Federal Reserve Bank of San Francisco

Community Development

The Subprime Crisis in Suburbia: Exploring the Links Between Foreclosures and Suburban Poverty

Author(s):

February 2013

Community Development Working Papers

In this brief, we provide an overview of patterns of subprime lending, as well as trends in foreclosures and REOs, in suburban communities compared to inner-cities. We also explore the relationship between foreclosures in suburban areas and the increased suburbanization of poverty. We find that the vast majority of foreclosures–nearly three out of four (73.1 percent)—have been in suburban areas, and that suburban neighborhoods with higher rates of poverty are more likely to experience higher foreclosure rates. This is of concern because the mechanisms for addressing the challenges associated with concentrated foreclosures can be more difficult to implement in suburban areas; suburbs may have smaller local governments, fewer nonprofits, and a more dispersed urban form, making it difficult for cities or nonprofits to administer programs or for residents to access them. Because the distribution of foreclosed homes has significant implications for the long-term stability of suburban neighborhoods, increased resources and attention should be devoted to developing foreclosure responses that take into account the capacity and access challenges that are unique to suburban neighborhoods.

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