Making Quality Housing Affordable Again for Latinos in Los Angeles

By Agatha So, Policy Analyst, Economic Policy Project, NCLR

ELACC and partners with tenants’ rights fighters and allies from all over the state of California. Photos: ELACC

Homeownership continues to be essential to the creation of Latino family wealth, yet many Latino families are still trying to recover from the loss of their home to foreclosure during the financial crisis, as well as job loss during the recession that hit Latino communities hard.

For families who live in expensive cities like Los Angeles, homeownership can seem even further out of reach. In L.A., more than half of a family’s earnings goes to rent, and at 38%, Latinos have a lower rate of homeownership compared to other groups in the city. Even as families overall might pay less for a mortgage than on rent, Latino renters have difficulty saving for a down payment, let alone for a mortgage that would require nearly three times their median household earnings. Faced with this problem, community-based affordable housing organizations are finding creative ways of engaging community residents to make housing affordable for all.

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A Long Journey Home

Saul smiled. His eyes shinned behind the folds of his smile. He still couldn’t believe it. His dream of owning a home had just become a reality.

But Saul’s journey was not easy.

For more than 20 years Saul worked as a seasonal landscaper in Chicago’s suburbs. As soon as it was warm enough to work, Saul would begin redesigning Chicago’s intricate lawns and gardens. As the days grew longer, so did his workday. Every night he would return home… to a rented house.

Saul wanted more. He dreamed of being a homeowner.

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Celebrating National Homeownership Month

By Elizabeth Drake, Communications Department Intern, NCLR

HousingDiscrimination_blogpic_newHomeownership represents financial security for Latino families and a better life as they work every day to achieve the American Dream. Homeownership is great for Latino families and for society as a whole as it fosters investment in the community, as well as safe and stable neighborhoods.

For NCLR’s National Homeownership Network (NHN), this is an integral part of our mission. NHN helps Latino families purchase a home and reduces the large homeownership gap between White and Latino owners. Homeownership rates had been steadily increasing until the foreclosure crisis in 2007 hit. Since then, the rate of Latino homeowners has dropped significantly. According to the State of Hispanic Homeownership Report, in 2012, the rate of Latino homeownership was down to 46.1 percent.

In order to stop the decreasing rate of Latino homeownership and ensure that all families are getting the necessary information and opportunities to become homeowners, the NHN provides prepurchased homeownership counseling directly to the community. They also emphasize one-on-one counseling in order to prepare Latino families to become mortgage-ready. A plan is created to ensure that even if the clients are not immediately ready to purchase a home, they have short- and long-term goals that work toward owning a home.

We spoke with Lautaro “Lot” Diaz, Vice President of Housing and Community Development, to learn more about NHN and how he became involved in Latino homeownership.

NCLR: How long have you been helping Latinos become homeowners?

Diaz: Well, the NCLR Homeownership Network started in 1998, so we have been helping Latinos for around 17 years.

NCLR: What are the biggest issues you see that are important to helping or hindering Latino homeownership?

Diaz: There are three main issues: providing awareness and knowledge on homeownership, the family’s income and the prices of available products, and credit scores. NCLR trains and provides information to consumers and access to products to ensure that consumers are receiving the lowest cost possible. We educate and prepare families for mortgages and provide Latino families with work plans. We monitor the process of these plans to improve the cost and credit. If it turns out that families don’t immediately qualify, we are there to make sure they do over time.

NCLR: What are some trends or patterns you have seen over the years?

Diaz: Up until 2007, there was consistent growth in Latino homeownership, but the foreclosure crisis in 2007 caused reduction and after that homeownership has gone down significantly. In recent years, though, it has begun to slowly rise again.

 NCLR: What do you expect for Latino homeownership in the future?

Diaz: After the foreclosure crisis, homeownership went down by 2–2.5 percent, but I expect the rate to increase again, hopefully by another 2 percent. There is a desire to own a house in the Latino community and Latinos are a prime market for mortgage these days. We want to ensure that lenders provide low-cost products for the community and NCLR will partner with these lenders in turn.

NCLR: How many families has NCLR helped to become homeowners?

Diaz: We have helped a range of about 35,000 families and around 500,000 clients since the network first started, and we hope this rate keeps going up. We strive to serve as many Latino families as possible given the size of the group and the resources available.

The CFPB Empowers Homebuyers

By Nancy Wilberg Ricks, Senior Policy and Communications Strategist, Wealth-Building Policy Project, NCLR

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Yesterday, the Consumer Financial Protection Bureau (CFPB) released new online tools to help consumers be better informed when purchasing a home. Whether you dream of buying a home years down the line or are in the midst of closing now, these tools can give you helpful information specific to your needs.

Richard Cordray, Director of the CFPB, discussed the new tool, housing trends, and market improvements at The Brookings Institute. In the live webcast (also below), he emphasized the need to change the market culture by empowering homebuyers with better information when purchasing their house—the largest asset that many will ever acquire. “When people take out a loan to buy a home, they deserve to have confidence that they are not being set up to fail,” said Cordray.

Full speech below:

These essential tools also come at the one-year anniversary of the CFPB’s mortgage servicing standards. In January 2014, the Bureau implemented new standards to improve deplorable customer service to homeowners, especially for those who need help saving their home from unnecessary foreclosures.

To closely follow compliance with these standards, NCLR and the National Housing Resource Center surveyed its housing counselors and synthesized the findings in a report last week. We were encouraged that the new rules improved the market for families, but we also see room for improvement. Read more here!

For Latinos in Large Cities, High Rent and Stagnant Income Mean the American Dream is Slipping Away

While a majority of Latinos believe that homeownership is part of the American Dream, high housing costs and low incomes coupled with a lack of mortgage credit are locking them out of achieving it.

In the 10 cities in the nation with the highest median rents, households devote an average of 44 percent of their income to rent. NCLR overlaid the large Latino populations in these cities to show the high burden of rent on Latino households, who tend to earn below-median income, especially in places like Los Angeles, San Francisco, New York, and Miami.

While we’ve highlighted trends in the past indicating Latinos are being locked out of the American Dream of homeownership due to tightening mortgage credit standards, this analysis highlights the difficulty many Latinos have in simply affording rent, let alone being able to pay off debt to improve credit scores or saving for a mortgage down payment.

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Between 2009 and 2013, an estimated 1.3 million Latino families lost their homes to foreclosure and were made to downsize or switch to renting rather than paying a mortgage. As income has stagnated for much of the American middle class, rents have sharply risen, leaving Latino families with few options and forcing them to devote even larger portions of their paychecks to rent. A report by Reis, a real estate research firm, shows that rents today are 15.2 percent higher than they were at the end of the recession in 2009, with no sign of this trend slowing down anytime soon. Though Latino household income did rise slightly last year, it is still shockingly low, and long-term stagnation of wages is damaging to the American economy.

Across all 10 cities, families devote close to half of their incomes to rent, with the average rent-to-income ratio a staggering 45.4 percent.

In Los Angeles, the city with the nation’s largest Latino population, average monthly rent for a one-bedroom apartment now costs $1,740, while the city’s median monthly household income is just $4,145. This means a family making the median income living in a median-rent apartment devotes 42 percent of monthly income to rent.

In Miami, where Latinos make up 70 percent of the population, the rent-to-income ratio is even starker, with 61.9 percent of income going toward rent each month in families making the median income. Only in notoriously expensive New York City is this rate higher, with families devoting more than 68 percent of their income to rent.

Low wages and high rents trap many Latinos in a vicious cycle of poverty and debt, putting homeownership out of reach. With such high housing costs, Latino families may have little income left over to pay off outstanding debt, which leads them to take on further debt, which can lower their FICO credit scores. Low credit scores, in turn, make qualifying for a mortgage even more difficult. According to recently released data from the Home Mortgage Disclosure Act, the top three reasons Latinos were denied mortgages in 2013 were debt-to-income ratio, credit history, and down payment issues.

While a majority of Latinos believe that homeownership is an important part of the American Dream, high housing costs are locking them out of achieving it. Because Latinos are increasingly the face of America’s housing market, how Latinos fare in the housing recovery will have implications for the entire nation’s economy. Sensible policies like increasing the minimum wage can help ease the burden by improving stagnating incomes. Similarly, housing regulators can reduce barriers to homeownership by making sure lenders stop the overcorrection in credit standards that are shutting millions of creditworthy borrowers out of the housing market. We must ensure Latino families aren’t kept out of the home-buying process at a time when recovery is needed most.