The housing crisis for working families and especially for communities of color is nowhere near over (as Laura Gottesdiener reported on GRITtv). American families have lost nearly 40% of their wealth and Latinos and African Americans over 50% since 2007, and no significant help has come yet for struggling homeowners.
Some communities are fed up with waiting for relief. They’re taking action locally to do the one thing the feds and the banks have so far refused to: renegotiate mortgage principal for underwater homeowners. And if the banks won’t agree to the plan voluntarily, they’re willing to use eminent domain power to do it.
This September, led by Green Party Mayor Gayle McLaughlin, the Richmond City Council approved a plan to acquire troubled loans from banks and to restructure the mortgage to current home values. The goal is to help homeowners (by bringing their mortgage down to a value they can pay), while stabilizing neighborhoods and avoiding further erosion of home values by preventing a new round of foreclosures.
The Richmond plan is attracting fury from the financial services industry but excitement in similarly hard-hit communities. Take Newark New Jersey. New Jersey is faced with the second highest rate of foreclosure in the entire country, and foreclosures in Newark are costing the city, taxpayers and homeowners millions of dollars. More than 9,000 Newark homeowners owe on average $70,000 more on their mortgages than what their homes are worth. Together that adds up to $630 million in underwater debt that is strangling the Newark economy, local organizers say. If banks wrote down those mortgages, it could pump $66 million into the local economy in Newark and create nearly 1000 new jobs each year according to a report from New Jersey Communities Together.
GRITtv guest Trina Scordo is Executive Director of New Jersey Communities United. “What we need to solve the foreclosure crisis is large-scale principle reduction... Not fifty or sixty homeowners to get their homes reset to fair-market value, but hundreds of thousands of people who need their homes set to fair-market value.”
Eminent domain power could help cities combat the so-far unchallenged power of the finance sector. It is defined as “An action of the state to seize a citizen’s private property, expropriate property, or seize a citizen’s rights in property with due monetary compensation, but without the owner’s consent. The property is taken either for government use or by delegation to third parties who will devote it to public or civic use or, in some cases, economic development.” Eminent domain has been used plenty of times, as Scordo puts it: “to extract wealth from communities”, especially poor communities of color. Could it be used now to put wealth back into those communities? It’s quite possible.
“Richmond is symbolic because I feel that it represents the push back on Wall Street and banks. to say you are no longer going to bully working class communities, you are no longer going to bully cities, you are no longer going to bully communities."
Watch the interview.