How African Americans Have Been Ousted From the Middle Class
1 year ago
The housing crisis and chronic high unemployment have taken their toll
There is no doubt that the global financial crisis, which began in the U.S. with the collapse of the housing market, had a tremendous affect upon upward social and economic mobility for African-Americans and other minorities. After decades of struggle for equality in this country, the setback for these communities will be felt for decades to come. There are four factors – the housing crisis, chronic high unemployment rates, lack of decent wages, and the higher education scam – that are creating a debilitating and severe economic divide between people of color and non-Hispanic whites in the United States.
A Ruined Middle Class: The Housing Crisis Hit African-Americans Hardest
In the wake of the worst economic downturn since the Great Depression, millions of Americans lost their homes. Entire communities, many in low-income urban areas across the United States, quickly fell into ruin as residents, block after block after block, found themselves facing foreclosures. It should be noted that wealthier neighborhoods were also affected by the Great Housing Crash of 2008. Kathleen Day of the Center for Responsible Lending, however, points out that “African-Americans and Hispanics were disproportionately hurt” by the subprime mortgage crisis and many of these individuals were low- to moderate-income earners. Subprime loans are harder to repay and have higher interest rates than other types of loans. The terms for repayment, in many cases, were difficult to understand. Moreover, many homeowners were deliberately misled by lenders and unwittingly took out these sorts of loans. Day said, “many people were unfairly turned away from their homes.”
All of these figures about the subprime mortgage crisis come from HMDA data, Day said in a telephone interview.
Based upon this data, Day explained, “Of all the loans made that year  to black families, more than 50% were subprime. For Hispanics, of all the home loans made to Hispanic families that year, more than 40% were subprime. Of all the home loans made to white non-Hispanic families that year, 22% were subprime. It was up for everyone, but it was very pronounced for black and Hispanic communities. We have predicted that one out of five of each of those subprime loans have failed, which is 20%, and it’s turned out to be closer to 40 or 50%. So 20% of 50% is much higher than 20% of 22%. So, while numerically the number of families being foreclosed on in the United States are white non-Hispanic families, as a percentage of a community, black families and Hispanic families have been disproportionately hurt."
"It’s an economic wound that is going to be felt for several generations, because the main way that people move up the economic ladder in the United States is through home buying. And people forget that nine out of every 10 of these bad subprime loans that were made went to people who already had a home.”
In a word, a large number of African-Americans and Hispanics have lost their homes and their place in middle class America, thanks to the financial and banking industry.
To make matters worse, most housing for Americans has become unaffordable and wages have not kept pace with the spike in the cost of living. In 2012, the National Coalition for the Homeless carried out an exhaustive study entitled, “Out of Reach.” This report “is a side-by-side comparison of wages and rents in every county, metropolitan area (MSAs/HMFAs), combined nonmetropolitan area and state in the United States. For each jurisdiction, the report calculates the amount of money a household must earn in order to afford a rental unit in a range of sizes (0, 1, 2, 3, and 4 bedrooms) at the area’s Fair Market Rent (FMR), based on the generally accepted affordability standard of paying no more than 30% of income for housing costs. From these calculations the hourly wage a worker must earn to afford the FMR for a two-bedroom home is derived. This figure is the Housing Wage.”
Based upon this research, the organization concluded that “a mismatch exists between the cost of living, the availability of rental assistance and the wages people earn day to day across the country. The Housing Wage consistently exceeds the actual wages earned by renters, in both urban and rural communities nationwide.”
Are there reparations for those who feel that they lost their homes unjustly? At this juncture, it is hard to imagine when the banking and financial industry did not really pay the fair price for foreclosing on millions of Americans through fraudulent and dubious lending practices.