Prelude to the Subprime Crash: Beecher, Michigan, and the Origins of the Suburban Crisis

The subprime lending catastrophe and the Great Recession that it triggered have cast a pall over the postindustrial city of Flint, Michigan, and its increasingly bleak suburbs. Arriving after many years of General Motors (GM) factory shutdowns, gnawing population losses, and an earlier episode of predatory lending that very few people even remember today, the most recent rash of home foreclosures has shaken this already ailing metropolis in a relentless, decade-long aftershock. According to most local observers, the Vehicle City’s latest meltdown commenced shortly after the dawn of the new millennium, when thousands of area homeowners—many of them financially overstretched by a combination of unemployment and high-interest subprime loans—began defaulting on their mortgages and property taxes. Between 2002 and 2009, officials from the Genesee County Land Bank, a public receiver for abandoned and tax-foreclosed properties, quietly repossessed nine thousand homes, businesses, and lots just within Flint, a figure that accounted for 14 percent of the city’s overall surface area.¹ Meanwhile, in the private lending market, mortgage foreclosures were surging to Depression-era levels, routinely exceeding a thousand homes per month. Just during September 2010, for instance, nearly 1 percent of the region’s two hundred thousand housing units slipped into foreclosure.² By decade’s end, the toxic trio of deindustrialization, tax delinquency, and predatory lending had pummeled the local housing market into a state of near collapse, with average sale prices for homes in Flint reduced to just $17,000—significantly cheaper than the Buick sedans that GM workers once assembled on the city’s North End.³

The human dimensions of Flint’s current housing crisis and the broader national economic crash are simply staggering. Already, the subprime calamity has caused more forced relocations of local residents than any other single event in the region’s history.⁴ All across the nation, in fact, the dual menaces of economic recession and usurious lending have ravaged local tax bases and denuded once-thriving communities of human life and wealth. Just between 2007 and 2010, more than nine million properties in the United States fell into foreclosure. By 2012, that number stood near the twelve-million mark.⁵ According to George Packer, a journalist from New Yorker magazine who toured some of Florida’s hardest-hit neighborhoods in 2008 and 2009, the crash has transformed huge swaths of suburbia, including untold numbers of middle-class communities once known as “boomburgs,” into eerily apocalyptic “ghost subdivisions.”⁶ The effects of the tailspin have been so severe that many policy observers have taken to employing the language of singularity to describe the bursting of the real estate bubble.⁷

In reality, though, predacious banking and mass foreclosure are deeply rooted in American history. During the Great Depression of the 1930s, and yet again in the 1970s, credit crises, economic slumps, and old-fashioned usury converged to trigger similar episodes of mass property repossession.⁸ Although scholars have written very little about the latter of these downturns, it was during the 1970s when the seeds of the current subprime debacle began to germinate in communities such as Flint and its nearby suburb of Beecher, rising out of the ashes of an obscure federal housing policy known as Section 235.⁹ Implemented under the terms of the Housing and Urban Development (HUD) Act of 1968, Section 235 was a novel government finance program for low-income home purchasers. It came into being just a few months after President Lyndon Johnson signed the landmark Fair Housing Act of 1968, which outlawed racial discrimination in most real estate transactions. Together, these two federal laws helped to stimulate the nation’s flagging real estate industry while opening up many sectors of the private housing market to African Americans, the poor, and others with limited access to credit.¹⁰ Between 1968 and 1973, when President Richard Nixon ordered a moratorium on all “subsidized” residential developments, Section 235 funds supported the sale of 465,972 new and used homes nationwide.¹¹ In Flint and the surrounding communities...