WASHINGTON -- Declining homeownership and a lack of low-cost rental housing are undercutting central cities, including Baltimore's, and were among the indirect causes of the recent Los Angeles riots, leaders of the realty and mortgage banking industry said here yesterday.
More costly barriers to the federally insured Federal Housing Administration mortgage program -- which became effective last year -- have greatly increased hurdles for low- and middle-income borrowers seeking to buy their own homes, said Stephen B. Ashley, vice president of the Mortgage Bankers Association of America. That, in turn, has led to increased frustration among city residents.
"Owning a home is still the American dream. Unfortunately, that dream has fallen on hard times in America today. The decade of the '80s witnessed the nation's first drop in homeownership since the Great Depression," Mr. Ashley said at a housing conference held at the National Press Club.
At Baltimore's St. Ambrose Housing Center, director Vincent Quayle said yesterday that federal programs to support low-income home purchases and rentals have been "clobbered" for the past 11 years during the Reagan and Bush administrations. He said unhappiness over housing shortages is increasing anger in urban communities throughout the country.
"Those riots [in Los Angeles] were from the last 12 years of doing nothing about problems festering," Mr. Quayle said.
Through the use of a state or federally insured mortgage, a Baltimore resident seeking to buy a modest home in the late 1980s could have done so with a $1,000 to $1,500 down payment. Now, because of higher mortgage program hurdles or program cutbacks, it takes at least $2,500 to $3,500 in down payment and closing costs to buy the same home, he said.
"Credit has tightened, and people need more cash to put into a house than they did," Mr. Quayle said. At the same time, he said, rental units for poor families have become fewer.
The 1990 National Affordable Housing Act increased the mortgage insurance premium and down payment required for the FHA mortgage program, one of the most commonly used vehicles for homeownership among low- and middle-income buyers.
As a result of the FHA changes, which became effective last year, FHA activity fell 12 percent from July to December of 1991, Mr. Ashley said.
Statistics from Harvard University's Center for Housing Studies show that during the 1980s, homeownership among young families declined 9 percent. For the population as a whole, the homeownership rate fell 1 percent during the decade, the Harvard center reported.
Although the decline in homeownership has been linked by the Mortgage Bankers Association and the National Association of Realtors to changes in the FHA program, a representative of the Bush administration said at yesterday's meeting that the changes were necessary to keep the program financially sound.
John C. Weicher, an assistant secretary at the Department of Housing and Urban Development, said the single-digit mortgage rates available in the market are assisting those at all income levels seeking to buy homes.
He said the use of FHA mortgage programs by very poor residents of inner-city neighborhoods in Los Angeles and elsewhere have led to high default rates.