately three times higher than white areas, with ethnically mixed communities also deeply affected. They estimate that the typical neighborhood experienced 4.5 foreclosures per 100 homes during the crisis, but the figure rises to 8.1 and 6.2 homes in predominately black and Latino areas, respectively, while white neighborhoods lost only 2.3 homes on average.
When the foreclosure waves rushed through, the resulting buyers (or likely renters, after an investor scooped up the property) were non-white, either because they had no other options or because this represented the only plausible affordable housing. Foreclosure towns are now minority towns, with all the economic challenges you would expect to arise from that. This was particularly true in Sun Belt and sand state cities where foreclosures peaked, like Atlanta, Las Vegas and Sacramento. Where neighborhoods were once integrated, they now slipped back.
You can see how this would lead to economic depression in poor, racially homogenous areas, and how that could intersect with social tumult. The lack of community hope begins with the destruction of the wealth in the home, the biggest financial asset for the bottom half of the income distribution. The integrated communities became segregated and more poor, and aggressive policing sought to control social unrest. Foreclosure-ravaged neighborhoods were like a tinderbox waiting for a spark.
That’s what makes the foreclosure crisis a racial justice issue as much as an economic justice one. The failure to arrest this was terrible for the country economically. But it also generated a massive dislocation that reinforced existing social tensions and challenges. To do nothing in the face of millions of foreclosures out of an affinity to protect bank balance sheets led us to Michael Brown and Freddie Gray, in a very real way. The demographic makeup of the country changed for at least a generation, and it didn’t have to.
When the legacy of the Obama Administration gets written, it simply must include this point. This President presided over one of the largest destructions of wealth of people of color in history, as well as a migration unparalleled in nearly a century. The foreclosure crisis was a civil rights failure of historic proportions.