Foreclosure crisis is leaving neighborhoods in ruins

The Domestic Policy Subcommittee of the House Oversight and Government Reform Committee held a hearing on “Neighborhoods: The Blameless Victims of the Subprime Mortgage Crisis” to discuss the more widespread repercussions of foreclosures and vacant properties within concentrated areas, as opposed to effects on individual families and the economy.

Chairman Dennis Kucinich (D-Ohio) said that “when foreclosure leads to vacant and abandoned properties, surrounding neighborhoods and local municipalities suffer significant consequences.” Kucinich said these include falling neighborhood-wide property values, equity loss, decreased rental availability, lowered business rates for merchants, increased crime from arson and vandalism, increased building and demolition costs, increased legal expenses and reliance on governmental service programs, and loss of tax revenue. Kucinich called the neighborhoods “totally blameless” victims of the crisis who “had nothing to do with the transactions that resulted in the subprime mortgage meltdown.” He mentioned new pending legislation, the Neighborhood Stabilization Act of 2008, which would authorize $15 billion in grants and loans for local governments to spend on property acquisition, building rehabilitation and demolition. Kucinich said the bill faces a veto threat by President Bush, which he said he “just cannot understand.”

Rep. Diane Watson (D-Calif.) said that California foreclosures have surged by 327% from 2007 to 2008, which amounted to 517 foreclosures every day for three months. Witness Nancy Floreen of the Maryland Council said that Montgomery County experienced a 1,250% rise in foreclosures during the same year, from 68 in the first quarter of 2007 to 916 in the first quarter of 2008. Floreen expressed support for the Neighborhood Stabilization Act, saying that the market alone cannot fix the crisis. She also said the crisis has disproportionately impacted minority communities and that the market has “preyed upon” people who cannot afford subprime lending.

Witness Daniel Kildee, Genesse County Treasurer from Flint, Michigan, said in his written statement that vacant land is a “Tyhpoid Mary to a neighborhood struggling to sustain itself.” When asked by Kucinich about the lessons to learn from his county about non-interventionist government, Kildee said the government should not be allowed to treat high-value property differently from property whose value is “upside-down.”