The Link Between Miami Payday Loans and the Affordable Housing Crisis

Inside Subprime: March 18, 2019

By Lindsay Frankel

The affordable housing crisis has left most people living in poverty without access to affordable rentals, according to a new report published by the National Low Income Housing Coalition. For every 100 low-income families, only 37 affordable rental units are available. The report was released within days of President Donald Trump’s 2020 Budget Request, which proposes cutting funding for affordable housing programs even further.

While there isn’t a single state that has enough affordable housing for its low-income residents, the situation has become especially dire in Miami, where there are only 22 affordable rental units available for every 100 low-income renters. The city has one of the most severe affordable housing problems in the nation. Housing costs are rising in other big cities, like New York and San Francisco, but incomes are higher in these cities as well. In Miami, 24.9% of residents live in poverty, one of the worst rates in the nation.

For more than 40 million Americans, housing costs eat up greater than 30 percent of their earnings, making it difficult for families to afford other costs such as food and healthcare. And many of these same families find it difficult to get a loan from a bank due to bad credit. This pushes indigent Americans into high-interest alternative products such as payday loans. 10 percent of payday loan borrowers use payday loans because they can’t afford their rent or mortgage payment, and renters use payday loans at more than double the rate of homeowners, according to Pew Charitable Trusts.

The lack of access to affordable loans and affordable housing perpetuates the cycle of poverty for Miami residents. But a handful of banks in Miami have stepped up to finance affordable housing for Miami’s working class communities. The Community Development Fund helps banks to finance affordable housing and to follow the Community Reinvestment Act, which requires that banks and thrifts provide capital to low and moderate-income residents of the communities they serve. Since launching three years ago, the Community Development Fund has led to $50 million in support for affordable housing.

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