Americans renters are struggling with a “toxic mix of rising rents and stagnant wages” that are generating an “unprecedented affordability crisis,” leaving more than half of households in a precarious financial state, according to a report from the Federal Reserve’s Community Advisory Council.
Fifty-one percent of renters nationally “pay more than 30% of their income on rent and utilities,” the council, whose members hails from a wide range of community and social organizations, said in its biannual communique. “Low-income renters and renters of color, particularly women of color, are most squeezed by the crisis.”
The council estimates “more than three-quarters of lower-income households pay too much for rent, and six in ten women of color, who are heads of households, pay too much for rent, compared with four in ten white men.”
Among a range of statistics, the group cited a new Zillow analysis showing just 42% of rental listings were within financial reach for median-income U.S. households–just 16% for median black family income and 27% for the median Latino household.
The report noted risks from a sharp rise in “investor landlords,” shown to evict tenants at a “significantly higher rate” than small landlords in the same county.
With regards to the broader economic outlook, the council painted a more sobering picture than the rosy outlook laid out in recent speeches from top Fed officials, including Chairman Jerome Powell, despite a historically low jobless rate of 3.7%.
“Despite strong overall economic conditions and record low unemployment in black and other low-income communities of color, economic mobility continues to be stalled for the nation’s most vulnerable,” the report said.
“The numbers are improving, but there are still many people who are locked out—there is joblessness despite decreasing unemployment, and wages are also not increasing for vulnerable communities. The low overall unemployment rate can be misleading.”
In addition, “economic growth and prosperity is very uneven spatially, and many low-income communities of color continue to struggle with disinvestment, poverty, and lack of jobs and market activity. Others face the challenge of gentrification and displacement from neighborhoods experiencing reinvestment.”
The Fed’s community council expressed concern about the Trump administration’s proposed changes to the Community Reinvestment Act, which gives the U.S. central bank considerable latitude to ensure fair lending that is broadly accessible across regions, racial groups and income ranges.
“As a key lever to improve economic growth and mobility for the most vulnerable, banks should be required under a reformed CRA to do more to safely invest, lend, and bring underbanked populations into the financial and economic mainstream and out of the shadows of predatory, under-regulated alternatives,” the report said. “The Council feels the proposed framework laid out by the Treasury misses the mark in this regard.”
Instead, the Fed’s Community Advisory Council offered its own set of recommendations:
- Strengthening the grading process to ensure more lending and strategic investments that help poorly served communities thrive
- Requiring public/community-informed plans that reflect local community input and scrutiny
- Downgrading scores when banks act outside of the spirit of the CRA and against the interests of the most vulnerable
- Creating additional CRA assessment and/or investment areas to reflect the modern age of online banking
- Bringing transparency to small business lending by implementing section 1071 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act)
- Including mortgage companies, credit unions, and insurance companies under the CRA to level the playing field for other financial actors that impact the most vulnerable
All seem like reasonable ideas, but they are unlikely to get a fair hearing under the current administration. After all, Donald Trump’s Treasury Secretary Steven Mnuchin, is a former Goldman Sachs banker who earned the nickname of “foreclosure king” for his record as CEO of One West Bank.