Renters feeling mortgage crisis shockwaves

Ripple effects now squeezing area's financially vulnerable due to greater competition for affordable housing

Durham and the Triangle have been spared the worst of the credit crunch and foreclosure wave, but the effects are nonetheless rippling through the local economy, sometimes in unexpected ways.

Everyone knows that banks, builders, and home-buyers and sellers are suffering from a credit crunch these days.

But so are others whose situation has not been so well publicized -- even those who don't have homes.

"Foreclosure has hit lower-income people," said Jack Preiss, a retired Duke University sociologist and former Durham city councilman who has been building low-income housing for decades. "These people have been hit very hard."

The crisis in mortgage lending that began a year ago has set off a general business crunch, leading to job losses and tightened credit:

- Some homeowners who were financially marginal to begin with are out of work, and those still employed find getting to work increasingly expensive.

- Foreclosed homeowners, as well as potential owners now unable to get financing, have raised demand for affordable apartments and rental houses.

- Some landlords who own affordable housing are facing foreclosures themselves.

- Money for government housing vouchers is harder to come by.

- Agencies set up to help low-income people find homes and pay rent are being called on to help jeopardized homeowners.

- Builders of housing for low-income buyers and renters face harder times finding construction loans.

The Triangle's strong economy has softened the blow considerably, as has the fact that housing prices didn't inflate as much as in markets such as South Florida and California. But the region is not immune.

"We haven't really seen [effects] yet," said Terry Allebaugh, director of Housing for New Hope, a Durham nonprofit that assists the homeless. "But we read the papers and see signs."

Housing for New Hope operates halfway housing and permanent apartments for otherwise homeless people with low incomes and/or disabilities. It also assists individuals and families without places to live or at risk of losing the homes they have.

"We know some people who might be hurt [who] own rental housing," Allebaugh said. "That would have a negative impact on the people we serve."

The Durham Affordable Housing Coalition is seeing signs of a change, too.

"One of the things we do here is home-ownership counseling," said director Anita Oldham. "Now, most of our requests are for people in [mortgage] default. That's affected us and our workload."

Rising construction costs are slowing construction, she said, and Larry Jarvis of the city's community-development office said the present economy is having effects "in ways that would not be readily apparent." For example, the tax credits offered for building low-cost housing are less attractive to builders with less income to shelter.

Chris Estes, director of the N.C. Housing Coalition, said the situation is precarious in several respects .

"Foreclosure has driven competition for affordable housing," he said. "Many of these folks have very low incomes, so ... they really have to get a [federal rental] voucher and getting a voucher is much more difficult. ...

"Lending in general has been tighter," Estes said. "There's more competition for scarcer resources -- we've seen some apartment buildings go under."

Preiss said the crisis in housing, and its larger effects, is due in large part to lenders abdicating the responsibility long expected of them.

"Bankers, I think, have often been stereotyped as being ones who insist on [good] credit," he said. "Very careful about it. ...

"And then when this happened, we suddenly found out that bankers didn't give a damn about it."

Lenders, as well as agencies meaning to aid low-income buyers, encouraged people to take on mortgages they could barely afford, he said, and who had no reserve cash to carry them through a job loss or illness or other unforeseen catastrophe.

"Nobody was minding the store," Estes said.

He expects the situation will get worse before it improves, but he thinks it will improve eventually and bring changes in public policies.

"Hopefully, it will really lead people to call into question ... what kind of entry-level home lending is available," Estes said.

"This area's growing fast," he said. "And local governments are realizing affordable housing is really a premium for them if they want to have housing available for the work force."