Tag Archive for: minorities

‘Hammered From All Sides’: Minority Truckers Say California’s Green Regs Are Destroying Their American Dream

Minority truckers are struggling to stay afloat as the state of California levies stringent green regulations on their businesses, according to some of those affected who spoke with the Daily Caller News Foundation.

The California Air Resources Board (CARB), California’s environmental regulatory agency, will ban the sale of new diesel heavy-duty trucks starting in 2036, a policy partially motivated by a desire to improve health outcomes for minority populations. That requirement is the latest in a string of similar requirements imposed in recent years, all of which have made it excessively difficult for minorities to operate their own trucking enterprises and pursue the American dream, some of those small business owners told the DCNF.

“Many California neighborhoods, especially Black and Brown, low-income and vulnerable communities, live, work, play and attend schools adjacent to the ports, railyards, distribution centers and freight corridors and experience the heaviest truck traffic,” CARB said in 2020 after proposing its most recent “clean truck” rule. That particular rule for trucks was motivated in part to address the “disproportionate risks and health and pollution burdens affecting these communities,” the agency said at the time.

While bureaucrats writing the rules pitch them as a way to reduce respiratory and health ailments in minority communities that live in and around frequently-trafficked trucking routes, some minority truckers told the DCNF that the rules are squeezing them financially in ways that render any purported health benefits moot.

“A lot of our members are minority-owned small businesses,” Joe Rajkovacz, the director of governmental affairs and communications for the Western States Trucking Association, told the DCNF. “Here in California, there is a decided indifference to small business trucking by both politicians and bureaucrats.”

Randy Thomas, a black man, grew up in South Central Los Angeles as the son of a World War II veteran and a lifelong resident of California. He ran his trucking firm for many decades, growing his business from a one-man operation to a company that employed 15 drivers and provided enough income to send all of his children to college, making them the first in his family to get the chance to do so.

By 2009, the regulatory environment left him no choice to shut down his business, as it did not make financial sense for him to purchase new and expensive trucks to meet new mandates.

“I did my first trip when I was 20. Everything was going great from 1971 up until around the time that (former President Barack) Obama got into office,” Thomas told the DCNF. “By 2008, we come up with this clean truck program here. We were having all these meetings. I’m looking at the division between the environmentalists, telling us about CO2 and gases …  I’m looking at the charts of what our engines that we had at that time, which were made mainly mechanical diesel, and they had no idea what engine was gonna be the engine they were writing into prospective goals.”

“Guys are going out of business like you wouldn’t believe,” Thomas told the DCNF about other Californian truckers he knows.

After closing his business, Jackson moved on to a different company, and he still drives truck routes delivering medical supplies and other time-sensitive loads. But, as he explained to the DCNF, “it wasn’t my company anymore.”

Bill Aboudi, a Palestinian-American who still owns his own small trucking company operating out of the Port of Oakland, touched on some of the same themes in an interview with the DCNF.

Aboudi was born in 1966, and his father went missing in action during the Six Day War between Israel and a coalition of Arab states in 1967. Aboudi immigrated to the U.S. when he was 14 years old, and started helping his brother out with his trucking business in 1989 after he got out of the California National Guard and never left the industry.

“I live in the middle of getting hammered from all sides. One of the first things that CARB always makes it out to be, is if you’re in the trucking business, you’re a polluter. I always try and explain to them, I’ve got an organic garden, I have about three fruit trees in my backyard. I used to keep bees … I’ve got 12 chickens. I love the environment, and I want to get the best technology for my operation,” Aboudi told the DCNF. “It seems like the regulators have no clue. They want to be able to turn on a switch and have everybody switch directionally right away … They end up reducing our company size and stunting our growth.”

Assembly Bill 5, which reclassified California’s 70,000 independent owner-operators as employees of shipping companies rather than independent contractors, was another policy that hurt the workers politicians purported to help, Aboudi said.

“This kills the liberty of being a trucker and kills the American dream,” Miguel Ramirez, a Los Angeles-based trucker, told the DCNF in July 2022.

It’s not just truckers who are impacted by regulations and their impacts on California’s trucking operators, Aboudi explained to the DCNF. There are many thousands of blue-collar workers — including immigrants like him — whose jobs rely on California’s busy ports, providing parts for trucks and other closely-related trades.

“I am still paying for trucks that I upgraded on the last round, and I can’t use them,” Aboudi continued, referencing older regulations. “Now I’m paying for the newer trucks that I upgraded to. And I’m being told I’m gonna have to go to zero-emission trucks that are still in the first stage of development … We’ve already had to downsize our company from 13 trucks to eight trucks.”

While bureaucrats in Sacramento and the supporters of their political superiors in Los Angeles and San Francisco may think that their progressive approach to environmental policy is benefiting minority communities, the opposite is true in many cases, according to Donna Jackson, the director of membership development for the National Center for Public Policy Research’s Project 21.

“California leads the country in enacting climate change policies that are increasingly leading to tiered social classes, the rich and the poor,” Jackson told the DCNF. “Like the Biden administration, California has ignored the real needs of underserved communities. Its climate change policies are destroying minority businesses and creating needless barriers to upward economic mobility. The result of all of this is not just job losses, but lost role models, financially unstable families, declining home ownership rates and a loss of community pride.”

CARB did not respond immediately to a request for comment.

AUTHOR

NICK POPE

Contributor.

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Loosening of Lending Standards Harms Low Income and Minority Americans

aei risk center logoThe Spring home buying season continues to show strength, buoyed by strong first-time buyer volume and share. Historically low mortgage rates, an improving labor market, and loose credit standards, combined with a 32-month-long seller’s market for existing homes, continue to drive up home prices faster than income.

The continued loosening of lending standards during a strong seller’s market is moving the goalpost further away for many lower income and minority renters desiring to become homeowners.

  • In June* first-time buyers accounted for 58.8 percent of primary owner-occupied home purchase mortgages with a government guarantee, up from 57.2 percent the prior June.
  • Increasing first-time buyer volume and share is being driven by increasing leverage and a strengthening job market.
  • The number of primary owner-occupied purchase mortgages going to first-time buyers in June totaled an estimated 128,000, up 20 percent from the 107,000 mortgages in June 2014
  • The Agency FBMRI stood at a series record of 15.83 percent, up 0.5 percentage point from the average over the prior three months and up 1.1 percentage points from a year earlier.
  • The Agency FBMRI is 6¾ percentage points higher than the mortgage risk index for repeat home-buyers, and the gap has been widening.
  • Nearly 55 percent of agency first-time buyer loans were high risk (an MRI above 12%) in June, up from 51 percent a year earlier.
  • As demonstrated below, the extremely small sample size of the NAR’s realtor survey generates monthly noise that tends to mask both seasonal and underlying trends in first-time buyer share, trends readily apparent in the AEI combined first-time buyer share index.

The First-Time Buyer Mortgage Share and Mortgage Risk Indexes (FBMSI and FBMRI) are key housing market indicators based on monthly data for nearly all government-guaranteed home purchase loans, which greatly reduces the risk of sample error. By relying on millions of loans, this approach stands in contrast to traditional first-time buyer surveys based on small samples of home-buyers or real estate agents.

In June 2015, first-time buyers accounted for 58.8 percent of primary owner-occupied home purchase mortgages with a government guarantee, according to the Agency First-Time Buyer Mortgage Share Index (FBMSI).  As shown in the chart below, the June share was 0.2 percentage point above the revised share of 58.6 percent for May and 1.6 percentage points above the June 2014 share of 57.2 percent.  Through March of this year, the first-time buyer share had displayed no clear trend apart from seasonal variation. But the increases in April, May, and June pushed the share to successive new highs, supported by improvements in the labor market, riskier mortgage lending, and continuing low mortgage rates.  These factors, combined with a 33-month-long seller’s market for existing homes as reported by the National Association of Realtors (NAR)[1], are driving up home prices faster than income.

“The housing lobby, led by the NAR and the Urban Institute, has successfully pushed for looser lending standards for first-time buyers,” noted Edward Pinto, co-director of the American Enterprise Institute’s (AEI’s) International Center on Housing Risk. “Rather than increasing accessibility, the loosening of lending standards during a strong seller’s market is moving the goalpost further away for many lower income and minority renters desiring to become homeowners.”

The chart below displays the monthly first-time home-buyer percentage by agency.  As shown, the share varies widely across agencies.  FHA is at the high end with a share at or above 80 percent, while Freddie Mac is at the low end with a share of about 40 percent.  Fannie Mae’s share has consistently tracked somewhat above Freddie’s and stood at 46.7 percent in June. Fannie’s share is higher because of its much greater volume of 97 percent LTV loans for first-time buyers relative to Freddie.  These loans carry substantial risk and account for most of the gap between Fannie’s MRI for first-time buyers (8.18 percent in June) and Freddie’s (6.72 percent).

As shown by the blue line in the chart below, the Combined FBMSI (which measures the share of first-time buyers for both government-guaranteed and private-sector mortgages) stood at an estimated 52.9 percent in June 2015.  Consistent with the agency series, the broader combined share moved to successive highs in April, May, and June, after having varied seasonally with no trend over the prior two years.  The first-time buyer share published monthly by the NAR, the dotted red line, also has risen to the highest level over the period shown.  Although the two series are currently sending the same message, the NAR series provides a much noisier signal month to month because of its small sample size.[2]

The first-time buyer share shown by the combined FBMSI is much higher than that estimated by the NAR survey of realtors and the separate NAR survey of homebuyers and sellers.  This gap largely appears to reflect a difference in the definition of first-time buyers.  In the federal agency data that we use, first-time buyers include purchasers who owned a home more than three years ago but not in the past three years.  The NAR surveys ask whether the purchaser is a first-time buyer, without further instruction.  Survey respondents likely apply a literal definition of first-time buyers, which would exclude purchasers who owned a home more than three years ago.[3]  The broader definition in the federal agency data captures the full set of households transitioning from renter to homeowner status and thus provides a more complete measure of changes in demand for owner-occupied housing.  The rising first-time buyer share and the strong increase in first-time buyer sales volume shown by our broad definition help explain the tightening inventory conditions in the long running seller’s market.  The unsold inventory of existing single-family homes stood at 5.2 months in May, down from 5.6 months a year earlier; for new single-family homes, the unsold inventory was 4.5 months in May, down from 5.1 months a year earlier.[4]

The monthly count of agency first-time buyer mortgages (theAgency FTB Loan Count) is presented in the chart below.  The number of primary owner-occupied purchase mortgages going to first-time buyers in June totaled an estimated 128,000, up 20 percent from the level in June 2014.  This increase in the Agency FTB Loan Count outpaced the 15½ percent rise in total agency purchase loan volume over the same period.

The Agency FTB Loan Count and the Agency FBMSI are calculated, as noted above, from a nearly complete dataset of government-guaranteed home purchase loans, which greatly reduces the risk of sample error. Data on the importance of first-time homebuyers for non-agency loans are not available to our knowledge from any source.  The Combined FBMSI is calculated from the agency loan data, along with assumptions for non-agency loans that we believe to be reasonable.

“While the strength of this Spring’s homebuying season is noteworthy, it is being unsustainably fueled by increasing leverage,” said Pinto. “This leaves first-time buyers and neighborhoods vulnerable to excessive defaults.”

“We paint an accurate picture of changes in the first-time buyer share by using a nearly complete census of agency loans,” said Stephen Oliner, co-director of AEI’s International Center on Housing Risk.  “In contrast, the monthly changes in the first-time buyer share from the NAR survey are often just noise.”

AEI’s Agency First-Time Buyer Mortgage Risk Index (FBMRI) estimates the share of first-time buyer mortgages that would default in a stress event comparable to the 2007-08 financial crisis based on the actual performance of loans originated in 2007.  The Agency FBMRI stood at 15.83 percent in June, up 0.5 percentage point from the average over the prior three months and up 1.1 percentage points from a year earlier. As indicated in the chart below, the Agency FBMRI is 6¾ percentage points higher than the mortgage risk index for repeat home-buyers, and the gap between the two series has been growing.

The higher risk for the mortgages taken out by first-time buyers is largely due to risk layering. As shown in the table below, in June 2015, 71 percent of first-time buyer mortgages had a combined loan-to-value ratio (CLTV) of 95 percent or higher, and 97 percent had a 30-year term. Given the combination of little money down and slow amortization, these buyers will have very little home equity for a number of years unless their house appreciates substantially. In addition, more than one-fifth of first-time buyers taking out mortgages had a FICO score below 660, the traditional definition of subprime mortgages, and one-quarter had total debt-to-income ratios above 43 percent, the limit set by the Qualified Mortgage rule.  The mortgages taken out by repeat buyers are less risky along two dimensions in particular: a much smaller share had a CLTV of 95 percent or higher and a smaller share had a FICO score below 660.

Characteristics of Mortgages Taken Out by First-Time and Repeat Home-buyers:

June 2015
CLTV ≥ 95% 30-year Term FICO < 660 DTI > 43%
First-time Buyers 71% 97% 22% 25%
Repeat Buyers 38% 91% 9% 23%
Source.  AEI International Center on Housing Risk, www.HousingRisk.org

This risk profile for first-time buyers implies that the supply of mortgage credit to this group is not tight.  In June 2015, the median first-time buyer with an agency mortgage made a downpayment of only 3 percent, or $6900 in dollar terms.  Moreover, the median FICO score in June for first-time buyers with agency mortgages was 706, slightly below the median of 713 for all individuals in the United States with a score.[5] For first-time buyers with FHA-insured loans, the median FICO score in June was only 674, well below the middle of the distribution for the U.S. as a whole. These data are a strong counterpoint to the frequent claims that first-time buyers face difficulties in obtaining mortgages.

“Our data refute the conventional wisdom that first-time buyers face tight credit,” said Oliner.  “Many first-time buyers with ordinary credit scores are purchasing homes every month with little money down.”

ABOUT THE FBMSI AND FBMRI

The FBMSI and FBMRI are objective and transparent measures of the first-time buyer share and the riskiness of first-time buyer mortgages, respectively, based on the millions of loans contained in the National Mortgage Risk Index (NMRI) database developed by AEI’s International Center on Housing Risk. The FBMSI, FBMRI, and NMRI are updated monthly.  For more information about these indexes and the work of the center, please visit HousingRisk.org or contact Edward.Pinto@AEI.org or Stephen.Oliner@AEI.org.

REFERENCES:

[1] According to the NAR, a seller’s market exists when the inventory of existing homes for sale would be exhausted in six months or less at the current sales pace.http://www.realtor.org/news-releases/2013/04/march-existing-home-sales-slip-due-to-limited-inventory-prices-maintain-uptrend The Census Bureau publishes parallel inventory and sales data for new homes.  Based on the Census data, May 2015 was the 43rd out of the last 44 months of a new home seller’s market using the NAR definition of six months’ supply or less.  The NAR and Census data on months’ supply are posted on the FRED site maintained by the Federal Reserve Bank of St. Louis (https://research.stlouisfed.org/fred2/series/HSFSUPUSM673N for the NAR series and https://research.stlouisfed.org/fred2/series/MSACSR for the Census series).

[2] The NAR’s monthly survey (http://www.realtor.org/reports/realtors-confidence-index) is sent to more than 50,000 realtors (out of a total of 1.1 million members), but has a low response rate; only 3,805 responses were received for the May 2015 survey and of these, only 2,247 realtors provided information based on the last sale they had closed in May.  The NAR’s separate annual survey of homebuyers and sellers also suffers from small sample problems.  For the 2014 survey, responses were received from only 9 percent of those mailed the survey, and these responses constituted only 0.2 percent of all purchase loans originated during the 12-month period covered by the survey.

[3] For details about the estimated effect of this definitional difference on the first-time buyer share, see footnote 2 in the May 2015 first-time buyer data release (http://www.housingrisk.org/first-time-buyer-mortgage-share-and-mortgage-risk-indexes-for-may-2015/#more-1781).

[4] See footnote 2 above for the links to the NAR and Census data.

[5] The national median score is from FICO; the other FICO scores cited here are from AEI’s International Center on Housing Risk.