Gentrification is a common concern in urban California due to excessive home and rental prices. Although Bay Area urbanites of all sorts are ready to flee in droves, many are unaware of the deep toll housing costs and subsequent gentrification have already taken on the area’s minority populations.
In response to this growing urban housing crisis, San Francisco implemented the Neighborhood Resident Housing Preference (NRHP).
The NRHP allocated 40% of privately subsidized or city-subsidized units in new residential developments to San Francisco residents with at least one member of the household whose primary residence is located within:
- the same Supervisorial District as the new residential development; or
- a half mile around the new residential development.
Qualified residents were to be entered into lotteries for one of the allocated units. San Francisco intended the preference program to benefit minority residents who otherwise might likely be expelled from the area due to excessive housing costs. Particularly, San Francisco has suffered a major loss of African-American residents, who used to make up 13.7% of the city population in 1970 — and currently account for only 5.7% of the population in today’s impossible housing market.
However, the NRHP drew inadvertent negative attention from the U.S. Department of Housing and Urban Development (HUD), which ultimately decided the preference program violated the Federal Fair Housing Act of 1968. HUD cited the program’s potential to perpetuate segregated neighborhoods as the main reason for the rejection — an unintentional disparate impact the likes of which were denounced by the U.S. Supreme Court in June of 2015. [Texas Department of Housing and Community Affairs v. Inclusive Communities Project, Inc. (2015) 135 U.S. 2507]
Gentrification, housing costs and California minorities
HUD’s rejection of the NRHP certainly isn’t the first obstacle minority residents in California face in the pursuit of housing, nor will it be the last. Minority homeowners in California took the hardest hits in the housing crisis. For example, one in ten minority homeowners lost their homes to foreclosure, whereas only one in 25 white homeowners lost their homes to foreclosure due to the crisis.
Additionally, minority homebuyers have been subjected to discriminatory lending practices and unlawful steering by unethical real estate agents and lenders urging buyers to overextend their income. Even lending practices which aren’t inherently discriminatory have disparate effects upon minorities. For example, minority homebuyers were twice as likely to obtain riskier nonconventional mortgage financing than white homebuyers as of 2014, according to a report on recent Home Mortgage Disclosure Act (HMDA) data.
Thus, San Francisco’s altruistic intentions make sense. Low- and middle-income homeowners and renters throughout California’s largest metropolitan areas steadily diminish as stagnant wages and expensive commutes make the costs of living unmanageable. These residents, many of whom grew up in the Bay Area, need to relocate to maintain any semblance of a healthy debt-to-income ratio (DTI) necessary for future homeownership in less demanding locations.
Of course, the prominent result of diminishing minority populations and low- to middle-income populations is significant gentrification. Cities like San Francisco which celebrate diversity and vibrant cultural arts are unable to retain the variance which ultimately lures businesses and employees to the Bay Area — with the obvious exception of the tech elite. This high-income group bleeds into many traditionally diverse cities to the detriment of their original residents, like those facing an impeding exodus from East Palo Alto.
How real estate agents can help
Real estate agents can’t fix the urban housing crisis, but that doesn’t mean they aren’t able to help. Agents need to hold themselves accountable to ensure their minority clients are given equal opportunity to obtain housing. To do so, agents ought to brush up on the Federal Fair Housing Act to ensure their practices are fair and accommodating to all homebuyers and renters in need of their services.
Need to refresh your knowledge of the Federal Fair Housing Act? Check out the Fair Housing chapter of Agency, Fair Housing, Trust Funds, Ethics and Risk Management, available through the first tuesday Realtipedia.
Another shining example of the federal government’s failed war on poverty. Generations of politicians and bureaucrats have spent the better part of 50 years, untold trillions of dollars, and most of their limited number of brain cells attempting to eradicate poverty and control housing prices. The result? Not shockingly, more poverty and skyrocketing housing prices. If we could only get these people to spend a couple of decades away from the office, we might get the economy back to some semblance of normal.
one of the reasons why minorities had a higher foreclosure rate was because the federal government pressured banks to make more loans to minorities.
If the federal government had instead pressured banks to loosen qualifying guidelines generally for everybody then the foreclosure rate gap between minorities and non minorities would have been a lot less.
another reason minorities had a higher foreclosure rate than non minorities is simply because of the overall income gap between the two groups.
But please, don’t blame the banks! The federal government caused those foreclosures to occur. They did so with good intentions, but nevertheless the fault lays with the feds, not with the people, not with the banks.
This article doesn’t challenge baseless claims of racial housing discrimination. These claims should be checked, and either verified, or looked at very skeptically. I’m getting tired of B.S. narratives being pushed by “journalists” in professional newsletters.
Baseless claims? A national study commissioned by HUD (there has been 3 since 1977) whereby thousands of tests consisting of one white and one minority tester showed high levels of discrimination.
Easy enough to google if one is skeptical.
Or read the publication: http://www.huduser.gov/portal/Publications/pdf/HUD-514_HDS2012.pdf
Or http://www.nytimes.com/2013/06/12/business/economy/discrimination-in-housing-against-nonwhites-persists-quietly-us-study-finds.html
Or http://www.diversityinc.com/diversity-and-inclusion/though-more-hidden-housing-discrimination-is-still-absurdly-high/
I’am amazed at the political B.S. that has entered into the profession of real estate…..
You’re absolutely right, D Browne.