Hello and welcome back to Defining Affordable. I'm Jamie. And I'm Robin. We're so happy to have you here with us today. Our second episode is going to be a little bit of a history lesson. Yes. So we're excited about that. We've done a lot of work to prepare and try to make this as interesting as possible and help tie it into everyone's kind of everyday experience they're having now. So with that, we are going to start with pre-1930s. Jamie, take it away. Yes, and I will just say before we start that most of this information I learned about from a great book called The Color of Law by Richard Rothstein. So we are trying to put it into a 20-minute podcast for you, but if you're interested, we'll have that info in the show notes, and I really recommend it. So we are pre-1930s, and I want to talk about what it was like to get a mortgage and to buy a home in that time. So it's much different than the way that we purchase homes now. Back then, you had to put almost 50% down for your down payment, which is insane. And then the term of the loan was about three to five years. And then at the end of the term, so let's say at the end of five years, you had to pay a massive balloon payment, which really is just a lump sum, to pay off the house. If you couldn't do that, which most people couldn't, you would refinance again and get another loan. So you end up stuck in this cycle where you're just paying interest and you're not actually owning the house outright, which seems a little messy and even more inaccessible than the way home purchasing works today. And then what was the precursor or the catalyst for the changes we saw to the methods of home buying post-1930s? If you remember, the stock market crashed in 1929. That set off the Great Depression. A lot of folks lost their jobs, banks folded, and people defaulted on their mortgages. When people defaulted on their mortgages, the banks got scared, and they didn't want to lend out any more money. And if you think about it, the way those mortgages were set up, people were constantly just refinancing. So it was kind of set up on a house of cards. So 1930s, that house of cards collapsed and the banks did not want to loan any more money. But we still needed people to have houses to live. So the federal government decided to step in. So in the 1930s, as part of the New Deal, we created, we being the government, sorry, I'm not the government. The government created the FHA, the Federal Housing Administration. and their big thing was federally insuring those loans. So instead of a local bank saying, hey, I'm really nervous to loan out this big sum of money, the government said with the FHA, hey, we'll back you, we'll give you that assurance that if the person defaults, we'll be there to support you. So that allowed banks to feel more comfortable and start issuing mortgages again. And that method of assuring that this business model of loaning money to individuals to purchase homes was through the FHA insurance program. Is that correct? That is correct. Got it. Yes. With that program, that allowed a lot of people to access homeownership. It also created the modern system that we use today. So a slightly smaller down payment, 20%, but then you could go less and have private mortgage insurance, typically a 30-year loan term, and no massive balloon payment at the end. So it really shaped the way we purchase homes in the United States today. That's why it was important. I do just want to mention that the idea of massive balloon payments on a basically interest-only loan did come rushing back in the early 2000s. And it was one of the things that fueled the housing boom that then became the housing market collapse of 2008. So that idea was recycled with similar consequences. and personally having been in the housing industry during the time and lived through it I have a concern now that some of those ideas maybe not that one in particular but some of those ideas may be starting to again look shiny and there are policymakers considering recycling them again and I do have strong concerns that that would again lead us down the same path which would then be the third time to another crash. So as we know, that's coming up in a future episode, but I just did want to point out that that similar policy strategy has had catastrophic events, not once, but twice so far. Yes, and to add to that, history repeats itself. And one of the reasons we're doing this podcast is to remind people how we got here so we can maybe not do it again and have a better outcome. And this is just anecdotally, but my assessment at 56 years in life is that the main reason why history repeats itself is because people forget. And so one of the things that we want to do, and especially in this particular episode, is just bring back some of these important, what we feel are important points of history, that point to where we are now, that set the intention for where we are now, so that in the areas in which we have the ability to stop history from repeating itself, or at least help be the catalyst to stop it, we very much want to be. Exactly. And here we are. So we have the FHA saying we want all Americans to be able to own homes. What does that sound like? Maybe the American dream. Maybe. If you've heard it, we looked this up. If you think of the American dream, when I think of it, I think, oh, it's for someone to purchase a home. I think of a white picket fence. That's kind of the descriptor that you think of. We looked it up. That term was popularized in 1931 by a man. His name is James Treslow Adams. Adams. So when Adams wrote about the American dream in 1931, it was not the idea that all Americans can access a home or gain material wealth. It was actually a criticism against that. He was saying that he was dreaming of a social order where every man and every woman can attain, this is a quote, the fullest stature of which they are innately capable and be recognized by others for what they are, regardless of the fortuitous circumstances of birth or position." Which I find is very interesting because when I just think of the American dream colloquially, I still can't say that word, colloquially now, it's the idea of home ownership, right? To be able to pass that on to future generations of your family. But the guy that created this idea, it was a direct criticism of that. He said, it's not about material wealth, it's about everyone having the same access, which is something to think about. Something to think about, indeed. So with this new FHA home ownership policy and agenda, was that available to everyone? That's a great question. And we know the answer is absolutely not. It was not available to everyone. It was only available to specific people. The FHA one of the things they did they created a map of all cities and towns in the United States and they color it based on levels of risk for loaning money What they did though was every minority neighborhood particularly neighborhoods where Black Americans lived they colored red And red meant that was the highest risk They are not going to back a mortgage there. That's where the term redlining comes from, meaning they cannot get a federally insured mortgage there. So if you are a person of color living in your own neighborhood and you want to purchase a home, the FHA says you're not allowed to. They're saying your neighborhood is too risky, so they're not going to give you a loan. And the only way you're going to be able to purchase that home is you're going to have to pay cash, which most people cannot do. So that cut out an entire group out of homeownership. And just back to what we were talking about before in regards to after the Great Depression, the banks, who are the ones who actually loan the money, lost confidence in that business segment. Right? Very simple. We loaned money to people. They defaulted on the loans. We're out X number of dollars. We're not sure we want to keep doing this. The FHA came in and said, no, no, no, don't worry. We'll help you. We'll help you by ensuring that your business model is viable because we will provide insurance to those mortgages. So I think it's really important to hold these two things in mind at the same time, is that the driver for the new mortgage business post-1930 was access to insurance. And then at the same time, you have redlining, which is saying this is the highest risk area. therefore we will not offer insurance so if you need something to mentally tie that into to today especially in California we see that happening where insurance companies are saying we think your fire risk is too high so we will no longer insure entire neighborhoods entire counties entire cities so it's the same thing so if you cannot purchase insurance then you don't have access to to that mortgage product. Yep, and with the redlining, let's think of a person in a neighborhood who wanted to purchase a home, a black household, but their neighborhood was redlined, did not have access to the insurance, they could not buy a home there. During this time, there was also a lot of development of suburbs, because there was a housing shortage, just like there is today. 100 years ago, we also had a housing shortage. So we did see a lot of building going on. Perhaps a household that couldn't buy in the neighborhood they were currently in, maybe they could get in on a new suburb. Unfortunately, no. There's a thing called restrictive covenants that specifically said in the house deed or in the neighborhood that this house can only be sold to certain people. And they list it out. Usually it would say you can sell it to white households, you cannot sell it to black or brown, or essentially anyone who's a minority, anyone who's not white. So that's two ways that people of color in the United States were denied access to home ownership. One, through insurance in kind of a roundabout way, but not really. And two, explicitly through restricted covenants where it's named that they are literally not allowed to purchase that house. So home ownership is great only for certain people, is really the message that we want to get across in the 1930s. By design. Yes, by design. And all of those policies were designed, well, the covenants were quite direct, but the insurance policies and the mortgage-related policies were were indirect enough to it's almost like it created that plausible deniability where they could say well no we've made this available to everyone and just don't look at this this part over here right yeah and that's why uh critical thinking and context is really important when we examine history yes yes absolutely so getting back to the 1930s i mentioned there was a housing shortage recognizing that not everyone is probably ready to purchase a home. The government also said, okay, we need, we as the government need to actually build some of this housing because it's not being built fast enough. And we want to make sure that our citizens have a safe, affordable place to live. And that was rental housing. Yes. So we have the home ownership that we just talked about. And then they also wanted to build more rental housing. housing. So we have what is called public housing, which is a term that I know a lot of people have heard of. There's a lot of thoughts about it. There's a lot of stereotypes that I don't like. We will get into that, but just want to let you know that this is where the term public housing was created. I believe it was an act in 1937 that created an agency which was the precursor to HUD, really public housing just means it's being built and managed using federal dollars. That's all it means. So initially, public housing was targeted to middle-income families, which is interesting because I think the assumption is that it's just for people that are low-income. Not true. So initially, they built a lot of housing that was for middle-income families. And you say families, and I think you use that term specifically, because if I remember from a previous conversation, you mentioned something about that in the rules and regs or covenants or however that was written, that they would not rent to single women or single mothers. Is that correct? Yes. So we are pre-1960, which is the Fair Housing Act. So this was all legal, technically, but the government had a very specific idea of who that public housing was for. So their idea was white families, two-parent households. The application process was pretty invasive. They would ask about your marital status, your relationship status, things that are illegal now, thanks to the Fair Housing Act. But it was really judgmental. And really, they were looking for a specific group of people to live there that they thought were deserving of this housing, if you will. And public housing, again, it created minimum standards for rental housing across the United States. So it did improve living conditions for 12 million Americans. But again, the question is, who got left out? the theme we keep coming back to is who was not included in that. It was segregated. Most public housing buildings were specifically for white households. There were some buildings that were for black households, but it was a smaller amount of those properties. It was not in as nice of areas and it didn't have as good of amenities. So very clearly separate and unequal. The wait list for Black families to get into that housing was really long because there just wasn't as many units. Whereas for white households, if they met that criteria, they didn't really have to wait because they had more public housing options. Yeah. Again, we have two ways that there are programs that are supposed to help people and help folks get out of poverty, but it's only for certain groups of people. And that will impact where we are today, which we will get to soon. So as I said in the beginning intro, we really want to try hard to weave historical facts with some factual stories that you can either directly relate to or indirectly relate to to help you get a real sense of like what this means in people's everyday lives. So um I know that Jamie has a great story her basically family history from arriving in America um to now And I think it fits in really well right here So if you would be kind enough to share that with me and the audience, I think it would be really helpful. Yes, of course. And thank you to my mom, Barbara, for letting me fact check this right before I got here to make sure I had everything right. Okay. So my great grandparents, They came from Poland in the 1890s to New York City. They got work as a gardener and working in a factory. They were able to, after just a few years of arriving, go in on a house on Long Island with extended family and purchase a duplex. So that's the first time in the United States my family was able to own a home in the early 1900s. And while this is before the 1930 FHA creation, restrictive covenants were still in effect. And on Long Island, you were not allowed to purchase those if you were a person of color. So my great-grandparents were able to buy that because of what they looked like. They purchased that home, and eventually they were able to add an ADU on the back where they rented it out and they were able to have additional rental income that they could use for their household. My grandpa and his sister were born in that house. I remember him telling me, yeah, we didn't have a lot of money growing up, but you know, I had a roof over my head and I, my mom fed me, so it was good. In his words, he's telling me that's a stable platform. His parents had no formal education. They were factory workers and gardeners. They were able to purchase a home. So my grandfather was able to stay in school and finish high school. Then he was able to think and determine what kind of career he wanted. If they didn't have the home, maybe because they're trying to make ends meet, he could have had to drop out of school early to work. So what was next for him? He got married to my grandmother, and on his wedding day, he got a draft notice for the Korean conflict. So he left. He served for two years. When he came home, they needed a place for him and my grandma to live. They did not want to live with their parents, which is fair. He was able to use the GI Bill, which helps veterans get a VA home loan with no down payment, no private mortgage insurance, and a competitive interest rate. So that program, the GI Bill was created after World War II. And unfortunately, guess again, it was only for certain groups of people. Black veterans were not allowed to take advantage of that. So my grandfather was able to take advantage of that. He purchased a home with my grandma. Also important to note that they purchased it together. If my grandma had been a single woman, she would not have been able to buy the home by herself. Technically, women could have owned property then, but again, the access to insurance to get a mortgage or a loan. Until the 1970s, women had to have a male cosigner. So again, another group of people that were cut out of home ownership from the beginning of the modern way that we do home ownership. So then they live in their lovely house. They had three children. Again, they have a safe and stable platform. The children are able to, including my mom, are able to finish school and then decide what they want to do next. All three of them made the choice to go to college, and because they had a home, my grandparents were able to fund that for them. So all three of them got to go to school to study what they were interested in. My mom studied biology. So again, we're saying having that choice is directly related to being able to purchase that home. And your description of your mom and her two siblings having that opportunity of choice to do what they were passionate about ties back exactly to that quote about the original intention of the American dream was to provide people an opportunity to be the best of whoever they are and whatever it is lights their fire, if you will. had nothing to do with who can have the biggest house, own the most things, 10x their lifestyle. Yeah, exactly. So that is the American dream as it was originally coined by our friend, Mr. Adams, not the way we've sort of distorted it today. Yes. Distorted is a good word. Yes. I tell that whole story about my parents, not because it's a unique story or an incredible story. It just shows how access to insurance and home ownership can really transform lives and give people the opportunity to achieve their dreams. My grandfather bought that house around 1953. So in 1960, we had the Fair Housing Act passed, which means that the opportunities that my family had were now open to everybody else. However, if you're comparing a new family that just got access to that compared just in my family's story, they're already 70 years behind in entering the homeownership market. So purchasing a home in 1890 versus 1960 is a big difference. So while in 1960, on paper, by law, everyone is equal, they still aren't. Because they're not starting at the same place. Yeah, because they had a huge, a massive disadvantage. Just for me personally, I was fortunate enough to be able to purchase a condo four years ago, which was great. But now, just four years later, if I was trying to buy the same condo at its current rate with their interest rates, I would be priced out. So I got priced out in four years. So imagine what happens to households that have been kept out of the market for 70 plus years. Right. The reason we talk about That disadvantage is because it still impacts outcomes and housing that we see today. White families outpace Black families still in home ownership, meaning that there are more Black families in the rental market. As we talked about in our last episode, it's a really challenging rental market to be in. Black families also have a lower household wealth. I think on average, white families are, it's eight times greater than black families. So you have black households overly represented in the rental market. And then we look at these households in California, black households are twice as likely to be rent burdened than white families. We can directly trace that back to how they were kept out of home ownership opportunities for so long. And we keep saying rent burdened a lot. And you might be wondering, why does that actually matter? What we understand that rent burden means you're paying more than 30% of your income towards housing? Why should we care? Robin, if you could sort of share the impact just on your health in your life that being rent burdened has? Yeah, absolutely. I think rent burdened, as bad as that term sounds, actually, I feel like it kind of smooths over in some ways the reality of what's happening that's a great burdened means it really is that you are in a chronic state of financial stress right because if you're paying more than 50 percent of your income in rent there is no way you are not that does not create a massive amount of financial stress for you to be able to magically find some way to take care of all of your other responsibilities that all have a financial price tag associated with them with that other 50% of your money. Yeah. And to just jump in, you said 50%. So rent burdened is 30%. We had to create a new category If it 50 of your income you severely rent burdened Right So even again even more in worse we had to create multiple categories to show like how challenging this is. Right. And how unfortunately it's very common. It shouldn't be though. Right. So then when, when I think when people hear things like, uh, affordability is a hoax. is about as gaslighting as you could possibly get and about as disconnected from the reality of what's happening for people in their everyday lives on any given day, what's actually happening, how much money they actually have to pay for all the other things that they need. so that that financial that perpetual financial at least moderate level crisis that's happening just becomes chronic and then puts the person in a state of chronic fight or flight high levels of stress which we know you know obviously we're not a health podcast but there is absolute causation between stress and health outcomes, not just correlation, but causation. Yeah, negative health outcomes. Yes, negative health outcomes. Thank you. And if you just think about, so if you're being chased by a lion, you are not thinking about, well, gee, what book should I read in the future? Where do I think I want to go to college? Maybe Maybe I'll travel and learn another language. You're thinking, oh my God, I'm being chased by a lion. I have got to run up a tree behind a door, over the fence. I got to do whatever I got to do to get away and be safe in this moment. And so the reality is, is that we have so many people in our population who can't possibly think long-term, let alone act long-term, right? Because you can't, you're not going to take action that you can't consider first because they're in this constant state of short-term crisis management. Right. Trying to stay housed to keep a roof over their head to pay the bills. Exactly. Yeah. Exactly. It's unfair to discount the impact being paycheck to paycheck or rent burden has on your mental health, your physical health, and just your ability to think long-term. I know we had a lot of stats related specifically to Black households, but at this point, we're not saying that what's happening that is only happening to that group. No. It's just, it's the demographic that I would say that the proof is most glaring. Yeah, it's the most explicit. There are more and more people in the last decade, even 20 years, that are struggling to make ends meet, which really just means have safe and affordable housing. Yes. Which, if you were a group that this has been your normal and you've been shut out, you're like, wake up. Yeah, welcome to the club. Right now, in society, we judge probably the most vulnerable people who are working their hardest to survive and they're in poverty or they're unhoused. We see it as a personal moral failing. No, it's an economic condition that has been set up, that has been orchestrated. So it's this idea that we sort of blame people for their own situations. And of course, yes, people make personal mistakes. But when housing keeps getting so much more expensive and wages don't keep up, it is a logical conclusion that you reach that more and more people aren't going to be able to afford housing. So why are we judging those people when it is just a math problem, right? Yes. their wages didn't go up housing went up a lot of course you're going to have issues making ends meet oh there are so much more context and so much more societal policy that has led to these things that we see and you can't take you can't take something as three-dimensional as all of these nuanced issues are and flatten them out to a one-dimensional judgment to say this person deserves help, that person doesn't. Exactly. Yes, so we see with housing now that white, middle-class, and upper-class Americans are also struggling. Now, all of a sudden, it's a big thing that we're talking about when other communities, minority communities, have been experiencing this for years. So people are paying attention, but they only paid attention when certain people were impacted. We see that also exact same thing happened with addiction. People really started paying attention with the opioid epidemic because that was impacting white, middle, and upper class people. So I think if you are white, which I am, and I am, yes, it's really important. That should be a warning sign and a red flag. If another community, especially a marginalized community, is telling you that something is happening, pay attention. and believe them and believe them it is their experience just because it's not your experience at that moment doesn't mean it's not their experience and doesn't mean that it couldn't be you next yeah we need to believe our neighbors and our communities about their own experience and trust that they are the experts and not wait you can't wait until something affects you to care about it that's yeah a terrible strategy i love that right don't wait till something affects you to care about it which brings me to this like a fundamental value of mine is to consider the greater good of the whole in our business with the communities that we provide services to we are actively trying to provide events educational opportunities spaces for the greater good of the whole to create community there and i just encourage people to ask yourself did any of my actions today positively impact the greater good of the whole? I mean, go for it. Have everything else you do in the day impact your greater good directly. But just consider doing one thing that would improve the greater good of the whole. Because I think if everyone did that, we would see a huge shift in the underlying energy driving things. You know, honestly, every time I see someone run a red light out of impatience, if it was a mistake, okay. But out of impatience, I just think, really? Really? Well, it's like, what if everybody else did that? Right. Right. I think that's why I'm so passionate about making sure everyone has access to safe and affordable housing, because I know what it leads to and it creates healthier communities. I care about my neighbors. I want everyone to have the same opportunities that I was able to pursue because housing stability was never a thought in my mind growing up. I never had to think about that. And again, like we told that story, some of that for me was unearned. Or that was because my parents, my grandparents and my great grandparents had opportunities to access things that other people didn't access. Right. So, yes, I can afford my housing. That's awesome. I want everyone else to have that opportunity too. Right. It's for the greater good, folks. For the greater good. Let's care about other people, not just your immediate family. I think that might have been a bit of a rant, but you can rant. That's fine. Thank you. There's your history lesson. We started 1900s-ish. We got about up to the 1960s, related it to what's going on today. Stay tuned for our next episode. I think after that we will maybe get to the 1990s. So thank you for listening. I'm Jamie. And I'm Robin. This is Defining Affordable. See you next time. Bye.
