Chasing the Dream: Encouraging Homeownership in Los Angeles
La Opinion: OpEd
December 7, 2003
Mara Marks, Ph.D. and Fernando Guerra, Ph.D.
Los Angeles was built on big dreams and hard work. The dream of homeownership has been the bedrock of the region's economic vitality and social stability from the time of homesteaders, to dust bowl migrants, to returning World War II vets - and for subsequent waves of newcomers from across the country and around the world.
Sadly, the ambition and optimism of too many Los Angeles residents is not being realized because the dream of owning a home - despite hard work and conscientious saving - is simply out of reach.
For Latinos, LA's emerging middle-class, and the future of the region, the situation is particularly tragic. LA County's housing market locks too many Latino families out of homeownership and into poor quality rentals.
Simply put, the housing market in Los Angeles County is failing its largest population. Henry Cisneros, former Secretary of the U.S. Department of Housing and Urban Development has observed, "The high housing costs and lack of availability represent an economic Achilles heel for Southern California. Especially with a weakening economy, we cannot afford to keep ignoring this reality."
To safeguard the American dream for the area's largest demographic group, Los Angeles needs more housing as well as home loans that are less expensive and of higher quality.
Los Angeles County has one of the lowest rates of homeownership in the country, but Latinos are faring particularly poorly. Latino homeownership stands at just 38 percent, compared to 58 percent among Whites. And compared to non-Latinos, those Latino families in the rental market tend to live in housing that is lower quality and more crowded, even rent eats up a larger portion of their household income.
A central cause of the problem is the dismal rate of housing production in Los Angeles. Only one new home is being built for every 30 Latinos who take up residence in Los Angeles County. Access to capital is another part of the problem. Latinos comprise 45 percent of the population, but they receive only 17 percent of new home loans. Latinos who do receive home loans are more likely to have mortgages with worse terms than those of their White counterparts. And as home prices continue to soar, the dream of homeownership slips further out of reach. - Between 2002 and 2003, median home prices shot up 25 percent in Los Angeles County.
Low rates of homeownership mean that Los Angeles is losing out on a powerful engine for personal wealth creation and community stability. Equity generated from homeownership constitutes almost 45 percent of total household wealth. Other financial benefits of home ownership include state and federal tax subsidies from the mortgage interest deduction, home equity borrowing power, and forced savings from monthly mortgage amortization. In addition to promoting economic security, homeownership helps build strong communities by promoting neighborhood stability, public safety, and civic involvement.
By working together, elected officials, developers, mortgage bankers, and the public at large can keep the American dream alive - not only for Latinos but for all of Los Angeles. Housing production must increase. This means we must balance concerns about the environment and the character of existing neighborhoods with the urgent need for more housing.
To increase the supply of quality, affordable housing, the emphasis should be on positive incentives that encourage developers and lenders to explore investment opportunities in Los Angeles' diverse housing market. Streamlining the regulatory and entitlement processes would go a long way in this regard. In addition, greater flexibility is needed to encourage housing development, particularly multi-family and affordable housing. Where appropriate, minimum lot size requirements should be reduced to encourage the development of housing for rent and ownership. Cities mandating that developers reserve a portion of new housing projects for sale or rent at below-market rates should also adopt by-right development provisions and density bonuses.
Cities throughout Los Angeles County should follow the positive examples set by the City of Los Angeles and Pasadena that make infill projects on vacant and underutilized parcels a priority as well as mixed-use projects that integrate housing into major developments such as schools, transit, and commercial projects.
LA's Latinos have demonstrated a remarkable capacity to achieve in spite of challenges. Los Angeles cannot allow this vibrant, optimistic, and hard-working community to become discouraged, alienated, or politically detached. By working together to promote homeownership, we can reinvigorate Los Angeles as a place where big dreams are worth dreaming and hard work pays off.
Mara Marks, Ph.D., and Fernando J. Guerra, Ph.D., direct the Center for the Study of Los Angeles at Loyola Marymount University in Los Angeles.