Community and Economic Development

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Using Community and Economic Development to Promote Growth

The recent financial crisis is considered by many economists to be the worst financial crisis since the Great Depression of the 1930s. It was caused by the housing bubble that disguised risk and had other various enabling conditions that resulted from bank deregulation. From these circumstances, many cities like Detroit saw a sharp increase in foreclosures and abandoned housing which then resulted in a decrease in quality of life. There are numerous development strategies that cities can employ as they seek to recover from the impact of the collapse of the real estate market upon neighborhoods and local economies. This paper aims to explain the rise and collapse of the housing bubble and provide possible development strategies for cities to enact in order to recover.
The housing bubble and sub-prime mortgage crisis sent shock waves through the economy, particularly in metro areas like Detroit. Simply defined, a subprime mortgage is just a loan made to someone with a weak or troubled credit history. By 2005, the list of subprime-lending specialists had grown to 210 lenders, from 141 in 1996 yet their combined loan volume grew tenfold during the same period. The subprime crisis hit Detroit particularly hard as residents went from struggling to get loans from banks to having loan brokers, who required no licenses, knock on their doors offering subprime refinance deals – with interest rates that are higher than those on conventional loans. In fact, 70 percent of the loans made in the Detroit neighborhood carried a high interest rate. Furthermore, the bigger the loan, the more those loan brokers make in commission so they encourage consumers to take out larger loans than...

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...obal capital: The subprime crisis, federal policy and high-foreclosure neighborhoods in the US," International Journal of Urban and Regional Research, 35 (1): 130-146.
Markee, Patrick. 2011. "The unfathomable cuts in housing aid," The Nation (Dec. 11).
Porter, Michael E. 1995. "The competitive advantage of the inner city," Harvard Business Review, 73 (May-June): 55-71.
Pristin, Terry. 2011. "Who invests in low-income housing? Google for one," New York Times (Jan. 25).

Rose, Kalima. 2001. "Beyond gentrification: Tools for equitable development," Shelterforce. (May/June).
Solow, Robert M. 2009."How to understand the disaster". New York Review of Books, 56 (May 14).
Wilson, William Julius. 1996. "Work," New York Times Magazine (Aug. 18): 27+.
Zandi, Mark. “Op-Ed Contributors; the One Housing Solution Left: Mass Mortgage Refinancing.” The New York Times (13 Aug. 2012)

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