Top markets for affordable renovated housing inventory

Despite the rapidly deteriorating affordability, there is some hope for homebuyers in the form of renovated homes: properties that have been rehabbed into move-in ready condition after being purchased at auction.

HousingWire Magazine: December 2021/ January 2022

AS WE ENTER A NEW YEAR, let’s look at some of the events that we can look forward to in 2022. But what about what’s next for the housing industry?

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This webinar will be a discussion on understanding what’s to come in the future of mortgage lending by analyzing past trends in the industry, evolving consumer behaviors and demographics of the industry’s production capacity.

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Real Estate

Redfin: Former redlined neighborhoods at massive flood risk

Issues remain despite 1930's-era practice outlawed

A new Redfin report details how Americans – many of whom are people of color – living in formerly redlined neighborhoods are more likely to see their homes jeopardized by water damage.

According to Redfin, $107 billion worth of homes are currently at high risk of flooding in parts of the country that were designated “undesirable for mortgage lending” under the former practice known as redlining – a 1930s practice where lenders refused to lend money or extend credit to borrowers in certain areas of town, usually Black or brown-dominated neighborhoods.

The creation of the Home Mortgage Disclosure Act (HMDA) in 1975 required lenders to track and report loan-level data to the Consumer Financial Protection Bureau (CFPB) in an effort to reduce redlining, and finally, in 1988, amendments made to the Fair Housing Act of 1968 deemed it illegal.

But problems still remain, as evidenced by the staggering amount of homes at risk of flood damage in the former redlined areas – a systemic problem that now factors in climate change, according to Sheharyar Bokhari, Redfin’s senior economist.

“Redlining kept home values in Black neighborhoods depressed, which in turn meant there was less money invested and reinvested in those neighborhoods for decades to come,” Bokhari said. “And the cycle continues today. As climate change fuels rising sea levels and powerful storms, many of these neighborhoods lack the funding for the infrastructure upgrades necessary to combat flooding.”

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Per Redfin, 58.1% of households in current neighborhoods that were once designated undesirable for mortgage lending are non-white, compared with 40.4% of households in current neighborhoods that were labeled desirable for lending.

Statistics also show that communities of color suffer more when hurricanes or major storms make landfall. Four of the seven zip codes that faced the costliest flood damage from Hurricane Katrina in 2005 were at least 75% Black, per Redfin. And after Hurricane Harvey hit Texas in 2017, Black and Hispanic Americans were about twice as likely as white Americans to report falling behind on their mortgage payments as a result of the storm.

Of note, two metro areas where formerly redlined areas face a high risk of floods are Sacramento, Calif., and Chicago. 21.6% of homes worth approximately $2.6 billion in Sacramento’s redlined areas currently face a high risk of flooding, compared with 11.8% of homes ($717 million worth) in greenlined neighborhoods. That 9.8% point difference represents the biggest gap of any metro in Redfin’s analysis with a larger share of homes at risk in formerly redlined neighborhoods.

In Chicago, basement flooding is a specific issue in formerly redlined neighborhoods. Nearly 13% of the city’s 600,000 properties – many with basements – are estimated to face 100-year flood risk, which is substantially higher than FEMA’s 0.3% estimate. And almost 90% of flood damage insurance payments in Chicago are made to households in communities of color, per Redfin.

“When major storms hit, Black communities are often forced to spend years rebuilding their homes instead of moving on and building home equity,” Bokhari said. “This perpetuates a cycle in which Black families lag financially.”

Interestingly, The National Fair Housing Alliance and nine other housing organizations filed a lawsuit against Redfin in October 2020, accusing the online brokerage of racial discrimination and favoritism toward predominately white neighborhoods. The lawsuit plaintiffs outline differences in Redfin practices in 10 metropolitan areas between June 2018 and June 2020.

Redfin CEO Glenn Kelman responded to the lawsuit, acknowledging that the issues raised in it are “important” to the company. As of last month, it’s been reported that leadership from both organizations have been in contact to further discuss the lawsuit.

“Even though the suit is wrong about the law, the issues it raises are important to Redfin, to our society and to me,” Kelman said in a written statement. “We have a long history of expanding into lower-priced communities; we want to expand faster.”

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