It’s been almost five decades since the Home Mortgage Disclosure Act (HMDA) began making more transparent the mortgage lending practices of the nation’s financial institutions. Strengthened over time through amendments that broadened and deepened the information covered by the Act, HMDA spawned a small industry of research on discrimination in home lending, fueled the advocacy campaigns of community groups around the country, and contributed vital information to policymakers at the local, state, and federal levels.
It’s time to apply this principle of transparency to other areas of the housing market. In fact, there are at least three immediate needs for greater transparency in the housing market that deserve our attention.
No. 1—Who Owns Housing?
The rapid growth of outside investor purchases of apartment buildings and single-family homes has exposed a pressing need to know more about the ownership structure of the nation’s housing stock. Investor-owned rentals, in both single- and multifamily buildings, have been connected to a variety of adverse outcomes for communities and for tenants, ranging from degraded management and upkeep to loss of affordability through higher rents, and elevated rates of eviction.
Current public records on property ownership make it exceedingly difficult for researchers to discover the extent of consolidation of ownership in local housing markets and to uncover patterns of abuse that are traceable to individual owner-entities. Individual owners or investment corporations can and do hide their ownership by creating separate LLCs for each property owned. Attempts to construct information on market consolidation are time-consuming and the results often incomplete or inaccurate.
When the true owners of a property who have created LLC entities for the purpose of obscuring their identity are revealed, it becomes possible for residents, activists, and researchers to know who owns what. Patterns of market activity and exploitation can be recognized. Tenants won’t have to struggle to identify and contact management to get repairs made, activists are able to identify targets for community pressure, and policy makers are able to hold actors accountable for adverse housing and community conditions.
No. 2—What Goes on in the Secondary Mortgage Market?
The mortgage crisis of 2008-2012 revealed the screaming need for greater transparency in secondary market activity. The opacity of the secondary mortgage market made it impossible in too many cases to know who the actual owner was and who held the power to negotiate loan modifications and other solutions that might have averted millions of foreclosures and evictions.
Innovations in financial instruments have far outpaced legal protections and transparency measures, together making default prevention, mortgage restructuring, and forgiveness nearly impossible due to the obscurity of ownership information. Families and communities suffered because of this, rates of foreclosure and displacement were higher than they had to be, and the pain of the crash more widespread and longer lasting than necessary. Greater transparency here should provide a path to the person or entity who could negotiate to achieve greater levels of individual and community stability. While this would be especially important in the case of another crash, we need it for all foreclosures, whether there is a generalized market crisis or not.
No. 3—Who Has Developed, and Who Owns, Subsidized Housing?
The significant and growing presence of the private sector in the development, ownership, and operation of this nation’s subsidized housing stock suggests a third area in which transparency should be improved. Some programs, such as the Low Income Housing Tax Credit (LIHTC) program, have utilized private development and ownership options from the beginning. Other programs, like HOPE VI and RAD, are converting the public stock into one in which hybrid forms of public/private development and ownership are common.
Despite the billions of dollars of public subsidy that are involved, and even though we are as a country relying more and more on private entities to deliver the subsidized housing that millions of households depend on, there is no accessible, consistent, or effective way to identify the entities involved. Knowing who has developed and owns our subsidized housing stock is important for many reasons.
First, recent work in the City of Chicago has shown that most of the developers of LIHTC properties in that city are white and that minority developers have been largely shut out of the market. These kinds of equity outcomes are impossible to monitor without easily accessible data on developer and ownership structure, and it is a question that is just as relevant for RAD, or any state and local level program, as it is for LIHTC.
The second example involves the Plaza East development in San Francisco, where tenants have come forward with extensive complaints about horrific conditions of decay, mold, and leaks. Plaza East was barely 16 years old when tenants began to identify these serious problems with the building.
Plaza East utilized extensive public subsidies and was developed by a private firm led by one of the architects of the federal government’s public housing transformation policy of the 1990s and 2000s, Richard Baron. The firm, McCormack Baron Salazar, is one of several private companies that have developed millions of dollars’ worth of real estate in U.S. cities since the mid-1990s, subsidized by the public sector and housing lower-income and vulnerable households. McCormack Baron Salazar alone has done more than 35 HOPE VI projects. Given the obvious problems with the Plaza East development and what those problems say about the quality of the development, we would do well to know the details of development and ownership for the entire stock of publicly subsidized housing, federal and local, that exists in the country.
The public interest in greater transparency for each of these three areas of housing market activity is obvious and extensive. The potential of the solution in terms of improved accountability is too great to ignore. Think of what HMDA did for our understanding of mortgage lending patterns and the prevalence of redlining and lending disparities. Think, too, about all that we know about who occupies federally subsidized housing and where those households live thanks to the reporting of such data by state and federal governments. Researchers and policy makers have been able to examine the spatial distribution of those households, and to connect those households to the environmental and social conditions of their neighborhoods, supporting countless initiatives aimed at improving the access of those households to more supportive economic and social contexts.
Each of these transparency challenges will require a separate solution. For example, parcel level property databases are maintained locally by taxing jurisdictions. The identification of ownership in these databases could be strengthened by requiring a standardized way of naming the beneficial interests behind LLCs, allowing detection of ownership webs now obscured. Standardizing this across the country as much as possible would be an important secondary goal. The second and third transparency challenges that I have identified will require federal action, the first in regulating the lending industry (including fully and vigorously implementing existing laws like the Dodd-Frank Act), and the second in, for example, requiring a standardized identification of developers and owners of all properties with federally subsidized financing. The principle driving these disparate efforts, however, should be the same: to provide for the greatest level of intelligibility in the workings of the housing market.
Transparency in housing market transactions and in subsidized housing practices is a simple, powerful, and largely underappreciated means of producing and sustaining movements for policy change in housing and community development.