Rewards in the Rubble

The implosion of the housing bubble continues to leave communities with unprecedented numbers of foreclosed homes. The question of what to do with them is sparking a range of ideas and proposals for reclaiming these homes as affordable housing. That project could also serve environmental goals and create good jobs. Together, these ideas could help pull the economy out of its mortgage-induced recession by promoting economic opportunity and equality as well as environmental sustainability. But what are we willing to pay for?

What will it cost to reclaim foreclosed properties as low-income rental housing? To energy-retrofit the housing? And to make sure that the workers doing the rehabilitation and retrofit are well paid? In a word: subsidy. Without it, new ideas hit the wall of real dollar limits. But clearly, the need for all three goals is evident.


Affordable Housing. According to Sheila Crowley, president of the National Low Income Housing Coalition (NLIHC), the policy attention being paid to foreclosures is upstaging the "structural deficit" of rental housing, particularly for lower -- income families. The coalition's research has found that nationwide there are only 63 low-rent homes available for every 100 extremely low-income families (those earning less than 30 percent of their area's median income, generally between $16,000 and $25,000 per year). The number of people who guard office buildings, serve food, work as nurse-aides, pick up trash, and perform other poorly paid work far outstrips the number of apartments with affordable rents.

The foreclosure crisis is worsening the rental-housing crunch. During the run-up to the crash, easy loans and unscrupulous lending practices increased our national homeownership rate to almost 69 percent. Real-estate experts project that this rate will drift back down to between 60 percent and 62 percent. The cascading foreclosures are turning owners back into renters. And tenants whose landlords have defaulted are being evicted. These new renters are competing for existing rental stock, further crowding local markets, pushing out even lower-income people. A plan to transform some of our foreclosed homes into rentals would benefit hundreds of thousands of low-income families.

Good Jobs. In principle, reclaiming foreclosed housing stock could provide good jobs. But advocates face the reality of a bifurcated construction industry where the well-paying union jobs are predominantly in commercial construction while low-wage, off-the-books jobs are more the norm in residential building and rehab work, especially of single-family homes.

These wage tiers mirror the huge demographic changes seen in the construction industry over the past 30 years, including the use of immigrants -- often undocumented. Five years ago, the Pew Hispanic Center reported that half of all undocumented Hispanic male workers were employed in construction. Peter Phillips, an economist at the University of Utah, found that real (inflation adjusted) wages in nonunion residential construction were the same in 2006 as they were in 1976.

These low wages are so pervasive that even single-family rehab or weatherization programs funded with federal grants pay very little, despite the federal Davis-Bacon Act and similar local prevailing wage laws that require good wages on government-funded projects. Single-family rehab usually gets waivers from wage regulations, which require minimum numbers of "units" before they kick in.

According to Mark Erlich of the New England Regional Council of Carpenters, only a company with overhead and a stable workforce can invest in the skill-building necessary to make rehab or weatherization a "good job." Pooling large numbers of houses together might make a high-wage/high-skill strategy attractive for contractors, but this involves incurring partly fixed costs while homes are foreclosed on a rolling basis. The Center for American Progress is exploring a proposal that would pool large numbers of foreclosed homes to be energy-retrofitted and sold to investors as rental housing. How present wage regulations would be applied remains a challenge.

Energy Efficiency. Walker Wells, director of the Green Urbanism initiative at Global Green, a leading advocacy group and green-development partner, points out that energy -- retrofitting costs for homes ultimately "come out to zero," because the money saved eventually surpasses the initial price. But the actual costs and benefits vary widely. The meaning of retrofit varies by house and geography. Does it include weatherization, sealing and insulation? Or all new appliances, toilets, faucets, electric water heaters, and -- where feasible based on climate -- complete solar-energy systems?

Wells has found that the average cost of basic retrofitting is between $5,000 and $7,000 per property for single-family homes. Expanding into more serious climate-change mitigation features can expand the price up to $20,000, $30,000, or more. This is in addition to whatever is required to make the home habitable again. The total outlay may be recoverable from future energy-cost savings, and it certainly helps with climate change, but the challenge is in finding the up-front financing so that the out-of-pocket costs don't deter broad participation by homeowners. And requiring that the jobs pay decently increases the cost.

The quintessential American single-family detached home is no small contributor to greenhouse gases; approximately 20 percent of all such gases in the U.S. come from residential housing. Retrofitting as many foreclosed homes as possible as part of a housing reclamation strategy could take us partway down the ecological road we need to follow, as well as provide good jobs.

Even tearing down some homes can be constructive, where population is declining or where the housing itself was overbuilt in an affront to ecological sustainability. This crisis is an opportunity for a different form of planning.


Meeting any of these goals -- much less all of them -- may be presently in the realm of the utopian. That does not mean they shouldn't be explored; the debate alone may open new ways of thinking.

Unhitching our housing agenda from its historic entrenched single-family form can free us to embrace new architectural models and city formations. Good wages must underpin any society that claims economic justice. Further, when we pass over any opportunity to mitigate climate change, we do so only at our children's future peril. Each of these arenas requires that we rethink our relationship to where we live, how we live, and what it costs to live -- and they all require public subsidy to counterbalance a private market that is not delivering the goods.

Rental-housing subsidy comes in a number of forms. It can be equity put into the building itself or direct rental assistance to the tenant, the government program known colloquially as Section 8 or Housing Choice Vouchers. Increasing voucher allocations to local governments could subsidize rents in rehabbed foreclosed housing and stabilize families and neighborhoods.

If the market doesn't pay decent wages, then we need better regulations and subsidies. As noted, Davis-Bacon and prevailing wage laws exclude most single-family rehab. Many cities have "living wage" requirements for all their contractors; these wages are vast improvements over minimum-wage laws but are still too low.

In the case of programs to rehab foreclosed housing, why not require the "housing wage"? That wage is the hourly rate necessary to afford the rent for an average local apartment. (According to federal standards, housing is "affordable" if it costs no more than 30 percent of household income.) The National Low-Income Housing Coalition annually calculates, for every metropolitan area in the nation, the hourly pay rate necessary to make the average rent in that area affordable. This year, the national housing wage for a two-bedroom apartment is $18.44 an hour or more than $38,000 per year. In some of the states hardest-hit by foreclosures, the hourly wage ranges from $14.34 (Michigan) to $25.52 (California). Florida's $20.29 housing wage and Nevada's $19.32 fall in between.

At present, the primary foreclosure-disposition program is the Neighborhood Stabilization Program. Originally proposed and funded in the July 2008 Housing and Economic Recovery Act, the NSP received $4 billion allocated by formula to all states and selected local governments. An additional $2 billion was authorized by the American Recovery and Reinvestment Act in 2009. Depending on their markets, municipalities can purchase, rehab, and resell foreclosed properties; in certain situations they can demolish them. They can, if they have the strategic ability and foresight, purchase properties and "land bank" them for future use -- or they can try to reclaim some as affordable, energy-retrofitted housing, creating good jobs to make it happen. Expanding NSP with more subsidies specifically conditioned on good wages, adding subsidies that facilitate the restoration of much of this housing as affordable rental homes, and requiring energy retrofits would go a long way to creatively responding to the crisis.


Since our nation's founding, we have preferred and privileged privately owned housing. Our vision of "home" since the 1950s enshrines a single-family, detached house with a 30-year mortgage, even as this model has also contributed to individual isolation and environmental degradation -- and more recently to a financial catastrophe.

How we ultimately dispose of these single-family homes will determine whether this crisis has any silver lining. We may lose some of this housing permanently, some of it may return as ownership housing, and some may find its way to redressing the structural deficit of rental units. Repairing and reclaiming it may contribute to our pervasive income gap -- or offer innovative ways of rebuilding wages in the construction industry. The stock itself may contribute to our ecological crisis or become a mitigation model. If any of the more positive of these results ensues, it will be because we have used this crisis as an opportunity to rethink what goes into a place called home.