Time to take action on housing in RI communities

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The people of Rhode Island have never been afraid to take action when they see a problem. We were the first of the original 13 colonies to declare our independence and were also the first to take military action against England. Now, we must be the first to stand up for our communities of color as they work toward building equity in the housing market.

Recently, America has enjoyed a steady stream of positive economic news: a growing economy, decreasing unemployment, rising job creation, and even a recovering housing market. After taking a deeper look, it is clear that the recovering housing market has not reached everyone, and Latinos, as well as other minorities and working class people, are being squeezed out.

The percentage of Latino homeowners in Rhode Island dropped by 4 percent from 2013 to 2014, even though the number living in the state increased by more than 4,000. With Latino home mortgage applications dropping from 1,952 in 2007 to a dismal 922 in 2013, it is clear the Latino community of Rhode Island is losing faith that lending institutions can provide them with a pathway to their American dream.

To make matters worse, tightening credit has become a barrier and deterrent to homeownership. According to the Joint Center for Housing Studies at Harvard, “The drop among minorities is particularly troubling, given their growing presence in the housing market… tight credit [has] made home buying more of a stretch for some households.”

While the job market has improved, income has not kept up and many are forced into the rental market, another roadblock to building wealth and eventual homeownership. According to the Latino Policy Institute at Roger Williams University, on average, Latinos are overly cost-burdened in Rhode Island, spending over $9,500 on rent and utilities while only making $29,000 or less. Almost a quarter of their yearly household income is spent solely on housing, making saving money very difficult.

Not only must we work to narrow the financial gaps that families of color contend with, but we must give institutions designed to help our families, like Fannie Mae and Freddie Mac, the ability to recapitalize and help underserved communities.

Fannie and Freddie’s mission is to help families secure the dream of homeownership, yet they remain in conservatorship under the Federal Housing Finance Agency, which means they aren’t allowed to retain profits, build capital and expand mortgage access. Despite paying back the government many times, Congress appears unwilling to work together to offer comprehensive reform that would commit to long-term programs to support lending to low-income communities. So for many, the dream of homeownership remains in the court of the government.

While FHFA has taken steps, such as a new lower down-payment program, that have opened up the market to more creditworthy families, there is no certainty that these programs can continue. FHFA should expand on successful programs like this through Fannie and Freddie, while adopting alternative credit scoring models that better capture creditworthiness of low-income and immigrant families. FHFA should also increase financial counseling for families before and after they buy a home – something Fannie and Freddie already do. This important education makes an extraordinary difference in keeping buyers on track as they transition from renters to first-time homeowners.

Fannie and Freddie must be allowed to help underwater families and neighborhoods, while ensuring a crisis like this never happens again. That means sound policies to fix the lasting damage of the mortgage crisis and more balanced guidelines for new loans moving forward. Meanwhile, Treasury should put Fannie and Freddie on the road to long-term financial health by letting them build capital buffers that protect them – and us as both homebuyers and taxpayers – from the risk of future bailouts.

I look at the current state of housing in many Rhode Island communities and see that it is time for us to stand up together as a state and take action again. As chairman of Senate Housing and Municipal Government Committee and a proud member of the National Hispanic Caucus of State Legislators (NHCSL) I recently introduced a resolution on housing reform to help address this, but we can’t do it alone.

Despite the efforts to address these issues by the Rhode Island delegation in Congress, action has been stifled by a Congressional stalemate. We now look to the Administration to install crucial reforms to Fannie and Freddie and to ensure that the rebounding economy benefits all of us, now and into the future. Rhode Island has always been a state of swift and decisive action, and we urge the Administration to follow suit.

Sen. Juan M. Pichardo is a Democratic state senator representing District 2. He resides in Providence.

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