When Tony Palladeno Jr. started buying and refurbishing houses on the east side of Flint, Michigan, 25 years ago, they seemed like a good investment. The houses are on what he described as “primo land” near a community college and a park, and he figured there would always be a stream of student renters. He hoped the extra income would provide a cushion for his wife, who doesn’t have health insurance, in case of medical emergencies.
Instead, Palladeno’s houses have become a crushing financial burden. The trouble started in 2006, when Palladeno lost his job at the local newspaper, and fell behind on property taxes. Then the Great Recession walloped the city, hastening what had been a steady decline in manufacturing jobs. Property values plunged. They were finally starting to creep up again in some neighborhoods when lead poisoning in the city’s water—which began two years ago this week, when the city switched to the Flint river for its water source—became a national scandal. All of the property in Flint combined is now worth some $500 million less than it was before the recession, according to NBC.
That’s left many residents trapped in homes they can’t sell. Not many people are eager to move into a city with poisoned water, and even if there were buyers, lenders won’t finance mortgages unless sellers can prove they have potable water. Few residents have the money to simply walk away. Some are even facing higher property taxes this year, because of the slight uptick in value before the extent of lead contamination was widely understood.
Palladeno, who has lived in Flint his whole life, estimates he’s put well over $150,000 in his four rental properties and the house where he and his wife live. He reckons he’d be lucky to get $7,000 for any of them now. “We don’t have any hope to sell these houses for anything close to what we put into it,” Palladeno said in a telephone interview. At least two of the homes have elevated lead levels in the water. “We can’t even rent them, because if someone gets sick or dies we could be liable.”
To make their homes habitable, residents have to repair what the contaminated water destroyed: pipes, hot water heaters, dishwashers, and other appliances. The necessary repairs will cost at least $4,000 per house, on average—an impossible sum for many Flint residents, 42 percent of whom live below the poverty line. Even if every dollar of the pledged recovery money ($28 million from the state and $85 million from the federal government) were handed out to residents, it would leave them short.
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Even more devastating may be what the water crisis has done to residents’ wealth. Flint’s population, which is 57 percent black, is particularly vulnerable to downward swings in the housing market. Nationally, home equity accounts for a staggering 92 percent of black Americans’ net worth, according to the Center for Global Policy Solutions, while whites tend to have more diversified investments. Maya Rockeymore, the group’s president and CEO, says that Flint’s black population is likely to be similarly dependent on property values.
Though they didn’t have much to begin with, the corrosion and resulting lead poisoning “literally stripped what little wealth the people of Flint had in their properties,” Rockeymore says. And it dimmed any prospect of recovery from the housing crisis. “We are seeing in real time how the racial wealth gap is created and perpetuated in contemporary America,” she says.
In February, Rockeymore and other experts on building wealth in communities of color sent a letter to Michigan Governor Rick Snyder, arguing that “in addition to damaging the health of Flint residents, we contend that your Administration’s actions have also undermined their potential for maximizing earnings and accumulating wealth over a lifetime, which has a direct impact on the social and economic viability of the communities in which they reside.” Their point was that a proportional response required more than fixing the city’s water infrastructure and providing healthcare to the people impacted by the lead poisoning and other contaminants. (Or prosecuting a few low-level officials.) Among other things, the letter called on the governor to establish a fund to compensate residents for “long-term psychosocial and socioeconomic effects,” and for relieving homeowners of debt and tax liability on affected properties.
There is precedent for compensation funds, notably the $7 billion fund set up for 5,562 people who lost family members in the September 11 attacks. But Michigan’s political leaders have expressed little interest so far. “We were very responsive to the victims of 9/11, and yet we’re seeing a slower and indifferent response of the victims in the Flint crisis,” says Rockeymore. Race and class bias may account for the disproportionate reaction, she suggested, likening Flint to Hurricane Katrina.
Green For All, a nonprofit working to center people of color in the climate movement, recently proposed a way for Michigan to finance a compensation fund. Under the Obama administration’s Clean Power Plan, the state could draft a plan for reducing carbon pollution that requires polluters to pay for their emissions, with that money going to a “Polluters Pay Fund” that would be invested in communities most impacted by environmental damage. Green For All will push for funds in a number of states, but chose to launch its campaign last week in Flint with a specific reference to the “huge amounts of wealth” local residents have lost because of the water crisis.
The federal government and entities like the Federal Housing Administration, Fannie Mae, and Freddie Mac should help stabilize the housing market, too, said Aracely Panameño, the director of Latino Affairs at the Center for Responsible Lending, by encouraging lenders to allow Flint homeowners to refinance their mortgages and write off the cost of repairs. “No amount of money can take away the harm that the children have suffered, and the adults too.… Having said that, you compromise the opportunity they do have if they are locked into their property and unable to move out of the city for whatever reason,” she said.
While lawmakers dither, Tony Palladeno’s wife is making plans to leave him. Not because their marriage has fallen apart, but because her hair is still falling out and she’s sick. She’s going to take the dog up to the northern part of Michigan, where they have a small cabin on a river, a river that isn’t polluted. Palladeno isn’t sure yet what he’ll do. “I can’t just walk away from this,” he said. “I’ve got too much invested.”
