Michael Nigro/Sipa USA/AP Images
Bernie Sanders speaks at the Poor People's Campaign Moral Action Congress, June 17, 2019.
Yesterday, the Bernie Sanders campaign rolled out its latest major policy prescription, known as “Housing for All.” In it, he enumerates a list of sweeping reforms to the housing sector: massive reinvestment in extant public housing, construction of new and affordable housing on the order of 10 million units, and a nationwide rent control program. “Housing for All” also promises to root out the forces of financialization within the housing market, establishing a hefty, 25 percent house flipping tax. It includes a vacancy tax of 2 percent for empty units being used as investment vehicles, an idea that’s been considered in cities rankled by high homelessness and high vacancy rates like San Francisco.
The plan builds off of his 2016 housing proposal, which had three fundamental tenets that largely remain in this newest iteration: building more affordable housing, expanding Section 8 rental subsidies, and nationwide rent control. The third prong has been beefed up in this current version, with a three percent cap on annual rent increases.
As Sanders pointed out during a recent tour of Los Angeles’s Skid Row, the housing crisis in America calls for sweeping action of comparable scale. In addition to the half-million homeless in America, 18 million Americans spend 50 percent or more of their earnings on housing, according to Harvard University’s Joint Center for Housing Studies. Meanwhile, financialization has permeated the housing market, with Wall Street firms now operating as some of the country’s largest landlords.
Perhaps the most interesting and novel proposal in the Sanders housing platform comes in its final bullet point. There, Sanders proposes to create “a commission to establish a financial relief program to the victims of predatory lending, mortgage fraud, redlining and those who are still underwater on their mortgages as a result of the 2008 Wall Street crash. This program shall include down payment assistance, mortgage relief, or rental assistance.” That relief, Sanders insists, must go to homeowners, not the Wall Street firms that put them in this position.
While many of Sanders proposals are forward looking, that commission purports to be a functional do-over of the inadequate bailout efforts in the wake of the 2008 housing crisis.
Such a notion is a strong rebuke of the Obama-era policies on a number of fronts. Obama preferred to “look forward, not backward” on Bush-era uses of torture and black site programs, preferring to bury the past rather than resurrect it and make amends. Sanders sharply breaks with that inclination here.
With that framework in mind, Obama executed the bailout programs passed under the Bush administration, which bailed out the banks to the tune of $29 trillion while many homeowners and mortgage holders were left holding the bag. No major bank executive was held accountable for the egregious behavior that led to the financial crisis or for the illegal foreclosure practices implemented in its aftermath. Obama’s Justice Department led the pursuit of a weak settlement that gave homeowners kicked out of their properties based on false evidence a measly $1,500 in “sorry you lost your home” consolation cash. For the remaining few still hanging onto their mortgages, only paltry relief was conveyed. After promising that 1 million borrowers would benefit from principal reductions in the foreclosure fraud settlement, just 83,000 received them, a reduction of over 90 percent.
The Home Affordable Mortgage Program (HAMP), an Obama Treasury Department fund allocated to relieve homeowners facing foreclosure, was one of the bailout’s most acute and egregious failures. As part of HAMP, the government paid mortgage servicers to modify mortgages for struggling borrowers. But an insidious mix of perverse incentives from those servicers, who made more money by keeping principal high and could even benefit financially from foreclosures, combined with nearly nonexistent oversight from Treasury and the Department of Justice, led to freewheeling fraud and corruption.
Some homeowners were wrongfully tricked into foreclosures, explained away by “lost paperwork.” Servicers deliberately pushed people into foreclosure to collect fees (Bank of America gave away Target gift cards to employees that generated the most foreclosures) and trapped other borrowers, squeezing out a few extra payments from them and foreclosing anyway. So HAMP, initially considered to be the great bulwark against foreclosure, ended up abetting it. In the end, after an initial promise of up to $100 billion in funding, HAMP barely spent $21 billion. The re-default rate of recipients of HAMP funding was over 40 percent as of 2016, Ultimately, HAMP’s failure wasn’t a glitch. The Obama administration’s aim was to “foam the runway” for the banks, as Timothy Geithner later admitted to former bailout inspector general Neil Barofsky and Elizabeth Warren.
The impact of Team Obama’s response to the housing crisis has reverberated throughout the economy, even a decade on. Homeowners continue to contend with the conditions brought on by those policy decisions, owing more on their houses or barely making payments. Others lost their homes long ago and were left with next to nothing. The commission proposed by Sanders would provide financial relief to those still dealing with the impact of mortgage fraud and its aftermath, including those who may have been driven into predatory lending arrangements in the crash’s wake.
The commission, too, would pay out, in the form of rental or down payment assistance, and funds to those who saw their houses foreclosed on illegitimately or were otherwise victimized by the crash. The inclusion of that demographic is important, because of its inordinate impact of communities of color, who were hit hardest by the foreclosure crisis.
There were particularly flagrant examples of this. Former Wells Fargo employees at one point testified that they’d deliberately tricked middle-class black families (who they called “mud people”) into subprime “ghetto loans,” a cruel twist on the redlining policies that banks have long been used to exclude racial minorities from access to home loans. Because home ownership makes up a much larger percentage of black and Latino wealth than it does white wealth, that foreclosure wave vaporized wealth from people of color in a way that never recovered. As Matt Breunig and Ryan Cooper noted in Jacobin, it took until 2016 for black wealth to return to 2007 levels, but the average black home equity has remained over $16,000 lower. An ACLU report stated that by 2031, for black households, wealth will be 40 percent lower than if the recession hadn’t taken place, leaving black families about $98,000 poorer.
Sanders’s commission to pay out reparations for the victims of the 2008 housing crisis presents an interesting vision. He has been involved in congressional bills to study reparations (HR 40, for example). But a restorative justice proposal to redress the profound bungling by the Obama administration provides a unique gloss on the reparations conversation. And while the discourse on reparations throughout the presidential primaries has focused on the enduring impacts of slavery, the Sanders proposal, in conjunction with ending redlining, rooting out discrimination, and aggressively ramping up enforcement against bad actors, takes on the most recent and enduring instance of widespread destruction of black wealth.
Homeownership is one of the major engines of wealth generation in the United States, so undoing the effects of HAMP, or redoing it with a more just vision in mind, would represent a major step forward toward economic justice. Of course, the commission would be unlikely to be as well funded as the multi-trillion bank bailout (it seems that Sanders’s entire housing policy will be broadly underwritten by a one percent wealth tax, a more modest version of Elizabeth Warren’s signature proposal). But even a lesser-funded program could make a major impact in chipping away at the impunity of the financial sector in the post-crash era, reversing the most acute elements of America’s housing crisis.
