Housing Crisis Rip-Off

California faces the worst housing crisis in the nation by nearly all measures. With a booming economy pushing rentals and home purchases out of reach, affordability is no longer a problem limited to low-income families. Nationwide, homeownership stands at a high of more than 67%, but it’s declining in California. Only 55.7% of state residents own their own homes, and the percentage is much lower in Los Angeles County. Homeownership is also increasingly out of reach in Orange County as the chasm between housing prices and income widens.

The slow pace of home and apartment construction threatens the state’s economic growth, according to the most recent UCLA Anderson Forecast, a quarterly report released this week. A continued lack of housing could discourage employers from expanding or relocating in California.

With an expanding California job market swelling the population in a period of low housing starts, there is a shortage of apartments and homes in every price range. As a result, workers must pay ever higher rents or mortgage payments. More families are paying 50% or more of their incomes for housing, which, according to federal Housing Secretary Andrew Cuomo, indicates a worst-case housing need.

Fewer families earning the minimum wage can now afford the average rent on a two-bedroom apartment, $899 in Los Angeles. Workers who earn the minimum wage would have to triple up--bring in three paychecks--to afford that amount.

Families pooling their resources to buy a first home and other low-income buyers may especially be at risk. Unscrupulous lenders prey on those who have bad credit ratings or can afford only a small down payment. Some potential homeowners--mainly poor immigrants and/or minorities--are exploited by abusive lenders who charge fees as high as 14% of the loan and add on other hidden costs.

These same lenders also target longtime homeowners, often the elderly, seeking a second mortgage. The borrowers can be gouged by huge fees in the fine print and lose most of their equity. A single missed payment may trigger a foreclosure.

To stop an alarming pattern of defaults, Cuomo has ordered a 90-day freeze on foreclosure proceedings to give government investigators time to determine whether certain lenders are setting up homeowners and first-time buyers as sitting ducks.

Dishonest lenders should be worried: The U.S. Department of Housing and Urban Development is sending 60 investigators to Southern California. They promise to take a hard look at mortgage lenders backed by the Federal Housing Authority, a HUD subsidiary.

Crackdowns like these present no panacea for California’s housing woes. The crisis won’t improve until the supply of housing increases. Washington can do only so much to stimulate housing production but should, among other things, increase subsidies, tax credits and funding for nonprofit housing developers. Sacramento too can help in the effort to speed up housing construction. Collectively, steps must be taken toward a goal that’s increasing important for California: a significant increase in the number of affordable houses and apartments.