Foreclosures and Renters in Washington, D.C.

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Abstract

Although much of the media have focused on the consequences of the foreclosure crisis for financial markets, lending institutions, and homeowners, comparatively less attention has been paid to how housing foreclosures have affected renters. This report, sponsored by the Annie E. Casey Foundation and using local administrative data from NeighborhoodInfo DC, documents the extent to which foreclosures in Washington, D.C., have occurred in renter-occupied homes and apartments. The conclusion outlines several policy options for helping renters during this difficult period.

Introduction

The U.S. foreclosure crisis has reached serious proportions with far-reaching ramifications for the national economy. According to data from the Mortgage Banker's Association (2008), the rate of foreclosure starts and the percentage of loans in the process of foreclosure in the U.S. set new records in the second quarter of 2008. The percentage of loans in the foreclosure process at the end of the second quarter was 2.75 percent, an increase from 1.40 percent from one year earlier. Serious delinquencies were also higher, suggesting that the wave of foreclosures was not likely to subside any time soon.

Although much of the media attention in the foreclosure crisis has focused on the impacts on financial markets and lending institutions, there is growing concern about the negative consequences on neighborhoods where troubled homeowners are concentrated. It has been widely documented that subprime lending, which is one of main causes of the increasing rates of foreclosure, was not distributed uniformly, but rather was concentrated among particular populations and neighborhoods. This, in turn, has resulted in higher rates of foreclosures in certain locations, which has threatened to undermine the stability and health of many neighborhoods. In fact, in response to these concerns, the U.S. Congress has authorized the Department of Housing and Urban Development to make a special disbursement of funds that local governments can use to purchase foreclosed properties to attempt to stabilize declining neighborhoods. The first round of the Neighborhood Stabilization Program (NSP) will disburse $3.92 billion in CDBG funds to states and local jurisdictions to acquire and redevelop foreclosed properties that might otherwise become sources of abandonment and blight within their communities. The District of Columbia's allocation of NSP funds will be quite modest: $2.8 million. The city has decided to use the money to support the revitalization of the Ivy City and Trinidad neighborhoods in Ward 5 (DHCD 2008).

Furthermore, comparatively less attention has been paid to how the fallout from housing foreclosures has affected renter households. Much of the discussion to date has focused on the impacts on homeowners and the possible adverse consequences for the nation's homeownership rate. But, renters can also be seriously affected by the foreclosure problem if the house, condominium, or apartment building where they live undergoes foreclosure. Furthermore, since typically it is the homeowner who is notified when the foreclosure process begins, renters may not even be aware that their home is threatened until the property has been foreclosed and they are at risk of imminent eviction.

To address these concerns, in this report we provide an overview of the housing and foreclosure situation for the District of Columbia as a whole, as well as for three subareas of the city: the area east of the Anacostia River (East of the River); Ward 7; and the Ward 7 neighborhoods of Deanwood, Marshall Heights, and Congress Heights (shown in map 1). The three neighborhoods of Deanwood, Marshall Heights, and Congress Heights have been the focus of targeted investments by the Annie E. Casey Foundation through the Foundation's Family Economic Success Initiative.¹ Throughout this report, we will refer to these three neighborhoods collectively as the "Casey targeted investment neighborhoods."

Because foreclosure problems cannot be understood outside the context of the broader housing market, we first present a summary overview of housing market conditions in the District of Columbia, including the home sale and rental markets, as well as data on subprime lending. In the next section, we provide up-to-date data on foreclosure rates, with separate breakdowns for different property types and for renter-occupied housing.

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