The financial crisis of 2007-2008 spawned in many of us a righteous outrage that took aim at a worldwide financial establishment that in the eyes of many had completely run amok. At the time, a number of experts cited new and expanded banking practices, many related to the home mortgage industry, that had a decidedly detrimental effect on both the American and larger global economies.
Since 2007, for example, Americans have become more familiar with terms such as deregulation, subprime and adjustable rate loans, credit default swaps, the housing bubble, collateralized debt obligations, mortgage-backed securities, hedge funds, predatory lending, over-leveraging, and the shadow banking system. As a result of such banking practices, the Twin Cities, along with many other urban centers, experienced an unprecedented number of home foreclosures.
In Hennepin and Ramsey Counties alone, there was a nearly 400 percent increase in the number of foreclosures during a six-year period where tens of thousands of homes were auctioned off by the respective sheriff’s departments. Most affected by this epidemic were the neighborhoods of North Minneapolis and the East Side of St. Paul.
While predatory lending practices and adjustable rate mortgages targeting working-class communities were at the root of many foreclosures, the generally wretched state of the economy stretched into the middle class and produced what some financial experts termed “the newly poor.”
However, as the foreclosure epidemic has waned in the Twin Cities, there remains a persistent and pernicious housing crisis that plagues the overwhelming majority of rental households in the cities of Minneapolis and St. Paul. Research shows that approximately three-fourths of all rental households in Minneapolis and St. Paul are defined as low-income, a majority of which qualify as very-low-income.
Wilder Research’s Minnesota Compass Project further illustrates that an alarming number of low-income renters are also classified as “cost-burdened.” This means that they spend more than 30 percent of their household income on housing.
According to Wilder Research, 40.7 percent of St. Paul households and 41.3 percent of Minneapolis households are cost-burdened, which respectively ranks the two cities 50th and 51st out of Minnesota’s 52 largest cities. On a larger scale, more than 36 percent of all households in Hennepin and Ramsey Counties are cost-burdened, ranking them 82nd and 83rd among Minnesota’s 87 counties.
A pair of recent reports shed further light on the disastrous trend that relentlessly assaults low-income households in Minnesota. Released in December 2013, “Out in the Cold” was a collaboration between the Minnesota Housing Project and the National Association of Housing and Redevelopment Officials.
This report demonstrates that sequestration and other cuts in federal funding have significantly limited safe and affordable housing options for low-income Minnesotans. Those particularly vulnerable to these cuts are children, the elderly and the disabled. The report also notes that the affordable housing crisis in Minnesota has resulted in a 33 percent increase in homelessness over the last seven years.
Equally disturbing is the “Minnesota Out of Reach 2014” report, which was jointly published in March by the Minnesota Housing Project and the National Low-Income Housing Coalition. This report states that “In order to afford the rent and utilities for a safe, modest 2-bedroom apartment in the private housing market, a Minnesota worker must earn $16.46 per hour, 40 hours a week, all year long.”
This means that a Minnesota worker earning minimum wage would have to work more than 90 hours per week to afford relatively minimal accommodations. The report added that for the fourth straight year, Minnesota ranked last in affordable housing in the 12-state Midwest region.
Again, for a place that is frequently championed as one of the best states in America to live, Minnesota performs woefully in a number of social and economic categories, especially in relationship to its working-class communities. After 33 years as a nonprofit executive in the Twin Cities, I have witnessed several ebbs and flows in the funding of social service programs.
Immediately after 9/11, there was a precipitous shift by government agencies and public and private foundations to increase financial support for basic needs. The recent financial crisis triggered a similar response, and the nonprofit and funding communities sought to ensure that food, shelter and other emergency needs were provided to all citizens.
Yet barely five years later, the nutritional and housing needs of millions of Americans are still not being adequately met. There are hundreds of thousands if not millions of dedicated nonprofit workers, public employees, foundation officers, and concerned citizens working tirelessly to make a difference in the lives of others. Nonetheless, more is required, and we must reconsider our priorities as a nation.
Martin Luther King famously noted that “a budget is a moral document.” It reflects our society’s values and allows history to judge how we treat one another. It is unconscionable that today, given America’s vast resources, we can still tolerate hunger, homelessness, and substandard housing.
Clarence Hightower is executive director of Community Action Partnership of Ramsey & Washington Counties. He welcomes reader responses to 450 Syndicate Street, St. Paul, MN 55104.