COVID-19 and the housing crisis

Amy Castro Baker has been in the news lately. As an assistant professor in the School of Social Policy & Practice, her research areas—the housing market and universal basic income—have come front and center as government grapples with the economic reverberations of the COVID-19 pandemic. Unemployment rates are up 13%, as people working in the service and hospitality industries have been laid off and those working in the gig economy struggle for their next bookings. “This public health crisis,” says Castro Baker, is “exposing the fractures that have been in our economy and our community since the housing crisis in 2008. It’s really pulling back the curtain on the fact that we’ve been a house of cards for a really long time.” 

What the U.S. economy will look at the end of this “depends on the willingness of the federal government to step up and make some bold choices,” Castro Baker says. She advocates for sustained payments and benefits for individual households, both in the short-term and then for the duration of the crisis. 

The housing crisis

Castro Baker began studying issues of family homelessness and housing issues as part of former Philadelphia Mayor John Street’s 10-year blueprint plan, and ran a program matching young mothers in West Philadelphia with older female mentors. Beginning in the early 2000s, she saw Black female homeowners, often the cornerstones of their families and communities, asking for homeless shelter referrals. “Why am I seeing fully employed women in their 50s and 60s suddenly become homeless?” Castro Baker then asked herself. It was the beginning of the housing crisis and the beginning of Castro Baker’s academic work. 

As she saw banks failing and the market crashing, Philadelphia’s housing court was filled with older Black women, Baker says. But when she looked at the data, nobody was talking about gender. “We’re eroding the gains of home ownership in Philadelphia,” Castro Baker says. She began to trace the first generation of women to get coverage in the 1960s and ‘70s. “Our data show we are basically reversing the trends of the civil rights and women’s movement,” she says. “What is it about gender and the market that is pulling that thread?”

“Until 1974, women did not have legally protected access to credit in their own names without a man’s signature,” Castro Baker says. “In many states, women were expected to provide medical proof of sterility in order to gain access to credit. This locked generations of women out of accessing the vehicles necessary to accumulate wealth.” But by 2000, single women were the fastest growing sector in the housing market. This rise in female borrowing happened alongside the rise of subprime mortgages, Castro Baker notes, a riskier form of borrowing that many homeowners did not understand. After unknowingly signing balloon mortgages or being targeted for risky loans, these people would lose their homes, “reversing gains of people who bought homes against all odds in the ‘60s and ‘70s,” she says.

This downward mobility was particularly evident in the erosion of the Black middle class. If you take a white man and Black women with the same financial profile, Castro Baker says, the Black woman is 256% more likely to be given a subprime loan. “The perfect customer,” she says, “was a women living off of a pension with credit card loans. Risky lenders specifically targeted this group of people.” Many of these women were the center of financially fragile networks, supporting and offering refuge to other family members, including dependents and the recently incarcerated. “I am the only thing between my family and the streets,” was a refrain Castro Baker frequently heard.

She says that societally “the lie is that if we are just smart enough and work hard enough, those subprime mortgages won’t affect us” and that this belief was widespread within white families. Black families, Castro Baker says, understood that the market has never been set up to support them. In contrast, “white women were blindsided,” she says. “They believed that what you’re supposed to do is be a wife and a mom. And that if they followed these gender rules and norms, it would work. But for a generation of white working class women in particular, it’s just not working anymore.”

Even as the economy saw recovery on the macro scale during the years after the Great Recession, “it doesn’t mean that our neighborhoods are recovering and that human beings are recovering,” Castro Baker says. “When you think about Philadelphia, what you had were entire ZIP codes, neighborhoods, and blocks locked out of home ownership and wealth building for generations. They finally got safer access to markets in later decades, only to have that wealth extracted from them during the housing crisis. People were losing their homes to foreclosure and watching their homes crumble around them. This erodes social cohesion, civic engagement, and family ties. It also sends people a direct message that they do not matter in our economy.” 

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$400 emergencies and the gig economy

The majority of American households don’t have significant savings accounts and are living at a tipping point that often gets overlooked, she says. And now the economy is experiencing a major shock in the form of the COVID-19 epidemic. Castro Baker, who is 40, says, “People of my generation came of age at a time when we were supposed to be hitting these markers that we weren’t able to hit, never recovered, and now we’re slammed with a second hit.” Lost wealth, lost wages, and lack of recovery underpins the current economy, she says. “You know according to the Federal Reserve, 40% of Americans can’t afford a $400 emergency? And what we have with COVID is bigger than a $400 emergency.

“This is one outcome of choosing to bail out the banks and corporations in 2010 instead of choosing to also bail out homeowners and communities. People never fully recovered.” Castro Baker says. “So, what we are looking at are compounded shocks, and we don’t know when it’s going to go away.”

A classic model is an Uber or Lyft driver, who relies on tips and doesn’t know how many shifts they’re going to clock. “This means you can’t predict your pay,” Castro Baker says, “which means you can’t budget, and without predictable income you’re locked out of many safer financial instruments. That type of precarious work is now endemic in most sectors of the economy, so we even have lawyers that live like that, we have musicians, we have writers, we have thinkers. That precarity of volatile work is moving steadily up the income ladder.”

Castro Baker urges lawmakers to consider implementing a policy that she’s testing in Stockton, California: universal basic income. 

In this project, a randomized group of 125 individuals living in Stockton neighborhoods where the median annual income is at or below $46,033 receive a monthly, no strings attached stipend of $500 during a period of 18 months. 

The $500 check does not cover all monthly needs but provides a cushion for people to pay down credit card debt or buy shoes, prom dresses, and food for their families. Castro Baker advocates for this public policy structure on a national scale during a time during a time of widespread unemployment and uncertainty. 

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Economic relief

Both the Democratic and Republican parties proposed economic relief plans, resulting in the $2 trillion dollar stimulus bill, which includes a suspension of student loans, a boost for unemployment insurance, a freeze on raises for those whose salary is over $425,000, an infusion of money for hospitals and the national stockpile of medical supplies, and one-time payments of some Americans, based on income.

While the political parties debated the mechanics of the stimulus bill, both Democrats and Republicans agreed on its necessity during the COVID-19 pandemic, which Castro Baker says is an opportunity to find common ground. “I’m extremely encouraged at the conversation at the federal level,” she says. “We need cash transfers, we needed them yesterday, and we need them to be long-term.” 

Castro Baker advocates for continued payments throughout the duration of the crisis, along with a boost in other benefits like social security and food stamps and a moratorium on evictions and foreclosures. 

The groups that are most at risk are those that are in mixed-documentation households, Castro Baker says. It takes five years after immigration to be eligible for most federal aid programs like Medicaid, even with documentation. “When you add on top of that the fear around deportation,” Castro Baker says, “those folks are going to delay seeking medical treatment as long as possible, which means they’re going to be far sicker when they actually do seek treatment.” 

In Philadelphia, the largest poor city in the U.S., Castro Baker anticipates a sharp divide, in terms post-pandemic recovery. “Federal intervention is only going to take us so far,” she says. “We need local leadership to get us the rest of the way there. Letting Mayor Kenney and local civic leaders lead is going to be key for the city of Philadelphia.” She notes that Philadelphia has a number of part-time employees in health care settings, not all of who have paid sick leave, paid care leave, and protected work. 

These changes can be implemented at the state and local level and by employers directly. “The point is we all have a part to play,” Castro Baker says. “There’s no one that’s left untouched, which means there’s no one who doesn’t have a responsibility to look at their particular sphere of influence, be it within the market, within the private sector and ask what their role is to play in altering their HR policies and caring for their workers.”

Castro Baker is heartened by the steps that have been taken in this direction. In the face of the pandemic, “our country is having this phenomenal conversation about what it means to care for one another,” she says. “People have advocated for cash transfers since the start of our democracy and talking about problems in the housing market for decades. So maybe this is the chance we have to pull those two pieces together when we’ve been so divisive for so long.”