First Republic Bank, one of the largest lenders among banks based in the San Francisco Bay Area, has fueled the displacement of families by lending to landlords who evict their tenants and drive up rents, according to a study released today.
The study, conducted by the California Reinvestment Coalition and the Anti-Eviction Mapping Project, found that the San Francisco-based bank has made at least 400 loans – the most of any lender in Oakland, California – to property owners who together have filed at least 500 petitions since 2009 with Oakland’s rent board to evict or remove units from rent control.
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“We are alarmed by the extent of displacement financing, and alarmed at how egregiously First Republic Bank has engaged in this harmful lending,” Paulina Gonzalez, executive director of the coalition, said in a statement. “First Republic Bank, long a bank for the wealthy, now appears to be a bank that actively seeks to displace people from the homes they have been in for generations.”
First Republic Bank said it was proud of its lending record in Oakland, asserting that it would be accused of redlining if it stopped making loans to qualified borrowers in low- and moderate-income neighborhoods or communities of color.
“That would violate fair lending laws, and we will not do that,” the bank said in an emailed response. “We have never engaged in lending practices that require borrowers to evict their tenants.”
The study also identifies JPMorgan Chase & Co., Goldman Sachs and Wells Fargo & Co. as other well-known lenders that have funded the displacement of many Oakland residents.
The California Reinvestment Coalition is an advocacy group dedicated to equal access to credit for all communities in the state. The Anti-Eviction Mapping Project, which provided analysis for the study, focuses on the displacement of Bay Area residents.
The study centered in on Oakland because it’s on the fastest pace for gentrification and displacement in the Bay Area. Housing prices there also are increasing at the highest rate, according to the coalition’s study.
Financing property owners who in turn evict their tenants or raise their rents runs counter to the banks’ obligations under the Community Reinvestment Act, according to Kevin Stein, the author of the report and the coalition’s deputy director.
“The consequences of the loan have a clear impact on the communities’ credit needs,” Stein said. “That’s what CRA is about: Are banks helping to meet the credit needs of communities, including low- and moderate-income communities?”
Evictions hurt tenants’ credit, he said, making it more difficult for them to own a home or a small business. That, in turn, has a broader impact on the community’s credit needs.
Under the Community Reinvestment Act, a 1977 law passed to combat the effects of discriminatory lending practices known as redlining, wherever banks have a branch that takes deposits, they are required to lend to the community – especially those dominated by the poor, working class and people of color.
In the past, banks have received CRA credit for loans that perpetuate the displacement of residents, Stein said, because the focus has been on the location of the property not the impact of the loan.
This adds to other ways banks exploit loopholes in the Community Reinvestment Act. Kept Out, an ongoing investigation by Reveal from The Center for Investigative Reporting, found that banks also receive credit for lending to white gentrifiers in poor and working-class communities.
Stein said banks could ease the impact of eviction and displacement if they prioritized first-time home buyers, did more research on their clientele and asked themselves a set of a questions.
“It’s enhanced due diligence: know who the customer is, know who the borrower is,” Stein said. “Is this someone who has shown a propensity to evict people, perhaps in violation of local law? Are you taking any steps to ensure that your borrowers are aware of any state and local tenant protections? Are you underwriting to existing rents and certainly not to rents that may be impermissible under local law?”
First Republic Bank responded that housing prices and rents are determined by supply and demand.
“While we are sympathetic to the community’s concerns about displacement and gentrification, these are public policy issues best addressed through the legislative process,” the bank’s emailed response said.
The study suggests several improvements at the local and federal level that could ease displacement. Among the recommendations:
- Banks should make loans based on current rents and not assume higher ones that would result in a greater burden on tenants or lead to their evictions.
- The city of Oakland should collect better data on eviction and rent increase filings by owner and property address and devote more resources to the Rent Adjustment Program, which handles disputes between tenants and property owners.
- The state of California should remove state-level restrictions on a city’s ability to adopt stricter rent-control policies.
- Federal bank regulators should downgrade banks that lend to property owners who have a track record of being more likely to evict their tenants or raise rents.