Foreclosure crisis to come in Puerto Rico

Even as the foreclosure crisis seems to have passed in recent years on the mainland, Puerto Rico is set to see foreclosures galore in the coming months:

Now Puerto Rico is bracing for another blow: a housing meltdown that could far surpass the worst of the foreclosure crisis that devastated Phoenix, Las Vegas, Southern California and South Florida in the past decade. If the current numbers hold, Puerto Rico is headed for a foreclosure epidemic that could rival what happened in Detroit, where abandoned homes became almost as plentiful as occupied ones.

About one-third of the island’s 425,000 homeowners are behind on their mortgage payments to banks and Wall Street firms that previously bought up distressed mortgages. Tens of thousands have not made payments for months. Some 90,000 borrowers became delinquent as a consequence of Hurricane Maria, according to Black Knight Inc., a data firm formerly known as Black Knight Financial Services.

Puerto Rico’s 35 percent foreclosure and delinquency rate is more than double the 14.4 percent national rate during the depths of the housing implosion in January 2010. And there is no prospect of the problem’s solving itself or quickly.

Even before the storm, Puerto Rico was mired in a severe housing slump. Home prices over the past decade have fallen by 25 percent, and lenders have foreclosed or filed to foreclose on 60,000 home loans, according to the Puerto Rico state court system. Last year, there were 7,682 court-ordered foreclosures — a roughly 33 percent increase from 2007. Some 13,000 foreclosure cases are pending, Black Knight estimates.

Without an easy fix and knowing that this is a longer-term issue that may not be solved with mild economic improvement, it will be interesting to see what happens. Some questions this raises:

  1. Will Puerto Rico and the involved parties (residents, mortgage lenders, local governments) be treated the same as mainland parties during the late-2000s housing slump?
  2. What lessons learned from the late 2000s will be applied here and can those lessons demonstrably help lessen the impact over time?
  3. Will institutional buyers of distressed properties see Puerto Rico as a potential gold mine? If so, how does this then affect Puerto Rico in the next few decades?
  4. What is a long-term plan to help boost the economic prospects of the island?

There are many ways this could play out but one would hope that since we have seen some of this before, the effects do not have to be so bad.

“Gated communities for the rich and poor”

A sociologist who has studied gated communities in Puerto Rico discusses gated communities across the socioeconomic spectrum:

The concentration of class and racial privilege in suburbs, fortressed enclaves, securitized buildings, and private islands takes place alongside the spatial concentration of poverty in ghettos, favelas, and barrios. Residential gates for the rich have also led to the rise of gates for the poor—in favelas in Brazil, South African townships, peripheral urban migrant settlements in China, and even in some public housing developments in the United States. The built environment sorts and segregates people, physically and symbolically distinguishing communities from one another. Whether one is locked inside or kept outside is determined by one’s race, class, and gender. In both kinds of gated communities, controlled access points restrict movement in and out. However, living in gated communities of the rich and poor are vastly different experiences.

The privileged gates of Extensión Alhambra offer a retreat into a secure, idyllic community; newly privatized street and sidewalks are restricted to sanctioned, paying community members, who can decide who is allowed inside. In the impoverished community of Dr. Pila, in contrast, government and private overseers control the movement of residents. So while the gates of Extensión Alhambra permit their affluent residents to exert greater political and social influence over their home turf, in Dr. Pila they have the opposite effect, diminishing residents’ power. In privileged communities, gates lock undesirables out; in poor communities, they lock them in. In both cases, gates are erected to serve the interest of the upper classes, who are primarily white. In other words, gates reproduce inequality, and cement or—to use Michel DeCerteau’s term—“politically freeze” social distinctions of race and class.

The same types of structures, different purposes and consequences. This reminds me of the debate regarding the design of public housing projects in the United States: if high-rises hadn’t been the primary choice and public housing agencies instead went with low-rise buildings or New Urbanist type structures, perhaps major problem would not have developed. But, in the case of public housing and gated communities, they can exacerbate existing issues but it is more difficult to claim they cause the issues in the first place.