Don’t Forget About the Suburbs

By Chauncey Robbs, Graduate Research Associate at the Kirwan Institute

Over the past year, newspapers large and small have filled their headlines with the once forbidden word “foreclosure”. The meltdown of the American housing sector has created such a debacle amongst major mortgage lenders and financial institutions that several mortgage lenders and financial institutions have closed their doors for good or are flirting with idea of merging to stay afloat. The panic has caused such disarray that people constantly question who holds the blame; is it investors, financial instructions, or the government? Regardless of which party holds fault for the meltdown, the effects of predatory lending practices and seedy lending institutions have not only affected inner cities, but have steadily percolated into suburban and newly developed communities as well.

The effect of the housing meltdown on suburban and developing communities has become an eyesore to neighboring residents and an incubator of crime. Vacant foreclosed homes have been stripped of copper wiring, vandalized, and have become the new murals for graffiti artists. A study conducted by Dan Immergluck and Geoff Smith in “There Goes the Neighborhood: The Effect of Single-Family Mortgage Foreclosures on Property Values” illuminates that an increase in the foreclosure rate by one percentage point increases neighborhood violent crime by 2.33 percent. Additionally, the authors postulate that increases in crime negatively affect property values within the immediate residential vicinity. “The Next Slum?” By Christopher B. Leinberger further illustrates that today’s suburbs can possibly be tomorrow’s tenements. The article draws upon the misfortunes of a new developed community in Charlotte, NC where 81 of the community’s 132 homes were in foreclosure as of late last year.

As the meltdown continues to strike suburban and developing communities, their long-term stability appears bleak. With municipalities depending heavily upon property tax revenues to provide services, dwindling property values will strain municipal budgets even further. Hopefully, the heightened involvement of the federal government with an economic stimulus package on the verge will help ease the burden on struggling homeowners. Regardless of the uncertainty of the future, public policy officials must advocate for more effective measures to mitigate the risk of future meltdowns.