Tag Archives: housing

And Then There’s Indiana’s Housing Crisis…

Our Indiana’s legislative overlords concentration on bullying trans kids and impoverishing public education evidently leaves them little time or interest in solving the state’s real problems, like the lack of affordable housing and/or the plight of low-income renters.

As I’ve indicated before, tenants in Indiana have almost no rights and no recourse against bad actor landlords. Indiana law–or really, the lack thereof– is an open invitation to out-of-state buyers of real property, with the result that Indianapolis is now first in the nation for out-of-state ownership of rental property. (In most cities, around 3% of rental properties are owned by out-of-state investors. In Indianapolis, the percentage is 15% and climbing.)

We have an eviction crisis, made more severe by Indiana’s lack of affordable housing. The Greater Indianapolis Multi-Faith Alliance (GIMA) reports that Indiana has a gap of 135,033 rental units affordable for Hoosiers in the bottom 30% of the income distribution. Indiana has the single highest housing cost burden among all Midwest states for those residents.

As a result,many Hoosiers are spending 50-80% of their incomes on rent. One minor emergency – an issue with a car, an emergency room visit, a layoff– can cause a spiral into evictions.

Indianapolis ranks #2 in the country for evictions. Only New York is higher, and costs are a huge factor; Marion County rents have increased an average of 20% since 2020, while wages have only increased by 4%.

As GIMA has reported,  out-of-state institutional investors are drawn to Indiana for its landlord-friendly laws, a situation that doesn’t just hurt renters, but drives up costs for would-be homebuyers as well.

Some other statistics: Sixty percent of rental property owners in Indiana live in Illinois, California, Georgia, Texas, and Florida. Indiana is on track for more than 30% of all residential property purchases to be by investors.  Indianapolis is #1 among U.S. cities for out-of-state corporate investment in real estate. 

GIMA is trying to get legislators’ attention.

It is supporting HB 1005, Rep. Doug Miller’s bill to establish a residential housing infrastructure assistance program and revolving fund. 

Rep. Miller’s bill will be particularly beneficial in rural Indiana, which highlights that this is not an urban, city-focused issue. It affects all of Indiana. Providing state-supported programs to build more housing is critical to stopping the evictions crisis. We would encourage our legislators to take this first, modest step to show the people of Indiana that they come first, that human dignity is a Hoosier value, and that housing is critical to human well-being.

The organization is also supporting SB114., a bipartisan measure sponsored by  Sen. Eric Koch, Sen. Shelli Yoder and Sen. Stacey Donato. That bill was prompted by an incident that received widespread publicity: in February of last year, Citizens Energy shut off the water supply for 868 tenants of Capital Place and Berkley Commons apartments for 21 hours, because the landlord, JPC Charities, owed $1.3m in missed utility payments.

Citizens Energy Group certainly deserves to be paid for its services, but tenants should be able to apply pressure by paying their rents into escrow accounts until the landlord remedies its misbehavior.

As GIMA’s policy paper put it,

This incident highlights the reality that tenants in Indiana have almost no rights, no power, and no recourse from bad actor landlords. It also highlights the impact that out-of-state investment in rental properties is having in our state… This small step will help send a message that Indiana is no longer ripe for “do-what-you want” property owners.

GIMA’s concerns about Hoosier tenants’ lack of legal recourse is shared by State Senator Fady Qaddoura. Last session, Qaddoura introduced legislation allowing renters to put their rent in escrow if a landlord did not make timely repairs to serious problems. He noted at the time that Indiana is one of just a handful of states without some mechanism allowing tenants to withhold payment of rent until repairs are completed.

Qaddoura has reintroduced that measure, together with some additions that would require out-of-state landlords to contract with real estate property managers inside Indiana.

“The philosophy here is that if you live and operate in Indiana, you’re not going to risk the reputation of your business to engage in deceptive practices on behalf of an out-of-state, negligent, corporate landlord,” he said.

Qaddoura also wants to increase state income tax deductions for tenants – currently set at $3,000. 

You would think these bills would pass easily– they simply reflect a fairer balance between landlords and tenants–but this is Indiana, so of course, you’d be wrong. As a friend who knows her way around the Statehouse tells me, the Indiana Apartment Association has ruled with impunity in the General Assembly for decades, and continues to do so. 

The IAA represents landlords–homegrown or not–and couldn’t care less about tenants. Particularly low-income Hoosiers who struggle to pay those escalating rents.

Speaking Of Structural Racism…

Discussions of Critical Race Theory are worse than useless, since most of the people arguing about CRT have absolutely no idea what it is. It has simply become the most recent wedge issue employed by the portion of America’s population intent upon protecting White privilege.

In other words, a distraction.

Why–you might well ask–do these angry people need a distraction? Since I’m not a psychiatrist (nor do I play one on TV), I can’t provide a truly satisfactory answer to that question. But as Americans continue to confront–or refuse to recognize– elements of our social landscape that document how inequitable that landscape truly is, a recent paper issued by The Brookings Institution may prove instructive.

It’s one thing to talk– as we academic types tend to do–about abstractions like “systemic racism.” Those abstractions are frequently dismissed by the people who become defensive in any discussion of unfairness based upon race. The Brookings study is more concrete; rather than talking in abstract terms, it paints a picture of what systemic racism is and does.

In September, Freddie Mac released a groundbreaking analysis of the U.S. home appraisal industry. Consistent with concerns raised by critics, they found that homes in Black and Latino or Hispanic neighborhoods are much more likely than homes in white neighborhoods to be valued below what a buyer has offered to pay.

A homeowner here in Indianapolis recently documented that appraisal bias.

The Brookings researchers found that Black neighborhoods were associated with much lower property values, and that only a relatively small portion of that effect could be explained by physical characteristics and neighborhood amenities.

Median home values in majority Black census tracts are 55% lower than median home values in non-Latino or Hispanic white census tracts. Part of this difference is attributable to quality differences between the housing stock. Lower wealth in Black communities means that homes in majority Black neighborhoods tend to be older, smaller, and more likely to be attached than homes in neighborhoods with few or no Black people. Lower wealth and lower home values further hinder the ability of Black homeowners to pay for structural improvements to the home and access mortgage refinancing to pay for renovations.

There are also differences in neighborhood quality that show up in housing price differences. Local schools are often less desirable—at least as measured by publicly available test scores accessible to home buyers—in majority Black neighborhoods than in non-Black neighborhoods. Some other characteristics of Black neighborhoods are more desirable, such as access to public transportation and proximity to local stores, but on average, they do not make up for the less desirable features. These structural and neighborhood characteristics explain some of the value penalty to housing in Black neighborhoods, which shrinks to 23% from 55% after adjusting for these factors.

That still leaves a lot of lost value. We estimate that losses amount to $48,000 per home and $156 billion cumulatively in majority Black neighborhoods.

The question is: What explains this?

In the linked paper, the scholars consider–and carefully rebut–criticisms of their research methodology. Interestingly, they also show that White-only neighborhoods are over-valued relative to Black neighborhoods.

Later in the paper, they return to that Freddie Mac study.

A team of economists and data scientists at Freddie Mac analyzed more than 12 million appraisals for purchase transactions submitted to Freddie Mac from January 1, 2015, to December 31, 2020 through the Uniform Collateral Data Portal (UCDP). Freddie Mac is a government-sponsored enterprise chartered to buy mortgages from banks in order to lower the cost and increase the supply of residential loans. In practice, their strict standards set the industry norm for what qualifies as an acceptable loan, and they have access to uniquely detailed data on mortgages submitted by banks.

The research team’s main finding is that homes located in majority Black neighborhoods and majority Latino or Hispanic neighborhoods are significantly more likely to have appraisals submitted to Freddie Mac that are below the contract price when compared to homes in majority white (not Latino or Hispanic) neighborhoods.

The research finds “strong evidence that appraisers discriminate against majority Black and majority Latino or Hispanic neighborhoods. They note in passing that their conclusions track with other other studies, including those showing that Black people are around 36% less likely to be called back for a job than white people with identical resumes.

This is what we mean when we talk about “systemic” racism.

No one is burning a cross on a Black person’s lawn, but the effects are–if anything–more detrimental.

Systemic Racism

I have been very critical of the Indianapolis Star since its acquisition by Gannett. (In all fairness, it wasn’t a particularly distinguished publication before that.) And while I remain unimpressed overall–and positively livid over its neglect of adequate reporting on state and local government– I must compliment the paper on recent reporting that not only highlights an unfair situation, but provides readers with an excellent illustration of what is meant by systemic racism.

Much of the pushback that accompanies accusations of systemic racism can be attributed to a widespread misunderstanding of what the term means. It doesn’t imply intentional animus–instead, it refers to widespread systems that may well have been intentional at one time, but have since simply been accepted as “the way things are.” (Redlining, for example, was long justified as simply a reflection of the differences between “good’ and “bad” neighborhoods, despite the fact that those designations often simply reflected the racial makeup of the inhabitants of those neighborhoods.)

The lede to the Star report tells the story:

Carlette Duffy felt both vindicated and excited. Both relieved and angry. For months, she suspected she had been low-balled on two home appraisals because she’s Black. She decided to put that suspicion to the test and asked a white family friend to stand in for her during an appraisal. h Her home’s value suddenly shot up. A lot. h During the early months of the coronavirus pandemic last year, the first two appraisers who visited her home in the historic Flanner House Homes neighborhood, just west of downtown, valued it at $125,000 and $110,000, respectively.

 But that third appraisal went differently.

To get that one, Duffy, who is African American, communicated with the appraiser strictly via email, stripped her home of all signs of her racial and cultural identity and had the white husband of a friend stand in for her during the appraiser’s visit.

The home’s new value: $259,000.

This particular situation isn’t a one-off, and it isn’t unique to Indiana. Media outlets have reported several similar situations around the country. As one expert noted, it is almost reflexive–what we might call “implicit bias.”  When appraisers see Black neighborhoods, they make unwarranted assumptions about the prevalence of crime and the quality of the schools, and devalue the property accordingly.

It isn’t just the appraisal process. Duffy qualified for a lower interest rate when her application omitted any indication of her race, even though her credit report didn’t change.

Toward the end of the article, there was a good explanation of the difference between systemic and individual racism.

Andre Perry, of Brookings, has conducted research on how racial bias distorts the housing market. He compared home prices in neighborhoods where the share of the Black population is greater than 50% to homes in areas where the share of the Black population is less than 50%.

They controlled for crime, walkability and other factors that could effect home prices. After those factors were controlled for, homes in Black neighborhoods were underpriced by 23% or about $48,000 per home. Cumulatively, there was a loss of $160 billion in lost equity.

Perry’s research preceded the crafting of the Real Estate Valuation Fairness and Improvement Act of 2021, which was introduced in the U.S. House of Representatives in April. The bill addresses racial disparities in residential and commercial real estate appraisals.

Discrimination in appraisals can be both systemic and individualistic.

“Systemic is the price comparison model,” he said. “When you only compare homes to like peers in neighborhoods that have been discriminated against, you essentially just recycled discrimination over and over again … You have individual acts of racism and you have more systemic reasons why. Both are robbing people of individual and community wealth.”

When individual bigotry raises its ugly head, most other people can see it for what it is. Systems that incorporate assumptions that were originally bigoted, however, are much harder to see and to root out.

That said, it’s a task we need to attend to.