By Laura Christensen-Garcia| Manager of Service Delivery | The Financial Clinic
Across the United States, low-income residents are being pushed out of affordable communities by an influx of higher-earning newcomers who are drawn by the business opportunities and are able to pay higher rents. The housing crisis is often talked about as something that started in 2008 when the mortgage bubble burst and ended a few years later as the housing market stabilized. On the contrary, the housing crisis today is pervasive and profound. What started as an owner’s crisis has shifted to a tenant’s crisis. As houses were foreclosed upon and millions of families lost their homes, the rental market suddenly became saturated with an influx of renters competing for an incredibly limited supply of housing.
Today’s housing crisis is primarily two-fold, based on affordability and availability. A recent report by The Eviction Lab showed that one in four working-class families spend over 70 percent of their income on rent and utilities alone. As housing costs continue to rise, wages stay flat. Despite an improving economy, workers simply are not seeing more money in their pockets. The Federal Reserve highlighted this in a report released this July. The report explained that “despite the broad-based strength in measures of employment, wage growth has been only modest, possibly held down by the weak pace of productivity growth in recent years.” This means that many individuals and families are just one misstep, one late rent payment, away from being evicted and left on the street.
The affordability and availability of housing in American cities not only make it difficult for individuals and families to find housing, but to keep housing. Developers buy housing stock in low-income neighborhoods with the intention to remodel and rent at an increased rent (sometimes more than 300% the original rent). Not only are rents increased, but many 2-3 bedroom units are broken up into studios and 1-bedrooms, decreasing the availability of family housing options.
A prime example of this is happening in Albany Park, Chicago. Albany Park is a working class, primarily Latino neighborhood on the Northwest side of Chicago. Stark Holdings LLC recently bought a 52-unit building on North Kimball and served a majority of the tenants with eviction notices. The tenants in the building organized alongside the Autonomous Tenants Union and formed the Kimball Tenants Union to organize as a community and to fight the eviction process in court (Block Club). As the fight continues, the tenants face a mountain of issues in their search for affordable housing in the area. Many tenants who have lived in the building for over a decade were understandably unprepared for the exorbitant fees to move into a new apartment and were unaware of the effect that their credit score has on their ability to secure housing. As they work to build their financial profile for a possible move, they continue the fight to stay in their homes and to protect their neighbors from displacement.
How can you be ready in the event of an eviction or unplanned move?
Increase your credit score:
Landlords and rental agencies typically look for a FICO score that is at or above 680. Use credit building tools, like secured cards, personal loans, lending circles (tandas/susus), and try to maintain a credit utilization rate below 30% to keep your score in check. In addition to the offensive tactics listed above, the financial system requires that consumers be constantly on the defensive. This means that you should stay on top of your score by pulling your report for free (check out this great blog post by Amy Cao for more information on credit report access). It’s important to check your report for any inaccurate/outdated personal information and negative accounts that may affect your score. If you find any unrecognizable debts or debts that are past the statute of limitations, or if you fear that you may be a victim of identity theft, send a dispute letter to the credit agency and the owner of the debt (i.e. collection agency).
If you do not have a Social Security Number, obtain an Individual Taxpayer Identification Number (ITIN) by filling out Form W-7 when you file your taxes. An ITIN allows you to build credit by obtaining credit cards and personal loans and join lending circles (see Mission Asset Fund). If you aren’t able to obtain an ITIN, consider building an alternative credit file. This file can contain receipts for on-time payments like utility bills and check/money order receipts for rent payments. There are also online services like RentTrack that report your on-time rent payments to credit agencies.
Make saving a habit:
The cost of moving to a new apartment can be outrageous. Many landlords require tenants to pay a security deposit, as well as first and last month’s rent upon moving in. For some tenants, this can be upwards of $3,000. Moreover, real estate brokers in some cities (incredibly prevalent in NYC) often charge broker’s fees which average at 15% of the annual rent. For someone who lives in a studio apartment at $1,900/month, this can mean a move-in fee of $8,120 (first and last month’s rent + security deposit + broker’s fee). On top of this, renters often have to pay to hire movers or rent a moving truck.
Come up with a personal savings plan that works for you. Saving for a crisis can be hard to commit to when you’re in a state of relative stability or if you deal with income volatility. If you make saving a habit and put a little aside each week or month, you’ll be more prepared to fight an eviction or pay for the move to a new apartment. Consider setting up an automatic transfer to a separate savings account that you don’t have easy access to with your debit card.
Organize in your community:
Pushing against the rising tide of rent increases and displacement can feel like an impossible and daunting task, especially when you yourself are in the midst of a housing crisis. You can take small steps within your community to help keep the housing stock in your area affordable and to prevent the displacement of your neighbors.
Have you lived in your building for years but never once met your neighbors? Take advantage of your building’s underused courtyard and organize a summer BBQ. In addition to having a friendly face next door to borrow a cup of sugar from, you might find an ally in a fight to repair the leaky roof or fix the lights in your stairway.
Learn about your building’s owner and their intentions for the building. You can look up records relating to your property and your landlord on your county’s recorder of deeds website, circuit court website, and assessor’s office. If you notice that your building was recently purchased with an incredibly expensive mortgage, this may signal that the owner plans to remodel the property and flip it for a profit. Take the Kimball Tenants Union case referenced earlier–Stark Holdings LLC purchased 4841 North Kimball for $4.65 million with a mortgage of nearly twice the buying price at $9million–this may signal that they expect to make a profit that will exceed the nearly $5million deficit.
Connect with local organizations that support tenants and stay abreast of ballot initiatives in your area that might affect your housing situation. One way to stay informed is to attend your local community board or zoning meetings.
Most importantly, know your rights as a tenant. Tenant protection laws vary by state and city. In Chicago, for example, renters have very few rights. What rights they do have are protected by the Residential Landlord and Tenant Ordinance. One example of a right articulated in the RLTO is that tenants may reduce their rent to make necessary repairs to their unit if their landlord has not responded to their request for repairs within 14 days. Take time to learn about the rights that you have as a tenant in your city–it could be the difference between whether or not you lose your home.
You can also use the following Change Machine tools to help you brainstorm and create your own plan:
- 5 Easy Ways to Keep Utilization Under 30 percent
- Address Judgements On Your Credit Report
- Building Credit Without a SSN
- Rules for the Road- Building an Alternative Credit File
- Master the Rental Report
- Jumpstart Your Savings
Did you know?
- “There are 900,000 evictions every year which equates to about 2.3 million people evicted, many of them families with children. That’s about 6,300 people a day that are evicted. That’s twice the number of people who die in car accidents every day in America.”
- Evictions take place in civil court where tenants do not have the right to an attorney.
- Many recipients of housing vouchers like Section 8 are unable to find landlords that are willing to accept the voucher. In Dallas, about 60 percent of people who get vouchers are unable to use them, according to MaryAnn Russ, the former CEO of the Dallas Housing Authority.
- “The U.S. has a shortage of 7.2 million rental homes affordable and available to extremely low-income renters, whose income is at or below the poverty guideline or 30% of their area median income. Only 35 affordable and available rental homes exist for every 100 extremely low-income renter households (NLHC).”
Find resources in your community at https://justshelter.org/community-resources/.