In a New York Times op-ed today, Howard Husock, vice president for policy research at the Manhattan Institute, is the latest in a string of conservatives to try pinning blame for the housing crisis on low-income borrowers and the Community Reinvestment Act (CRA). Husock claims that, “the American public will be ill served” if community-reinvestment rules and affordable housing goals are “allowed to continue unchanged“:
There’s little doubt that the rating agencies helped inflate the housing bubble. But when we round up all the culprits, we shouldn’t ignore the regulators and affordable-housing advocates who pushed lenders to make loans in low-income neighborhoods for reasons other than the only one that makes sense: likely repayment.
As Matt Taibbi put it responding to similar sentiments from Byron York, “Tell me you’re not ashamed to put this gigantic international financial Krakatoa at the feet of a bunch of poor black people who missed their mortgage payments.”
The notion that loans made to lower-income borrowers through the CRA somehow caused the housing crisis has been thoroughly debunked again and again. Only six percent of the subprime loans made by CRA-covered lenders went “to lower-income borrowers or neighborhoods in their CRA assessment areas,” while 60 percent went to middle- or high-income borrowers. It was non-bank mortgage companies — not covered by CRA — that originated 50 percent of subprime loans, while another 30 percent were made by non-bank subsidiaries of banks or thrifts.
After promoting that idea that the CRA helped ignite the housing crisis, Husock goes on to claim that “we no longer need blunt regulatory instruments to draw lenders into low-income neighborhoods.” This is also a misguided assessment, as lenders are still discriminating against aspiring minority homeowners.
Just this week, the National Commission on Fair Housing and Equal Opportunity released a report showing that “U.S. housing is still racially segregated 40 years after civil rights laws to end unfair practices”:
The report found that whites got better loans than blacks, Latinos and Asians, who make up roughly a third of the population and who were sometimes steered away from buying homes in predominately white communities.
As Federal Reserve Board Governor Randall S. Kroszner said last week “CRA has, in fact, been helpful in alleviating the financial isolation of many areas of concentrated poverty.” This week, meanwhile, the Times’ editorial board advocated “strengthening fair-lending laws, especially the Community Reinvestment Act.” Indeed, weakening these regulations in a misplaced attempt at assigning blame for the housing crisis is counterproductive, and will further exacerbate already existing housing divisions.