The Impact of Foreclosures on Home Ownership and Affordable Housing in the District of Columbia

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Abstract

Statement of Peter A. Tatian before the Council of the District of Columbia, Joint Public Oversight Roundtable on the Impact of Foreclosures on Home Ownership and Affordable Housing in the District of Columbia

In this testimony before members of the D.C. City Council, Peter Tatian, senior researcher in the Urban Institute's Metropolitan Housing and Communities Policy Center and director of NeighborhoodInfo DC, presents recent data showing that the national foreclosure crisis has not spared households in the District of Columbia. Although the intensity of the foreclosure problem is not as severe as in other parts of the region, the nation's capital has seen a marked and steady increase in foreclosures since the beginning of the housing market downturn.

Testimony

Good morning. My name is Peter Tatian and I am a senior researcher in the Urban Institute's Metropolitan Housing and Communities Policy Center. I am also the director of NeighborhoodInfo DC, an information resource for the District of Columbia.¹ I appreciate the opportunity to provide this testimony highlighting data compiled by NeighborhoodInfo DC on housing foreclosures in Washington, D.C.

The most recent data that we have analyzed show that the national foreclosure crisis has not spared households in the District of Columbia. Although the intensity of the foreclosure problem is not as severe as in other parts of the region, the nation's capital has seen a marked and steady increase in foreclosures since the beginning of the housing market downturn.

According to records of foreclosure notices filed with the D.C. Recorder of Deeds (ROD), the number of residential properties that were issued a foreclosure notice in the first quarter of 2009 was the highest level for all first quarters in the past 10 years (table 1). ROD recorded that 911 single-family homes were issued one or more foreclosure notices in the first quarter of 2009, almost four times the number in the first quarter of 2006. An additional 255 condominium units were issued foreclosure notices in the first quarter of 2009, more than five times the number in the first quarter of 2006, and 178 multifamily residential properties (cooperatives or rental apartment buildings) were issued foreclosure notices in the first quarter of 2009, over seven times the number in the first quarter of 2006. (Almost all of the multifamily properties with a foreclosure notice were rental apartment buildings.)

As a result of the increase in foreclosures filed against District of Columbia property owners, the number of properties in the foreclosure process is growing (figure 1). As of the first quarter of 2009, 2,116 singlefamily homes and condominium units were in the foreclosure process, the highest number since the fourth quarter of 2000. Unlike at the end of 2000, however, when new foreclosure starts were declining, the number of homeowners entering the foreclosure process for the first time has been increasing every quarter since 2006. The growth in foreclosure starts indicates that the foreclosure problem in the District of Columbia will likely continue to get worse before it gets better.

In addition, foreclosure activity is not uniformly distributed throughout the city. In particular, wards and neighborhoods with lower housing prices have higher levels of foreclosure activity (figure 2). Wards 7 and 8, which have the lowest home prices in the city, had the highest rates of properties in foreclosure and new foreclosure starts in 2008. Ward 5, which is in the middle of the city's price distribution, had the highest rate of foreclosure sales, and Ward 4, which is likewise moderately-priced, also had relatively high levels of foreclosure activity.

The three neighborhood clusters with the highest rate of foreclosure starts are also at the bottom of the home price distribution (table 2). These were Cluster 28 in Ward 8, which includes the Historic Anacostia neighborhood (43 foreclosure starts per 1,000 existing units in 2008); Cluster 31 in Ward 7, which includes Deanwood and Burrville (41 foreclosure starts per 1,000 units); and Cluster 23 in Ward 5, which includes Ivy City and Trinidad (35 foreclosure starts per 1,000 units).

Finally, as noted in the recent report that we prepared for the Annie E. Casey Foundation (Tatian 2009), renters can also be affected by foreclosure. Renters occupy many homes and condominiums in the District of Columbia, and multifamily rental properties are entering foreclosure at increasing rates. All together, we estimated that, between 2006 and the third quarter of 2008, at least 2,800 renter households were living in properties affected by foreclosure, the largest share of which (1,500 households) were in small multifamily rental properties of two to four apartments each.

The D.C. Council is justified in being concerned about this situation and in considering policies that may help people avoid foreclosure and remain in their homes. Such measures should include steps to prevent foreclosures from occurring, such as increased support for housing counseling for troubled homeowners and funding for financing options to help borrowers out of unaffordable mortgage loans. Efforts to mitigate the negative impact of foreclosures on families and neighborhoods might include increasing the availability of affordable rental options and supporting efforts to purchase, rehabilitate, and resell foreclosed homes. I hope the data I presented will be useful in formulating those responses and targeting them to neighborhoods where the problem is most severe. Thank you for giving me the opportunity to speak to you today.

¹NeighborhoodInfo DC is a partnership between the Urban Institute and the Washington, D.C., Local Initiatives Support Corporation. For more information, please visit http://www.NeighborhoodInfoDC.org.

(End of excerpt. The full testimony with tables and figures is available in PDF format.)

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