The Housing Disasters of 2008: Flood, Fire and Foreclosure
By: Donald A. Baldyga, Jr.
As the Midwest contends with flood waters and wildfires rage across the west, another disaster is ravaging the families across the nation.
FORECLOSURE.
Just as surely as flood waters wash homes of their foundations and fire burns homes to the ground, foreclosure is razing homes all across the nation. In some placing the destruction is metaphoric while in others, like our inner cities, it is a physical reality.
How can foreclosures compare with floods and fires? Isn’t foreclosure a human-made issue while the others are natural phenomena? Didn’t the families losing their homes to foreclosure get themselves in trouble? The answer to these questions is yes and no.
All three of these disasters have both natural and human-generated components. While the rain causes the river to overflow its banks and flood homes, man-made structures cause water to flow away from its natural path. While lightning may cause the outbreak of fires, human beings building in areas that have been susceptible to wildfires for millennia take a natural event and turn it into a disaster. A family that to want to improve its standard of living runs afoul of the manmade changes in the fundamental principles of our economy, and that is what has brought these families to and ultimately over the precipice that is foreclosure.
The physical and emotional toll of foreclosure on a family and a community is just as severe as the toll of flood or fire. A home that has been ravaged by the theft of copper and other valuables or burned to the ground by careless squatters trying to keep warm is no less destroyed than if the damaged had been caused by other means. The emotional devastation to the family that loses its home is no less real than if the home had been lost in a flood or fire.
In many ways the loss of home through foreclosure is even more insidious. First, the disaster itself is invisible to the uninitiated. With foreclosure there is no rising water or smoke to tell others around you that trouble is coming to your house. With flood and fire there is no stigma attached to the impending loss of the home, there is no shame in the approaching disaster. If the fire is coming, you wouldn’t hesitate to ask your neighbor for a hose but when foreclosure is coming, do we ask for help? In fact, more than half of the families facing the disaster of foreclosure never ask for help and without the telltale signs even a concerned neighbor, friend or family member doesn’t know that help is needed.
When a so called “natural disaster” occurs, society rushes to the aid of those in jeopardy and then looks into what caused the disaster. Send in the National Guard. Mobilize the Red Cross and the Salvation Army. Get FEMA on the job. Appropriate billions overnight. But in the case of foreclosure, much of society has taken to pointing an accusing finger at those who are in peril and our government has been busy with weak “voluntary” mortgage market reforms, fixing blame and bailing the financial markets. But where is the National Guard, the Red Cross, the Salvation Army, FEMA?
Newark is an area that has been hit exceptionally hard by this disaster. After decades of languishing, Newark was finally on its way into the renaissance that so many had hoped for for so long. And now decades of toil are being decimated in a matter of months if not weeks. The empirical data around this onslaught is astonishing to say the least.
With a predominance of multifamily homes, every dwelling lost to foreclosure and the ensuing destruction represents, for the most part, the loss of two affordable housing units. Add to that an average family size of just over 3.5; each foreclosure is displacing approximately seven individuals.
During calendar year 2007 approximately 350 dwellings were sold at Sheriff Sales. This number does not take into account properties that were transferred through either a short sale or deed in lieu. For discussions purposes, I’ll assume the total number of dwellings lost to foreclosure for 2007 approximates 400, or 800 affordable housing units, or 2,800 residents permanently displaced. In 2008 we are anticipating significant increase in the number of foreclosure filings. I estimate for 2008 dwellings lost to foreclosure will exceed 500 additional homes in the City. That is another 3,500 residents permanently displaced. That means in the course of two years, over 2% of Newark’s population would have suffered from the trauma of losing their homes through the disaster of foreclosure.
Another symptom of the Foreclosure Disaster is the cost it is having on our already strained health care system. The emotional and psychological effects on the family members as they try to stave off a foreclosure can be overwhelming. Not only will the stress manifest itself in physical symptoms such as headaches and stomach pains, but also, more alarmingly, in increased anxiety and depression. People who have pre-existing mental health issue are even more susceptible to the stress of a foreclosure.
As the foreclosure disaster continues, the human toll associated with it will continue to rise. Children displaced from their schools will lose crucial educational stability and opportunity. Families may choose hunger over homelessness for months leading up to a foreclosure. Some will end up on the street or in the shelter systems. Some who can least deal with the stress depression and anxiety have tragically chosen suicide over dealing with the feelings of failure and embarrassment of losing the family home.
Finally, aside from the personal and social consequences of foreclosure, let’s look at some of the financial consequences. Properties lost to foreclosure will result in a significant loss in tax revenues. This loss will have to be made up somewhere, which means an increase on the remaining property owners. As houses are foreclosed and abandoned, there will be a significant decrease in the value of the rest of the homes in the affected community. It is estimated that a lone abandoned home can decrease the values of the houses on that block by an average of 15%. And as housing values continue to drop and the tax burden rises, more people will be in jeopardy of foreclosure.
I am not trying to minimize the loss of those who have lost their homes in the fires and floods that have ravaged parts of our nation. On the contrary, I want it understood that the devastation caused by foreclosure is as real and as painful as that caused by fire and flood. We should give those facing foreclosure the same chance that we give other Americans facing the loss of their home.
By: Donald A. Baldyga, Jr.
As the Midwest contends with flood waters and wildfires rage across the west, another disaster is ravaging the families across the nation.
FORECLOSURE.
Just as surely as flood waters wash homes of their foundations and fire burns homes to the ground, foreclosure is razing homes all across the nation. In some placing the destruction is metaphoric while in others, like our inner cities, it is a physical reality.
How can foreclosures compare with floods and fires? Isn’t foreclosure a human-made issue while the others are natural phenomena? Didn’t the families losing their homes to foreclosure get themselves in trouble? The answer to these questions is yes and no.
All three of these disasters have both natural and human-generated components. While the rain causes the river to overflow its banks and flood homes, man-made structures cause water to flow away from its natural path. While lightning may cause the outbreak of fires, human beings building in areas that have been susceptible to wildfires for millennia take a natural event and turn it into a disaster. A family that to want to improve its standard of living runs afoul of the manmade changes in the fundamental principles of our economy, and that is what has brought these families to and ultimately over the precipice that is foreclosure.
The physical and emotional toll of foreclosure on a family and a community is just as severe as the toll of flood or fire. A home that has been ravaged by the theft of copper and other valuables or burned to the ground by careless squatters trying to keep warm is no less destroyed than if the damaged had been caused by other means. The emotional devastation to the family that loses its home is no less real than if the home had been lost in a flood or fire.
In many ways the loss of home through foreclosure is even more insidious. First, the disaster itself is invisible to the uninitiated. With foreclosure there is no rising water or smoke to tell others around you that trouble is coming to your house. With flood and fire there is no stigma attached to the impending loss of the home, there is no shame in the approaching disaster. If the fire is coming, you wouldn’t hesitate to ask your neighbor for a hose but when foreclosure is coming, do we ask for help? In fact, more than half of the families facing the disaster of foreclosure never ask for help and without the telltale signs even a concerned neighbor, friend or family member doesn’t know that help is needed.
When a so called “natural disaster” occurs, society rushes to the aid of those in jeopardy and then looks into what caused the disaster. Send in the National Guard. Mobilize the Red Cross and the Salvation Army. Get FEMA on the job. Appropriate billions overnight. But in the case of foreclosure, much of society has taken to pointing an accusing finger at those who are in peril and our government has been busy with weak “voluntary” mortgage market reforms, fixing blame and bailing the financial markets. But where is the National Guard, the Red Cross, the Salvation Army, FEMA?
Newark is an area that has been hit exceptionally hard by this disaster. After decades of languishing, Newark was finally on its way into the renaissance that so many had hoped for for so long. And now decades of toil are being decimated in a matter of months if not weeks. The empirical data around this onslaught is astonishing to say the least.
With a predominance of multifamily homes, every dwelling lost to foreclosure and the ensuing destruction represents, for the most part, the loss of two affordable housing units. Add to that an average family size of just over 3.5; each foreclosure is displacing approximately seven individuals.
During calendar year 2007 approximately 350 dwellings were sold at Sheriff Sales. This number does not take into account properties that were transferred through either a short sale or deed in lieu. For discussions purposes, I’ll assume the total number of dwellings lost to foreclosure for 2007 approximates 400, or 800 affordable housing units, or 2,800 residents permanently displaced. In 2008 we are anticipating significant increase in the number of foreclosure filings. I estimate for 2008 dwellings lost to foreclosure will exceed 500 additional homes in the City. That is another 3,500 residents permanently displaced. That means in the course of two years, over 2% of Newark’s population would have suffered from the trauma of losing their homes through the disaster of foreclosure.
Another symptom of the Foreclosure Disaster is the cost it is having on our already strained health care system. The emotional and psychological effects on the family members as they try to stave off a foreclosure can be overwhelming. Not only will the stress manifest itself in physical symptoms such as headaches and stomach pains, but also, more alarmingly, in increased anxiety and depression. People who have pre-existing mental health issue are even more susceptible to the stress of a foreclosure.
As the foreclosure disaster continues, the human toll associated with it will continue to rise. Children displaced from their schools will lose crucial educational stability and opportunity. Families may choose hunger over homelessness for months leading up to a foreclosure. Some will end up on the street or in the shelter systems. Some who can least deal with the stress depression and anxiety have tragically chosen suicide over dealing with the feelings of failure and embarrassment of losing the family home.
Finally, aside from the personal and social consequences of foreclosure, let’s look at some of the financial consequences. Properties lost to foreclosure will result in a significant loss in tax revenues. This loss will have to be made up somewhere, which means an increase on the remaining property owners. As houses are foreclosed and abandoned, there will be a significant decrease in the value of the rest of the homes in the affected community. It is estimated that a lone abandoned home can decrease the values of the houses on that block by an average of 15%. And as housing values continue to drop and the tax burden rises, more people will be in jeopardy of foreclosure.
I am not trying to minimize the loss of those who have lost their homes in the fires and floods that have ravaged parts of our nation. On the contrary, I want it understood that the devastation caused by foreclosure is as real and as painful as that caused by fire and flood. We should give those facing foreclosure the same chance that we give other Americans facing the loss of their home.