How TLEs Are Helping Shrink Housing Inequality in Tribal Communities
In the wake of the mortgage crisis of 2008, a bipartisan Congress passed the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank) to stabilize financial markets and shield consumers from predatory financial products and services. Following the sweeping changes in Dodd-Frank, home values have rebounded across the United States and are up almost 35% in the past 5 years. Despite major banks mostly recovering from the recession, housing credit is growing at a rate of only 5% annually, far slower than other forms of borrowing. As statistics show, Dodd-Frank regulations encourage banks to lend in wealthier coastal markets and leave many Americans without a stronger path to prosperity.
Homeownership is an important tool in wealth accumulation and family stability. Studies show that owning a home can have a positive effect on educational achievement, civic participation, and healthcare outcomes. In spite of these benefits, homeownership levels are no better now than back in 1965. Coupled with stagnant levels of homeownership are rental costs that have more than doubled since 1995. The gap in housing inequality has widened significantly in the past decade.
So what do housing prospects look like in America in the modern regulatory era under Dodd-Frank?
Dodd-Frank appears to be paying off well for wealthier households near the ocean. Since 2011, mortgage credit for middle income households is down 15%, while wealthier families have experienced a 21% spike in usage. Housing prices in coastal areas are up 40% this century, whereas areas away from ocean enclaves, which includes the vast majority of Indian Country, have experienced a 46% downtown over the same period. One study concluded that “post-crisis monetary and regulatory reforms have had a demonstrable, adverse impact on housing equality without offsetting macroeconomic, financial-stability, and consumer-protection benefits.” The impacts of these policies are felt especially hard in Indian Country.
One in four Natives Americans lives in poverty. Although Indians are owning homes at the highest rate since the government began collecting such information, Native Americans still lag considerable behind other groups in homeownership rates. Tribes face many challenges helping their members achieve homeownership, including a lack of access to capital, poor infrastructure, weak local economies, and restrictions on the use of tribal lands. The federal government offers some assistance in promoting homeownership, but heavy cuts to Indian Country in the President’s proposed budget will likely spell the end of these programs.
To make matters worse, much of the housing on Indian reservations is in poor condition and would not meet the standards to qualify for a home loan. Around 40% of reservation housing is considered “substandard.”. When the U.S. Census Bureau began tracking housing quality in 1940, it defined “substandard” as dilapidated or lacking indoor plumbing. As recently as 1990, 20% of reservation homes still lacked plumbing. With limited federal assistance programs and counterproductive federal regulation, tribes are filling the housing gap through revenues from tribally-owned businesses.
One NAFSA member recently used revenues from its lending operation to renovate and expand housing options in its community, including offering down payment and closing cost assistance for homebuyers. Such programs would not exist without contributions from tribally-owned lending businesses. Unfortunately, recent actions from the Consumer Financial Protection Bureau (CFPB) threaten tribal lending and assistance programs provided through business revenues.
With federal financial regulations from Dodd-Frank that only seem to promote homeownership in wealthy households and CFPB enforcement intent on infringing tribal sovereignty, Native communities will likely remain trapped in a cycle of substandard housing and insufficient social services. Some in Congress are moving to maintain a financial system that protects against market failures and also promotes responsible and equitable lending, but considerable infighting and administration priorities in healthcare, immigration, and election interference by foreign nations are limiting the effectiveness of Congress to pass meaningful legislation on financial matters. Regardless of the intentions of Dodd-Frank, Indian Country deserves a regulatory climate that encourages housing stability and fair lending.