Over the past decade, the number of new home purchase mortgages dramatically decreased. According to Home Mortgage Disclosure Act (HMDA) data, 4.9 million purchase mortgages were originated in 2001, rising to 6.0 million in 2005, then dropping to 2.7 million in 2012 (the latest available data, dark blue line below). The drop constitutes a 44 percent decline from 2001 and a 55 percent decline from 2005’s peak volume. Excluding rental properties, purchase loans declined by an even greater 47 percent.
What’s behind the mortgage volume drop?
A deeper dive into the numbers explains the decrease (and speaks to the urgency of expanding the credit box). New and existing home sales dropped over the last 11 years, meaning there are fewer purchases that could potentially be financed by a mortgage. Sales volume rose from 6.3 million units to 8.4 million units between 2001 and 2005, then took a steep fall to 5.0 million units by 2012. But this 20 percent decrease accounts for less than half of 2001-2012’s new purchase mortgage decline.
An increase in all-cash purchases, a sign of investor activity in the housing market, explains the bulk of the decrease in purchase mortgages. CoreLogic numbers indicate that from 2001 to 2007, the share of cash sales crept from 18 percent up to 23 percent, before soaring to 39 percent in 2012 (see figure below). This increase coincides nearly exactly with the decrease in purchase mortgages. Thus, the drop in first-lien mortgage purchases is reflective of the concurrent decline in home sales and increase in the cash-only share.
What demographic and economic factors are at play?
In 2001-2005, rapidly increasing home prices (See February’s At A Glance, page 17) spurred new home construction and enabled homeowners to “trade up”, while affordability products such as interest-only and neg-am loans enabled some riskier borrowers to purchase first homes. Then, during the recession, high unemployment and house price depreciation contributed to a decrease in household formation and lower homeowner mobility—down from 7.5 percent per year in 2005 to 5 percent in 2012—as borrowers with little or negative equity were locked into their homes, and few found jobs that require them to relocate.
Limited credit availability has further compounded the reduction in purchase mortgages. The rise in the cash share reflects a 3 to 5 year credit lock-out for borrowers after experiencing a foreclosure or short sale, and the difficulty for renters and newly formed households to obtain a mortgage. First time homebuyers, many of whom have limited or strained credit histories, now make up only 26 percent of current homeowners, the lowest on record since the series began in 2008. As the figure below depicts, in 2012, low FICO lending was just a fraction of its 2001 market share—dropping from more than 27 percent of new purchases secured with a sub-650 FICO score to less than 7 percent. And because the lack of credit deters current owners from trading up and keeps first-time home-buyers out of the market, many of the 7 million foreclosed homes have fallen into the hands of investors paying cash. If credit were readily accessible, more of these homes would be owner-occupied at an opportune time for these households to build wealth.
Will purchase mortgages bounce back anytime soon?
Though HMDA data, the most accurate count of mortgages, only exists through 2012, we believe that 2013 will show a small increase in purchase mortgages. Home sales rose from 5.0 million units to 5.5 million units in 2012 and the cash share dropped from 39.5 to 38 percent, reflecting the continuing recovery and lower investor interest as house prices have gained. But will these shifts translate into more first-time homeowners and housing demand? Only if credit-worthy borrowers can actually get loans.
Many Americans struggle to afford a decent, safe place to live in today’s market. Over the past five years, rents have risen while the number of renters who need moderately priced housing has increased. These two pressures make finding affordable housing even tougher for the very poor households in America. For every 100 extremely low-income (ELI) renter households in the country, there are only 29 affordable and available rental units. Extremely low-income households—a definition used by the U.S. Department of Housing and Urban Development (HUD)—earn 30 percent of area median income or less. Depending on the area of the country, for a family of four, this translates into incomes of less than $7,450 to $33,300.
Not one county in the United States has an even balance between its ELI households and its affordable and available rental units. As a result, ELI households have to search harder for a place to live, spend more than 30 percent of their income on rent, or live in substandard housing.
Some markets are tighter than others. Of the top 100 U.S. counties in 2012, Suffolk County, Massachusetts, has the smallest gap in units that are affordable and available for ELI households; Cobb County, Georgia, has the largest. But does this mean ELI households in Suffolk County have it easy? The answer is no. Even in Suffolk County, which is home to Boston, only 50units are affordable and available for every 100 families earning $29,350.
This situation would be much worse without HUD rental assistance, which we estimate provides almost 3.2 million affordable and available units to ELI households. HUD assistance comes in three forms: public housing, Housing Choice Vouchers, and privately owned but federally assisted housing. Without HUD rental assistance, we estimate that there would be 1 affordable and available rental unit for every 100 ELI households in the United States. The number would drop from 50 to 7 rental units for every 100 ELI households in Suffolk County, where an estimated 85 percent of the affordable and available rental housing for ELI households is federally assisted.
Why isn’t the private market filling this gap? The answer is relatively simple. With a few exceptions, the economics do not pencil out. Without subsidy, private developers cannot build or operate a new unit of rental housing at a cost ELI households can afford to pay.
The good news is some counties have been closing the affordability gap, including places like Suffolk County, Massachusetts, and Hennepin County, Minnesota, which is home to Minneapolis and its surrounding suburbs. Over the past decade, these two communities have engaged in intensive state and local efforts to preserve existing federally assisted housing that have stemmed the tide of losses. In addition to federal assistance, stakeholders in these communities invest significant state, local, and philanthropic resources in affordable housing serving ELI households.
Other counties have been losing significant ground. Wayne County, Michigan, and the District of Columbia offer two examples of how the affordability gap can widen under two dramatically different sets of market conditions: a really weak market, where incomes are low and lower-cost units are dropping out of the stock, versus a hot market where incomes are better but rents are rising faster. Wayne County (where Detroit is located) lost just over 22,400 rental units that are affordable and available to ELI households, likely due to demolitions of rental housing, but added approximately 10,700 ELI households competing for the units that remained. Between 2000 and 2012, DC lost approximately 8,000 units that are affordable and available for ELI households, likely due to gentrification, while losing just over 2,000 ELI households. DC’s overall affordability gap worsened during this period; in 2012, 23 percent fewer units are affordable and available for every 100 ELI households. That said, it is still near the top of the largest 100 counties with the highest number of units that are affordable and available for ELI households.
The Urban Institute will update this map periodically. And, as data become available, we will track the affordability gap for ELI households, as well as very low-income and low-income households.
The Assisted Housing Initiative is a project of the Urban Institute, made possible by support from Housing Authority Insurance, Inc. (HAI, Inc.), to provide fact-based analysis about public and assisted housing. The Urban Institute is a non-profit, nonpartisan research organization and retains independent and exclusive control over substance and quality of any Assisted Housing Initiative products. The views expressed in this and other Assisted Housing Initiative commentaries are those of the authors and should not be attributed to the Urban Institute or HAI, Inc.
I wrote most of this post more than a month ago. It sat in my outbox for weeks for the same reason that most academics are reluctant to be on Twitter—I was worried that if I posted it, it would diminish my scholarship. After all, if I am writing about something as seemingly frivolous as Twitter, it must mean that I am not a serious person.
But ultimately, I decided to post it, mainly motivated by Nicholas Kristof’s New York Times article condemning scholars for cloistering themselves in the shroud of academia, and in the process, making themselves irrelevant in the public discourse. As unpopular as it may be among my colleagues, I happen to believe Kristof’s thesis is generally correct. Pursuing knowledge for knowledge’s sake is wonderful, but irresponsible for anyone with a public policy orientation.
But rather than fighting that battle, I thought I would do something more constructive. So, I’m sharing my guiding principles for scholars using Twitter to talk about their work.
One way to think about Twitter is to work through the mechanics of tweeting and following and gaining an audience. But maybe a better way to approach Twitter is to think about how you create your Twitter gestalt, your personal narrative. I propose starting there. In no particular order, here are my 19 Twitter commandments (19 because prime numbers are awesome). This is my script—yours will be different.
1. Put the social in social network. Interact as much as you can.
2. Don't be scared. You can delete a tweet. And even though a mistake will be archived forever, seriously, no one cares. Just behave the way you would in a business meeting and you'll be fine.
3. Writing a tweet is about writing a headline. Experiment to figure out how to write headlines that resonate with others.
4. Follow people who say interesting things that you will want to comment on or retweet, particularly folks in the business (that includes reporters, policymakers, and other compelling tweeters, not just researchers/academics).
5. Stick to the script. My script is: be myself— serious researcher and archivist of current events with enough humor to be human. However I behave at work, that’s how I behave on Twitter.
6. No politics. Ever.
7. No personal business. Ever. (Most of my communications colleagues disagreed with this point, but as I said, this is my script.)
8. Whenever reasonable, link to your written work. But only when it's reasonable.
9. Promote your colleagues. It's really hard to self-promote in a human way, so let's help each other.
Norton Francis, Senior Research Associate, Urban-Brookings Tax Policy Center
“The District is riding high. Population is booming and the housing market is hot. Income and property tax receipts have been larger than expected, and the District finished 2013 with a $1.75 billion ‘rainy day’ fund. The mayor and council are debating what to do with the extra money, and, as if on cue, the D.C. Tax Revision Commission just released its recommendations ‘to increase fairness, broaden DC’s tax base, promote competitiveness, and encourage business growth.’ The Commission, which heavily relied on experts from the Tax Policy Center, has some good ideas on broadening the tax base in order to lower the corporate tax rate and provide individual tax relief. With a price tag of $74 million, the mayor will have to figure out how it fits in with his other priorities.”
Too little affordable housing
Mary Cunningham, Senior Fellow, Metropolitan Housing and Communities Policy Center
“The city’s prosperity and the rising rents that come with it have put pressure on its poorest families. Family homelessness has spiked over the past few months, leaving the city scrambling to find space in shelters. For some, crowded ‘temporary’ accommodations have become permanent housing; it’s the only space they can afford. We need a robust plan for affordable housing in the District. New-build and preservation should be part of it. But in the meantime, a good first step: put $40 million of the budget surplus into rent subsidies that can help families secure existing housing in the private market.”
Inequality has health consequences
Marla McDaniel, Senior Research Associate, Center on Labor, Human Services and Population
“In DC, asthma is an undeniably discriminating disease. The District is a national leader in the percentage of its children covered by health insurance. But in 2008, asthma prevalence in DC was three times higher among African American youth than among non-Hispanic white youth. And in 2010, the emergency room visit rates for asthma among children in the most disadvantaged zip codes of Southeast were more than 10 times greater than in the more advantaged zip codes of Northwest DC. Within the city, access to primary care varies greatly by location, but wherever children live, asthma is manageable. Our work suggests ways that even some of the most disadvantaged families can get support to treat the disease.”
The study “Making Sense of Childhood Asthma: Lessons for Building a Better System of Care” is forthcoming.
How should we measure school progress?
Austin Nichols, Senior Research Associate, Income and Benefits Policy Center
“Test scores in the District are up, but tracking the percentage of students in a school who score proficient on standardized tests—as is often done—can be misleading. DC is absorbing thousands of new residents per month. As better-resourced, higher-performing students enroll in a school, the sample of students that you’re trying to evaluate can change considerably. Measuring how much students learn over time is very difficult, but fortunately, the Office of the State Superintendent of Education has a measure—the median growth percentile (MGP)—that compares performance of students at similar ability levels across schools to measure learning, or the value added by a school relative to other schools. There are limits to this measure. Because of ups and downs in error-prone tests, very few individual schools can be reliably distinguished from the typical school. But some of the broad trends within MGP rankings are worth investigating. For example, while charter schools tend to rank higher than the typical school, traditional public schools are overrepresented at both the highest and lowest ranks.”
A MetroTrends analysis of DC public school median growth percentile figures is forthcoming.
“The Gray administration, including Police Chief Cathy Lanier, has done an exceptional job reducing crime and violence in the District. The next step is to think about public safety beyond law enforcement. We need to understand how families and at-risk youth touch multiple systems— the courts, child and family services, the schools—and address their multiple needs to put them on a path to a brighter future. Families and children cannot be effectively served unless all their needs—and strengths—are understood. And at the moment, that isn't happening in the District.”
That’s why I’m so pleased that the Obama administration’s upcoming initiative to support young men of color as they surmount these barriers includes mention of the criminal justice system. The announcement also includes two other key points: Data will drive the identification and establishment of best practices, and it will focus on “key moments in the lives of these young men where interventions have been shown to have the greatest impact.”
Some of these key moments occur early in young men’s lives, as they first encounter the criminal justice system in the form of police officers on the street, in their schools, and in their homes.
Roughly 30 percent of incarcerated parents report that their minor children were present at the time of their arrest. Boys who witness arrests that are violent, disrespectful, or involve foul language or physical violence are unlikely to view cops as the good guys. The manner in which police interact with children of the arrested – as well as with the arrested parents themselves – has particularly important implications for future community relationships. If handled inappropriately, the community could begin to view the police as an oppressive force in the neighborhood, undermining law enforcement’s legitimacy.
Yet most law enforcement agencies offer little guidance on an officer’s role in ensuring the safety of a child whose custodial parent has been arrested, and few uniform policies exist to guide law enforcement in attending to the arrestee’s children or determining where these children will be placed.
Negative perceptions of the police are further aggravated in cities that use intensive “stop and frisk” practices in high-crime areas. These tactics disproportionately target people of color, often arresting them for low-level drug possession that would otherwise go unnoticed, and further erode relationships between police officers and the communities they serve. In other words, a widespread crime-fighting tactic is teaching young men of color to distrust the criminal justice system while pulling them disproportionately into it.
This, then, is a key moment of intervention. How could we do better? Evidence points to one of the basic tenets of community policing, which is to enlist the community as equal partners in public safety. Doing so demands interacting with residents respectfully and justifiably. When citizens feel like the police are treating them with respect, they are more likely to judge their treatment as fair, whether they’re arrested or released.
These three ways the criminal justice system can restrain the advancement of young men of color also also offer critical opportunities for tearing down barriers to life success. We already know so much about best practices, and encouraging rigorous evaluation and implementation will help us continue to find new solutions. Doing so can dramatically improve young men’s life chances by reducing the odds of negative encounters with the criminal justice system.
In this Wednesday, June 20, 2012 file photo, Det. Anthony Mannuzza, left, and Police Officer Robert Martin, right, simulate a street stop during a training session at the New York Police Department's training facility in Rodman's Neck, in the Queens borough of New York, as the NYPD was re-training thousands of officers on how to do street stops amid a wave of criticism about the department’s controversial stop, question and frisk policy. In the ongoing federal trial over stop and frisk, lawyers for men who have sued police are seeking to show a disproportionate number of black and Hispanic men are being wrongly stopped in part because officers are under too much pressure to keep enforcement numbers up. (AP Photo/Colleen Long, File)
President Obama plans to announce a new initiative to provide young men of color with “an opportunity to get ahead and reach [their] full potential.” The concept is not totally new. Many programs across the country are already engaged in this work, but a nationally coordinated effort makes it easier to share promising practices, make strategic investments, and emphasize evaluation so we can invest in what works.
While the specifics of the initiative are scheduled to be unveiled at a White House event on February 27th, we already know the effort will feature public-private collaborations and evidence-based projects in areas likely to include education, health, employment, and criminal justice.
All of these are key levers for reducing barriers and opening doors so that these young men can succeed. Some small programs, run by local nonprofits, are already focused on particular leverage points, such as education or employment. Other programs are multi-faceted and serve a large number of boys and young men. A lot of attention is often given to early childhood development because it is widely accepted that early intervention can put children on the path to a bright future. But there are also programs that focus on pre-adolescents, teenagers, young adults, and young fathers.
While there is value in having program diversity in this field, a national initiative can add coordination. Resources are scarce and the problem is large. We maximize our chances of making a significant positive impact on young men’s lives if we test strategies and evaluate their success.
The Urban Institute has completed work on program effectiveness at many of these leverage points and is currently working with several jurisdictions to assess the quantitative and qualitative impact of programs focused on young men and boys of color. One program that we are currently looking at is the CUNY Fatherhood Academy, a project housed at LaGuardia Community College and funded by New York City and the Open Society Foundations. This program is designed to put young fathers on track to a better future by helping them pass the GED, enroll in college, obtain employment, and be a better father to their children. With this two-generation approach, the hope is that the young fathers will not only be able to provide economically for their families, but also to provide the nurturing and support their children need to achieve their own potential.
Because the outcomes we seek are sometimes far in the future, it is critical that we understand the connection between the short-term gains that these programs achieve and the long-term success that is our ultimate objective. This is where a tool like the Social Genome Model can help link programs to long-term outcomes. This is a data-rich model that uses the best research on what determines success in each life stage to figure out how a program that boosts success connects to long-term outcomes. The Urban Institute has been collaborating with the Brookings Institution to refine the model, including adding information that identifies differential impacts by race and gender.
The president’s announcement will be just the beginning of the effort to reduce barriers and provide supports for boys and men of color to achieve their potential. But with the evidence available from research and evaluation, plus ongoing evidence gathering to fine-tune and enhance program initiatives, it will be possible to help individuals get on and stay on the path to success.
Image from APImages.com (AP Photo/Charles Dharapak) of President Obama speaking about fatherhood at a Father's Day event. Similar themes motivate and will in part define Obama's new initiative aimed at helping young men of color overcome barriers to success.
These proposals are well intentioned. They arise out of concern over rising college prices and the struggles students and families face to pay for postsecondary education. Targeting community colleges is appealing because these institutions disproportionately enroll students from low-income backgrounds.
But who will really be helped by free community college tuition?
Most community college students would not be eligible for this assistance because it is restricted to recent high school graduates.
According to government data, in 2011-12, only 38 percent of first-year community college students in the United States were age 20 or younger. The other 62 percent were older and returning to school to gain education and labor market skills. They would not benefit from these new programs.
The lowest-income recent high school graduates will not benefit from the new subsidies because their tuitions are generally covered by federal and state grant aid. Also, this program, unlike other aid programs, does not allow students to use the money for living expenses.
Tuition and fees for full-time students at community colleges nationwide average about $3,330. Oregon charges $4,440; Tennessee’s price is $3,760; and Mississippi’s is just $2,390.
Students who can’t afford to pay any part of their own educational expenses are already eligible for federal Pell Grants of $5,645 per year, and most states provide some funding for low-income students to supplement that federal funding. Some students receive smaller Pell Grants, but the students who are not Pell-eligible would reap the biggest benefit from the free tuition plans.
The dollars will flow to the more affluent students who enroll in community colleges—those for whom the relatively low tuition is generally not a significant barrier.
Could low-income students be hurt by this policy?
Will free tuition induce more students to begin their studies at community colleges instead of at four-year institutions? If the policy increases the enrollment of middle-income students, it could strain community college resources and enrollment capacity, and wind up harming lower-income students.
In addition, evidence suggests that students with similar family background and academic qualifications are more likely to earn a bachelor’s degree if they start at a four-year rather than a two-year college. If a bargain price for community college lures students away from four-year colleges as their starting point, the net result may be fewer bachelor’s degrees among students who have that goal.
Better ways to help low-income students
It’s great that states want to reduce the financial burden of college. The most obvious solution would be to prevent prices from rising so rapidly in the first place. Increasing state appropriations for higher education institutions is the simplest way to do this. But this approach is expensive and not targeted to the students who most need the help.
The proposed incentives in these programs spurring students to keep up their GPAs and enroll in enough classes to graduate in a timely matter are very important. And providing academic and other supports to students—as the Tennessee plan proposes—can make a very big difference. Pushing community college students to apply for the federal grant aid for which they are eligible can also have an impact.
State need-based grant programs are targeted at low-income students. States should provide the funds to the students who are struggling most financially. These are students from low-income families and adults who lack labor market skills.
Funding these efforts would be more constructive than making college tuition-free for those who can already afford it.
Beyond Google’s reach lies a part of the World Wide Web invisible to the casual net searcher: the Deep Web.
The Deep Web is vast, 400 to 550 times larger than the surface web. Most of it is innocuous—the contents of email inboxes, company intranets, and searches on websites like eBay or Amazon that exist online, but cannot be accessed via search engines. However, a subset of the Deep Web consists of sites that are intentionally hidden and may require sophisticated encryption techniques to access. This hidden internet has gained notoriety as a haven for drugs and illegal pornography and a place for contract killers and drug dealers to ply their trade. It has even acquired a name to match its sinister reputation: the Dark Web.
The Dark Web entered the public spotlight with the rise of the website Silk Road. Operating relatively openly on Tor, a Dark Web network, Silk Road was an online black market, known primarily for facilitating drug purchases until its demise in October 2013.
This confusion exists because Dark Web research is inherently challenging. While researchers are beginning to develop more data on prominent sites like Silk Road, the Dark Web is designed to promote anonymity, making it difficult to determine the scope or nature of illegal activities taking place.
While all criminal justice topics have their share of hyperbole and misunderstanding, the fact that there is so little research and so much misinformation on Dark Web crime makes it difficult to identify the actual law enforcement challenges the Dark Web poses. If we are going to address Dark Web crime effectively, the first step must be a dedicated research effort that provides us with answers in three areas:
People: Who’s using the Dark Web? With the Dark Web’s sinister name and reputation, it’s easy to forget that hidden networks can be a vital tool for political dissidents in repressive countries. Tor even receives significant US Department of Defense support. Understanding the user base before launching aggressive enforcement efforts will be important if US foreign and domestic agencies don’t want to become a circular firing line, with one agency disassembling the Dark Web as fast as another supports it. Alternatively, Dark Web enforcement may become more attractive if it leads to the targeting of more sophisticated criminals than could be captured through conventional law enforcement operations.
Developing policy without answering these questions risks letting overreaction and misinformation squander scarce law enforcement resources on a topic that may generate more hysteria than crime.
Illustrations by Daniel Wolfe of the Urban Institute.