The large number of foreclosures is changing the nature of housing - and the election - in the United States
American elections are complex affairs, but the heart of a campaign is data: who are your voters? Where do they live? How do you contact them? And so forth. This puts the US housing crash and resulting foreclosure crisis that helped lay low the global economy in a very political light.
In August, canvassers in Milwaukee, Wisconsin, tasked with contacting some of the strongest supporters of Barack Obama - black voters - found more than 60 per cent of the names on their list were confirmed as no longer at their address. Through foreclosure or abandonment, this demographic block had melted away. There is now an unspoken fear among political operatives tasked with finding, contacting, and getting voters to the polls that this task will prove difficult.
In 2010, in an election to replace Massachusetts senator Ted Kennedy, Republican Scott Brown shocked the country by winning in a Democratic leaning state. Political scientists Tom Ferguson and Jie Chen traced this upset to job losses and the housing crash: for every 1 per cent decline in housing values, the Democratic share of the vote fell by a fifth of a per cent.
Sure enough, later that year, the Republicans swept the Democrats in legislative elections, electoral revenge for $3.1 to $4.4 trillion of home equity being wiped from the balance sheet of the American middle class. Since then, the economy has stabilised into a slow growth pattern, with housing values - still backed by the government’s backstopping of the mortgage market - ending their slide.
What is most surprising about the foreclosure crisis is how little attention it’s getting on an electoral level. Six years into the epidemic of foreclosures, there is still no public database of the problem.
The reason the housing crash is absent from the political debate is because both major party candidates largely agree on what to do. Republican Mitt Romney has said he wants to see foreclosures continue until the housing market hits bottom, and Mr Obama’s housing programmes are designed to spread out foreclosures, so American banks won’t have to take balance sheet hits all at once. Both believe that a mandatory programme to restructure mortgages is unworkable.
Some 10 million homes are on the road to foreclosure, according to Amherst Securities analyst Laurie Goodman. Where will all this property go? One of the hottest investment sectors is converting foreclosures to rentals, with the first sales of properties happening a few weeks ago. The US, which has based its core political ideology since the 1930s on homeownership as a mechanism for delivering prosperity, is returning to a society of landlords and tenants.
It’s not clear how this will affect elections going forward, or the mortgage market. One thing is for sure - the US is a very different country than it was just six years ago.
Matt Stoller is a fellow at the Roosevelt Institute