Since she left her post as the editor of City Limits magazine from 1999 to 2005, Alyssa Katz embarked on a dystopian tour to dig up the roots of the housing boom and the crash that followed. Her book “Our Lot: How Real Estate Came to Own Us," published last month by Bloomsbury, tells the stories she uncovered, stretching back through decades to reveal the mixed motives at the center of the crisis in home loan foreclosures. Housing writer Bendix Anderson sat down with Katz, now a consultant at the Pratt Center for Community Development and adjunct assistant professor of journalism at NYU, to discuss what happened, and what happens next – as well as Katz's experience writing this exhaustively researched account. Following are highlights from that conversation.
~
What’s your favorite thing about the book?

I was able to get out and go across the country and see how different people in different communities experienced the real estate bubble and bust.

News Topics
Housing and Development
What was the biggest surprise?

It was really how complicated people’s decision making was … very often people were deceived, set up, or led to believe things that weren’t true. But the situation was very much compounded by people’s own thinking — people thinking, this is how I’m going to get a leg up, this is how I’m going to make it to the next rung on the economic ladder.

Is it fair to say that the book is about how a massive government intervention to promote homeownership massively failed?

Yes and no. It is how a massive government intervention promoting homeownership should have corrected another major failure in American history. The phenomenon of near-universal homeownership promoted through the New Deal, though the Federal Housing Administration, excluded people of color and urban areas. We have seen a couple of failed attempts to rectify that, both very problematically executed. The FHA scandals of the early 1970s never had any hope — the idea was that the solution to urban disinvestment and riots was to permit FHA insurance in riot areas, but it was done in an incredible corrupt way that led to mass foreclosures. More recently what we’ve had is really a very promising effort to close the significant gap between white and black and Latino borrowers through the promotion of responsible mortgage products, credit counseling, and using the Community Reinvestment Act to bring people who otherwise would not have qualified to give them every opportunity to qualify [for home mortgages]. All that was necessary. It was an important step forward, except that this is happening simultaneously with the emergence of an increasingly deregulated financial system...

Deregulation worked too well. Too much money all over the world from too many investors was chasing this limited number of mortgages. Bankers also created derivatives, collateralized debt obligations, and credit default swaps that were based on the mortgages. Many of the investment banks created or purchased their own sub-prime divisions just to generate activity… as underwriting standards deteriorated in the mid-2000s, then investors were on the hook.

Can homeownership rebuild neighborhoods and help individuals become better people?

There is some empirical research that says that, controlling for other factors, homeownership is a force for strengthening communities. We have great examples of it here in New York, the Nehemiah Homes and Partnership Homes. I was just out to East New York, actually going back to one of the areas which had both been one of the hardest hit by the FHA scandals and which has one of the highest, I think it has the highest foreclosure rate in Brooklyn now, which is fascinating that it’s the very same blocks [that suffered the highest foreclosure rates in the 1970s]. And East New York also is where the Nehemiah Homes are ... those blocks have very low foreclosure rates. …The Nehemiah Homes are in great shape, people have beautiful gardens … I think the neighborhood would be in much, much worse shape if not for the Nehemiah owners.