Last Sunday, the Washington Post featured a cover story on loan default and delinquency for buildings with affordable housing units across the district.
The typical delinquent loan — among a list of 43 — is more than four years behind on mortgage payments, according to the records. And the number has swelled even as D.C. housing officials did little more than mail warning letters to loan holders. This was true even in cases when organizations and their executives failed to remit a single payment for more than a decade.
[…]
The demand for more affordable housing is the dark side of the city’s recent burst of gentrification, in which the supply of low-income housing has been reduced by more than 50 percent since 2000. District statistics show an intractable problem, with 5,000 families on the brink of homelessness, doubled up on sofas or sleeping on the floors in relatives’ homes.
In fact, loan delinquency is itself much more intimately connected to gentrification than the article implies. Delinquency on liabilities, whether property taxes or mortgage payments, represents a form of disinvestment in neighborhoods that sets up the preconditions for that process of massive and uneven injection of capital into a neighborhood known as gentrification. As Neil Smith explains in The New Urban Frontier (p. 192)
Nonpayment of property taxes by landlords and building owners is one common form of disinvestment in declining neighborhoods. Tax delinquency is in effect an investment strategy since it provides property owners with guaranteed access to capital that would otherwise have been ‘lost’ to tax payments.
We can certainly extend this to mortgage delinquency and default as well. In fact, default on city loans for affordable housing appears to be quite the safe strategy for investment and capital accumulation, simply because the city may consider having a stock of affordable housing – perhaps to absorb displacement from gentrifying neighborhoods, as the Post describes – worth the cost to city offers that comes with not collecting mortgage payments. This seems to be the position of the District’s government, and in effect serves as a city subsidy for disinvestment in these neighborhoods at the hands of those developers and landlords who have defaulted on their loans.
It also serves as a subsidy for future gentrification. As with tax arrears, owners and landlords will begin to repay delinquent loans in order to avoid foreclosure proceedings when they sense that retaining possession of a building due to an expected increase in sale price is worth the cost of loan repayments. Peter Marcuse and Smith have demonstrated that arrears data is the most sensitive for identifying the turning point at which a neighborhood begins to gentrify.
When properties on this map provided by the Post begin to repay these delinquent loans, this will be one of the first signs that capital is bracing for reinvestment in that area. If the city wanted to prevent further gentrification and the situation that has led to the creation of such a precariat of 5,000 families facing homelessness, it would force foreclosure on as many of these landlords as possible, as it is doing in the Park Southern apartments, while not shifting any costs onto the tenants.
Unfortunately, such a widespread activist move seems unlikely, given the cumbersome bureaucratic process involved in foreclosure, tight relationships of developers to DC politics (including those owning delinquent loans, one of whom is a former District council member), and the elite consensus synthesized by David Catania’s wretched use of “progress” to describe gentrification of Ward 8 in a recent mayoral debate, as he imagines the gentrification process as one that uplifts current residents rather than simply displacing them elsewhere.
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