How Foreclosures Feasted on Some Cities, Not Others - Miller-McCune
A look at foreclosures in two Southern California cities shows why some fared better than others in the housing crisis.
Lake Elsinore, California, is known for its freshwater lake, casino, outlet shopping, and its high rate of foreclosures — 86 per 1,000 after the housing bubble burst. (Hemera/istockphoto)
Here’s a tale of two cities in Southern California, one that survived the worst of the foreclosure crisis with a few scratches, and one that was badly beaten up.
In 2000, Santa Paula, a historic oil town bounded by vast greenbelts of orange, lemon, and avocado groves, had a population of 29,000 and a median household income of $42,000. When the subprime mortgage industry collapsed eight years later, 16 of every 1,000 homes in the “Citrus Capital of the World” went into foreclosure, well below the national average of 22 for every 1,000 homes.
Another old town, Lake Elsinore, closely matched Santa Paula in size and household income in 2000. Today, the city is known for its freshwater lake, the largest in the region; its casino, “California’s Friendliest Card Room”; its outlet shopping; and its high rate of foreclosures — 86 per 1,000 after the housing bubble burst.
The key difference, says Garrett Glasgow, a political scientist at the University of California, Santa Barbara, is that Santa Paula had slow-growth policies in place to prevent rampant residential construction, while Lake Elsinore was aggressively pro-growth. Between 2000 and 2008, Lake Elsinore was the 12th fastest-growing city in the state. The city’s slogan is “Dream Extreme.”
It’s a pattern that was repeated throughout California, according to a recent study in Urban Affairs Review by Glasgow and co-authors Paul Lewis and Max Neiman, political scientists at Arizona State University and University of California, Riverside, respectively. The stronger the city council opposition to residential growth in the late 1990s, their data show, the lower the rate of foreclosures nearly a decade later.
The study, then, runs counter to a prevailing view among public-policy scholars that cities are swept along helplessly by larger trends. The authors explain: “Although the foreclosure crisis was driven by national and global forces, more cautious local government policy approaches to residential growth appeared to moderate the damage. … One might claim that if more cities had made an effort to manage growth, then the housing meltdown might have been significantly less burdensome.”