by Executive Director Paulina Gonzalez, California Reinvestment Coalition (CRC)
Displacement of long-term San Francisco residents has become an all-too-common trend. Families, seniors, people of color, and other low- and middle-income renters are being pushed out of their homes to make way for higher-income, usually less-diverse renters and homebuyers; however, this displacement isn’t happening in a silo. In fact, in many cases it couldn’t happen if banks weren’t willing to make loans to speculators and investors who buy buildings and later evict the tenants, often out of affordable, rent-controlled units. Given the harm they’re causing, advocates renamed these loans “displacement mortgages.”
In August of 2015, community organizations and tenants in San Francisco joined together to take a stand against the banks and the role their loans are playing in financing displacement in the city. The story of this organizing victory sets the stage for holding corporate actors accountable to their communities and builds a model for public-private partnerships for the preservation of affordable rental housing.
In the summer of 2015, tenants groups approached the California Reinvestment Coalition (CRC) armed with data about First Republic Bank as the lender of record on 13 buildings where the tenants were being “Ellis Acted” by well-known serial-evicting investors. CRC joined forces with the coalition, and after an initial meeting and a tepid response from First Republic, the groups held a protest in front of the bank’s headquarters last August.
Tenants bravely shared their stories about the prospect of losing their homes and being forced to leave their communities.
In response to public pressure, a representative from First Republic Bank explained to the crowd that the bank had decided to change its policy and would no longer originate mortgages for buildings where the owner was intending to evict the tenants. This was a great first step, but the community organizations also urged the bank to go one step further and provide loans that would enable nonprofits to buy these buildings where the tenants were facing displacement. In this way, the tenants could remain in their homes, affordable housing stock would stay in community control and fewer families would be forced out.
After months of hard work, the Mission Economic Development Agency (MEDA) and the San Francisco Community Land Trust (SFCLT) announced earlier this month that they had completed the purchase of five of these rent-controlled buildings where the tenants had been facing displacement. With financing from the City and County’s Small Sites program and a loan from First Republic Bank, the two nonprofits purchased the five buildings, keeping 19 households in their homes and in the community.
This was a significant win for these tenants in San Francisco, but displacement is still happening. While First Republic changed its policy, we’ve been informed that other banks — including Wells Fargo, Sterling Bank, Bank of Marin and Bank of America — are still originating these displacement mortgages, despite the obvious and harmful impacts the loan have on low-income communities.
In the coming months, advocates will try to open a dialogue with these four other banks and with their banking regulators to discuss the role that bank loans are playing in Ellis Act evictions.
We’re especially interested in the contradiction between the responsibilities these banks have to responsibly reinvest in San Francisco communities under the Community Reinvestment Act (CRA) versus the harm these loans are causing to people in these communities.
In some cases, we believe banks may have actually sought CRA credit from banking regulators for providing these loans because they were for properties in low- to moderate-income areas. In other words, they were abiding by the letter of CRA, but not by the spirit of CRA, which was originally intended to discourage redlining. While these “displacement mortgages” are technically investments in low-income communities, the reality is that they are causing displacement in these communities. We hope the banks and their regulators will act on the contradiction presented by banks seeking CRA credit for loans in low-income communities, when in fact the loans are resulting in harm to those communities.
CRC has suggested to the bank regulators that banks that provide displacement mortgages should receive negative credit in their CRA exams. In this way, banks would know that practices that harm their communities will also be harmful for the bank’s CRA rating.
Meanwhile, we are calling on these remaining banks to change their policies so that fewer San Francisco families are evicted from their homes.