The housing blues — One Bourbon, One Scotch, and One Beer

I don’t drink, but I’ve enjoyed the classic blues song, “One Bourbon, One Scotch, and One Beer,” for as long as I can remember. In 1977, George Thorogood sang a compelling story about a man who lost his job. Unable to pay his rent and thrown out by his landlady, he tries and fails to secure lodging at a friend’s house. He goes to a tavern and repeatedly orders the three drinks to drown his sorrows, staying until the last call at three o’clock in the morning.

I was reminded of this song/story last week as our team wrapped up the 2022 CDFI Equitable Recovery Program (ERP) grant round. The CDFI Fund is providing awards to support CDFIs committed to extending loans to more low-income borrowers, including historically underserved minority communities disproportionately impacted by the COVID-19 pandemic with significant unmet capital or financial service needs.

Real-life housing blues

Access and affordable housing are the highest unmet needs among people negatively impacted by the pandemic. The research necessary to prepare for the grant applications was compelling, and addressing affordable housing was the most common theme among the many credit unions we helped—and for good reason.

Increasing homelessness reflects income inequality, and the pandemic has significantly exacerbated this. One survey conducted in 2021 to measure the impacts of the pandemic found that it spurred significant increases in rental debt, poorer housing quality, and downward residential mobility. While the eviction moratorium helped many individuals from being forced out onto the streets, it didn’t prevent them from taking on debt. Landlords became more creative in evicting their tenants by forcing individuals to move by changing locks or refusing to renew leases.

Apart from being evicted after being unable to afford rent due to job loss, housing and rental prices have skyrocketed since the pandemic’s beginning. Artificially lowering interest rates was one of the key responses to the pandemic, allowing businesses and individuals to have increased access to credit to deal with the loss of jobs and spending. However, lowering interest rates negatively affected low-income consumers because it led to a home-buying frenzy, which drove housing and rental prices up. Thus, the policy response to the pandemic to lower interest rates has priced many, especially low-income families, out of the market. During the pandemic housing boom, data in some cities indicated that Black and Hispanic consumers continued to be denied mortgages disproportionately compared to other demographic groups.

No “last call” for credit union first responders

We’re all aware of the dramatic action credit unions took to mitigate the pandemic’s devastating effects—interest-free loans, deferred loans, and instant credit to support dire, unplanned emergencies. Credit unions were there in a big way. What many might not be aware of is the amazing level of pandemic response that continues today through CDFI credit unions.

Here are a few impressive examples of how credit union first responders are making an ongoing difference in their communities:

  • Rental assistance. CDFI credit unions in the Pacific Northwest are strengthening a rental assistance program launched by the GoWest CU Foundation (formerly the Northwest CU Foundation). Building on previous program strategies, credit unions are providing 0-percent rental assistance loans to help low-income families access affordable housing.
  • Native American and Persistent Poverty communities. Our work with several credit unions focused on financing affordable homes (manufactured and mobile) in partnership with Native nations in Persistent Poverty Counties, where 20 percent or more of the population have poverty-level household incomes. The work also includes programs on Native lands to rehab former meth houses to make them safe and habitable, providing the funding for the remodel and even the financing to Tribal families participating in first-time homebuying classes.
  • First-time homebuyer programs and down-payment assistance. We saw a lot of programs leveraging community partnerships to provide first-time homebuyer education and down-payment assistance to help low-income families access affordable homes.

These inspiring examples demonstrate credit unions’ ongoing commitment to communities historically overlooked by mainstream financial institutions.

Why it matters

Consider the impact these programs have on participating individuals and families who found affordable access to housing. We all need a safe roof over our heads. It’s part of the foundation for a decent quality of life. These consumers gain the opportunity to build assets and credit development that will benefit them for the rest of their lives. Communities benefit from higher homeownership and safer neighborhoods. A long list of financial, health, and educational benefits are well documented.

Credit unions don’t need to be CDFIs to provide meaningful, affordable housing programs. Risk can be managed in multiple ways to give some relief and opportunity. However, it’s important to note that CDFI grant funding allows credit unions to significantly leverage their lending impacts at a much higher level. This is why an inclusive and efficiently run CDFI department at the U.S. Treasury is so important to credit unions and their communities.

Supporting CDFI credit unions in their grant strategy development and assisting with the grant plan and application is inspiring work. Our team is proud to work with so many mission-focused credit union leaders. Their work makes a difference, and their actions inspire hope among the hopeless and many others who want to engage and make the world a better place.

The pandemic isn’t over, folks. Communities still need credit unions. If we do this right, the song we sing will be compelling and increase the financial well-being of the millions of people we reach and serve.