Schmudget Blog


Children and Homelessness in Washington State

Posted by staceys at Mar 17, 2009 09:00 PM |

Safe, stable, and affordable housing is an important component of economic security for Washington families. According to a new report by the National Center on Family Homelessness, more than 24,000 children are homeless in Washington State.* The report ranks Washington 25th in the nation in child homelessness. (This is a composite of the number of homeless children in the state, an assessment of their well-being, the risk of children becoming homeless, and state efforts to address the problem.)

Among the homeless children in Washington state, close to 11,000 are under six years old, about 9,500 are between kindergarten and eighth grade, and over 4,000 are in high school. (See graph) Fifty-eight percent of Washington’s homeless children are white, 28 percent are Hispanic, and ten percent are black.

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Food

Food security is very low for one in 26 of Washington’s households, which is comparable to national rates of food security. Households living in poverty and headed by single women are especially vulnerable to hunger.

Health

Homeless children in Washington are also more than twice as likely as middle income children to have moderate or severe health problems, such as asthma, dental problems, and emotional difficulties.

Education

Less than 25 percent of homeless high school students in Washington graduate, which has a significantly negative impact on their lifetime earning potential.

Affordable housing

In Washington, it can be especially difficult for low-wage workers to find affordable housing. A full-time worker earning minimum wage ($8.07 per hour) in Washington would need to work close to 80 hours per week for 52 weeks a year in order to afford a two-bedroom apartment at Fair Market Rent.**

For a typical homeless family, which consists of a single mother with two children, affordable housing can be even more out of reach. The average income for a single mother in Washington who receives public support is less than $550 per month, which means she could afford to pay $157 monthly in rent. The cost of a two-bedroom apartment at FMR would be $672 higher than that each month.

Shelter and transitional housing

Families in Washington seeking emergency shelter or transitional housing do have some options. The state currently supports 827 units of emergency housing or shelter for one family, 2,628 units of transitional housing, and 595 units of permanent supportive housing designated for families. In Washington, approximately 89 percent or 3,348 individuals, of the total number of people on wait lists for public housing are families with very low incomes. Washington State does give priority on the wait lists to families experiencing homelessness and to survivors of domestic violence.

Long-term investments

The state has made long-term investments in trying to address the lack of affordable housing. In 1987, the Washington State Housing Trust Fund was created as a source of capital funding to support affordable housing for lower income Washingtonians. The Fund supports the construction, acquisition or rehabilitation of over 4,500 units every two years. In 2008, the Fund was increased to $200 million for the biennium, but the need still exists for affordable housing.

*The definition of homeless children and youth used in the report is that described in Title X, Part C, Section 725 of the federal No Child Left Behind Act.

**Fair Market Rent is defined as "the maximum chargeable gross rent in an area for projects participating in the HUD Section 8 program," and is set at the 40th percentile of market rents for units at each bedroom size as determined by the Department of Housing and Urban Development. American Community Survey. (2006)

Unemployment Rate Expected to Reach 10%

Posted by jeffc at Mar 13, 2009 11:40 AM |
Filed under: State Economy

An updated March forecast from the Economic and Revenue Forecast Council shows further weakening of the economy.

Since the November forecast, the projected unemployment rate for next year has risen from 8.3% to 10%. We have not had an annual unemployment rate that high since 1983.

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In addition, the leap from 5.3% in 2008 to 9.2% in 2009 would be the largest one-year leap in unemployment in at least three decades.

The ERFC notes that the downward revision is largely due to lower federal infrastructure funding than was expected, and is somewhat offset by higher funding for Hanford clean-up.

What is the unemployment rate? It's the share of the labor force that are looking for, but unable to find, work. This measure does not include people who have been discouraged from actively seeking work or people who are working part-time because they cannot find fulltime work.

"The High Cost of Subprime Lending" Part 3: Future of Housing Crisis in Washington

Posted by jeffc at Mar 13, 2009 08:25 AM |
Filed under: Economic Security

On Monday, the Budget & Policy Center released a paper entitled, "The High Cost of Subprime Lending in Washington State." Over the week we have posted here about the disproportionate effects of high cost lending on certain lower income neighborhoods and people of color. Today we will take a look at the future of the housing crisis in Washington State.

Washington has been relatively fortunate to avoid some of the deepest mortgage problems seen in other states as a result of the subprime lending crisis. Nationwide in the third quarter of 2008, over five percent of mortgages were seriously delinquent or in foreclosure, whereas in Washington, foreclosure rates were below 2.5 percent. (Only seven states in the country had such low foreclosure rates during this time.)

But the housing situation in Washington may take a turn for the worse in the near future. Nationwide, 77 percent of subprime loans with adjustable rates have already experienced a reset of the initial interest rate. In Washington State however, only 67 percent of loans have reset (see graph) The remainder are still at the original interest rate.

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In the next 12 months, it is expected that interest rates will reset on 23 percent of subprime adjustable rate mortgages in the state, a higher share during that period than nearly every other state in the nation.

Problems for strapped homeowners can be exacerbated by prepayment penalties and large loan balances. Thirty-two percent of subprime mortgages in Washington State have prepayment penalties currently in force, a higher percentage than nearly every other state. And only 10 states have larger average subprime loan balances.

This is worrisome because the subprime mortgages that are most likely to go into delinquency or foreclosure are those with adjustable interest rates. Homeowners with these loans see sudden and significant increases in their mortgage bill from one month to the next and the additional cost can lead to late payments and eventually, foreclosure.

"The High Cost of Subprime Lending" Part Two: Loans by Neighborhood & Region

Posted by jeffc at Mar 12, 2009 09:30 AM |
Filed under: Economic Security

On Monday, the Budget & Policy Center released a new report on the "High Cost of Subprime Lending in Washington State." We will be blogging on the topic throughout the week. Check out the entire paper and part one of the blog series.

Statewide, mortgages in lower-income neighborhoods were almost twice as likely to be high-cost than those in higher-income neighborhoods.* (See graph.)

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The effect on household finances of having a high-cost mortgage can be significant. The cost of a $230,000 mortgage can easily be $600 higher per month, or over $200,000 over the course of a 30-year loan. In the middle of the current housing crisis, having a high-cost mortgage also suggests a higher likelihood of foreclosure.

In most areas of the state, lower income neighborhoods had higher rates of high cost loans than wealthier neighborhoods (click on table below to see larger version). In Cowlitz County, for example, 45.5 percent of mortgages in the lowest income neighborhoods were high-cost, compared to 20.8 percent in the higher-income neighborhoods. Whatcom County was the only area where wealthier neighborhoods did not have significantly lower rates of high-cost mortgages than poorer neighborhoods.

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The pockets of high-cost mortgages across the state raise the question of whether borrowers in lower income regions and neighborhoods have adequate access to financial education and whether they have a variety of lending options. This has an impact on all homeowners: when foreclosures concentrate within neighborhoods, it is not just the delinquent homeowner that suffers. Other owners are likely to see impacts such as property value decline and increased crime.

 

*The federal Home Mortgage Disclosure Act (HMDA) classifies mortgage as “high-cost” based on the loan’s annual percentage rate (APR). The APR is a better measure of the total cost than the contract interest rate alone because it includes points, fees, and other finance charges. Mortgages with APRs above designated thresholds are defined as “high-cost.”

Community Health Centers and the State Budget

Posted by jeffc at Mar 10, 2009 12:55 PM |
Filed under: Health Care, State Budget

Deep spending cuts, such as those considered in the Governor's proposed biennial budget, would have severe effects on essential components of the state’s health care infrastructure, such as community health centers. Altogether, it is estimated that the Governor's budget would amount to a $250 to $350 million hit to community health center system. The table below summarizes the impact of selected cuts (click on it to see a larger version).

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Community Health Centers have a unique role in the state’s health infrastructure. They provide a comprehensive scope of services to Washingtonians who would otherwise have limited access to quality affordable care. And they do so without regard to their ability to pay. In fact, 32 percent of their patients in 2007 were uninsured (see graph)

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The cuts described above understate the situation faced by the community health center system because it also faces the impact of the recession. As people lose their jobs and therefore access to private health insurance, they are likely to become uninsured community health center patients. The need for these centers rises while their revenue falls.

Counting up the number of people who will directly lose coverage because of budget cuts also understates the effect on individual health care consumers. As community health centers reduce their services, it will have a detrimental impact on many more Washingtonians with lower incomes and special health needs.

"The High Cost of Subprime Lending"

Posted by jeffc at Mar 09, 2009 12:15 PM |
Filed under: Economic Security

Today, the Budget & Policy Center is releasing a new report on the "High Cost of Subprime Lending in Washington State." We will be blogging on the topic throughout the week. You can read the entire report by clicking here.

In Washington State in 2006, African-American and Hispanic homeowners were most likely to pay a higher premium for their mortgage than whites or Asians.*

The effect on household finances of having a high-cost mortgage can be significant. The cost of a $230,000 mortgage can easily be $600 higher per month, or over $200,000 over the course of a 30-year loan. In the middle of the current housing crisis, having a high-cost mortgage also suggests a higher likelihood of foreclosure.

The graph below shows the share of mortgages that were high-cost in 2006 by the race/ethnicity of the borrower. The differences were stark. Over 40 percent of the mortgages lent to African Americans and Hispanics were high-cost, compared to around 22 percent for non-Hispanic whites and Asians.

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It is unlikely that factors such as credit scores, debt-to-income ratios, and loan-to-value ratios can explain a gap of this magnitude. The blue bars show the high-cost mortgage rate for households with high incomes. Even among borrowers whose incomes were twice the area median, 39 percent of African-Americans and 37 percent of Hispanics had high-cost loans.

The difference in loan pricing suggest that the impact of further deterioration in the housing market will likely fall disproportionately on African Americans and Hispanics.

 

*The federal Home Mortgage Disclosure Act (HMDA) classifies mortgage as “high-cost” based on the loan’s annual percentage rate (APR). The APR is a better measure of the total cost than the contract interest rate alone because it includes points, fees, and other finance charges. Mortgages with APRs above designated thresholds are defined as “high-cost.”

"A Shared Vision" Part Four: Economic Security

Posted by staceys at Mar 06, 2009 10:00 AM |
Filed under: State Budget

This post is the final installment in our four-part series on a shared vision for Washington State. The series is based on the Progress Index, a framework for analyzing the state budget that was developed by the Budget & Policy Center. The Progress Index utilizes four commonly-held values: education and opportunity, thriving communities, healthy people and environment, and economic security. Last week, I wrote about healthy people and environment.

State investments in economic security ensure that people can survive difficult financial times and take steps to improve their quality of life. Families succeed when parents are secure in their ability to provide basic necessities for their children. Workers prosper when workplaces are safe and financial protections exist in cases of injury or job loss. And everyone in state benefits when people can meet their basic needs and find meaningful employment.

Even in times of prosperity, we all face the risk of job loss, disability, or family crisis. When the economy is strained, public investments in economic security matter even more. State spending on economic security fell as a share of personal income in each biennium from 1995-97 to 2005-07. Funding increased in the 2007-09 budget due to increased reimbursement rates for child care centers and a new collective agreement with family child care providers. (See graph)

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As the unemployment rate rises in Washington State due to the current economic crisis, unemployment insurance benefits play an increasingly important role in shoring up economic security in the state. Two recent stimulus efforts are directed at this benefit: the federal stimulus bill which passed last month, increases the weekly benefit amount by $25 for most claimants. The state also enacted new legislation in February increasing the weekly benefit amount by $45 and raising the weekly minimum amount for many claimants.

The combined impact will be an additional $70 per week for recipients and $480 million of additional money circulating through the state economy. Economists calculate that for every dollar of unemployment insurance issued, there is $1.64 generated in spending.

Safe and affordable housing is also an important component of economic security. Stable housing is a key variable to getting jobs, educational attainment, and health care. Research shows that quick rehousing plus supportive services can have a long-term impact on homelessness. But affordable housing is not readily available to many people living in Washington State: three-fourths of renters with incomes under $35,000 per year were paying more than 30 percent of their income in rent in 2007.

Finally, financial asset development is an important way for people with lower incomes to work towards improving their quality of life. Washington encourages lower income families to build assets through the state's Individual Development Accounts program. IDAs match the savings of lower income families to help build assets that can be used to start a business, buy a home, or pay for college.

But in other instances, the state inadvertently discourages asset building by limiting access to temporary cash benefits (TANF) based on assets the family possesses, such as a retirement account or a car used to commute to work or school. This system works against shared goals. Public programs should help people meet temporary needs without requiring them to deplete modest savings.

This post concludes our series on a shared vision for Washington State. The Budget & Policy Center will continue to use the framework outlined in the Progress Index to evaluate the state budget and analyze our long-term progress toward meeting research-based goals.

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