Last year, we shared Richmond, California’s innovative approach to quelling its foreclosure crisis: using eminent domain to protect homeowners from banks. The concept has since been backed by UC Berkeley’s Haas Institute for a Fair and Inclusive Society and attracted the interest of other cities.
New York City is the latest municipality to explore eminent domain as a way to ease the suffering of homeowners with underwater mortgages. When eminent domain is in the news, it’s usually when the government takes private property and uses it for public purposes. In this case, however, cities are considering protecting homeowners from predatory banking practices.
Four city council members (working with New York Communities for Change and the Mutual Housing Association of New York) released a study that delves into the mortgage crisis in New York City. Unsurprisingly, the study reveals that African American and Latino households are disproportionately burdened by underwater mortgages– meaning that they owe more than their homes are worth.
Key findings include:
- 60,000+ New York City homeowners have underwater mortgages
- That’s almost 12% of all mortgages in the city
- 24,000+ of underwater mortgages are private-label securitized mortgages– the majority are high-interest, subprime mortgages
“As the City Council and de Blasio administration begin to combat the affordable housing crisis throughout the five boroughs, one thing is certain: we must act to end the foreclosure crisis, and the use of eminent domain should be explored as a tool to do that, before we run the risk of casting the neediest of New Yorkers into an uncertain future,” said Council Member Jumaane Williams.
Utilizing eminent domain will not only bring relief to homeowners, but also to entire communities. When homeowners struggle with foreclosure, it drags down the value of neighboring properties. This degrades the tax base and affects the quality of services available to all.
If New York City pursues eminent domain, it would be the largest municipality to do so.