From Redlining to Subprime Lending: How Neighborhood Narratives Mask Financial Distress in Bedford-Stuyvesant, Brooklyn

Abstract

This article explores why and how homeowners in Bedford-Stuyvesant, Brooklyn, New York, took out subprime mortgage loans, and the effect of these loans on individuals and their community. It analyzes real estate histories for properties on four street blocks in Bedford-Stuyvesant by linking public data for real estate transactions with homeowners' descriptions of those transactions, gathered through interviews. Subprime lending flourished in a neighborhood that historically was redlined by conventional lenders, and created and exacerbated poverty, as it stripped equity from individuals and the neighborhood. Many homeowners in the study managed to combat this process of becoming poor, however. Homeowners are averting foreclosure while making sacrifices that are not apparent from data for mortgage foreclosures, neighborhood appearance, or initial conversations with residents and community leaders. Longtime homeowners' personal and neighborhood narratives of upward mobility and stability remain sacrosanct and attached to homeownership, even when belied by financial realities. More recent homeowners are more likely to focus on safety concerns and economic uncertainty and to consider leaving. These findings suggest that efforts to address the subprime lending and foreclosure crisis and to prevent its recurrence should include homeowners who are not in foreclosure, but may nonetheless be struggling, and that solutions must consider homeowners' relationships with their communities.

Keywords::

• homeownership
• mortgages
• neighborhood
• predatory lending

Acknowledgments

This research was funded in part by a PSC-CUNY Research Award and a Eugene M. Lang Junior Faculty Research Fellowship. I thank Bethany Nelson and Nekenasoa Randresihaja for their top-notch research assistance, and John Goering, Alexis Iwanisziw, Nicole Marwell, Josh Zinner, and the anonymous reviewers for their comments and help.

Notes

^1. I refer to Bedford-Stuyvesant residents primarily as black, to include both African Americans and Caribbean Americans. The neighborhood is quite large, and its boundaries shift somewhat, but are generally considered to be Flushing Avenue to the north, Atlantic Avenue to the south, Classon Avenue on the west, and Broadway/Saratoga Avenue on the east. In the 1950s and 1960s, the neighborhood designation often included parts of what are now considered Bushwick, Clinton Hill, and Crown Heights.

^2. The BSRC, founded in 1967 as part of the War on Poverty, and perhaps the most famous Community Development Corporation in the country, had a vested interest in emphasizing the homeownership rate, as it worked to nurture homeownership opportunities in the neighborhood, some might argue, at the expense of its poorest residents and their housing needs.

^3. The blocks are not immediately contiguous to avoid large institutional buildings.

^4. Until 2005, HUD compiled an annual list of lenders with a substantial portion of high cost loans. HUD refines that list based on feedback from “lenders, policy analysts, housing advocacy groups, and other users of the list.” Similarly, using the HUD list as a starting point, I reviewed it with four Brooklyn-based housing policy analysts and legal services lawyers to revise it so that it included all lenders making primarily subprime loans in the area during the study period. For a review of methods of measuring subprime lending, see the work of Gerardi, Shapiro, and Willen (2008).

Additional information

Notes on contributors

Hilary Botein

Hilary Botein is an assistant professor in the School of Public Affairs, Baruch College, City University of New York. Her research focuses on the history and social politics of low income housing and community development policies and programs in the United States.