December 8, 2011
Echoes of the Demise of a Diverse Boyle Heights in Today’s Foreclosure Crisis
Would today’s foreclosure crisis have been so bad if Jews had been able to get housing loans and remain in Boyle Heights? Its hard to say what would have happened if middle class Jews were able to get loans to buy and improve the housing stock in Boyle Heights rather than being financially forced to move west to where the banks were lending.
Bruce Phillips, my blog partner, was interviewed in Friday’s LA Times by Hector Tobar and brought Goerge Sanchez’s analysis of Boyle Heights as a multi-racial community destroyed by redlining, resulting in the forced exodus a Jewish community who couldn’t get housing loans to stay there.
Redlining by banks, the refusal to make home loans in certain zip codes, including those of the culturally diverse Boyle Height was a major factor in driving out Jews from Boyle Heights and the death knell of the ethnic and racial diversity that the Jewish community and Los Angeles enjoyed there.
Much research has shown that discrimination in lending had a strong effect on racial segregation across 40 metropolitan areas in the 1970s and 1980s.
Rugh and Massey found “residential segregation constitutes an important contributing cause of the current foreclosure crisis, that segregation’s effect is independent of other economic causes of the crisis, and that segregation’s explanatory power exceeds that of other factors hitherto identified as key causes (e.g., overbuilding, excessive subprime lending, housing price inflation, and lenders’ failure to adequately evaluate borrowers’ creditworthiness). Simply put, the greater the degree of Hispanic and especially black segregation a metropolitan area exhibits, the higher the number and rate of foreclosures it experiences. “
Douglass Massey argues, the more segregated a metropolitan area is, the easier it is to find exploitable clients. Segregation creates natural pockets of financially unsophisticated, historically underserved, poor minority homeowners who are ripe for exploitation.
Massey goes on to say that in the forty years after the passage of the Fair Housing Act, two thirds of all black urbanites continue to live under conditions of high segregation and nearly half live in metropolitan areas where the degree of racial isolation is so intense it conforms to the criteria for hypersegregation. If we had somehow been able to eliminate segregation between blacks and whites in the years since 1968, the average metropolitan area would have experienced a foreclosure rate 80% lower than that actually observed during 2006-2008. Segregation is the reason for the unusual severity of the foreclosure crisis in the United States.
(Photo credit: Nancy Friedman)