A foreclosure is a traumatic event in the life of any individual or family. This is especially true for children. An estimated 8.0 million children were affected by foreclosure as of February 2011, including those who have already lost their homes and those who are at immediate risk of losing their homes (Issacs 2012, see PDF
The adverse effects of foreclosure begin before the actual loss of the home. Qualitative research has shown that parents who are homeowners in the midst of a foreclosure become more stressed. In interviews, parents report fighting more often with their kids and with their spouses. Even when this isn’t the case parents say their kids are distressed by the increased tension in the house (Bowlder et al. 2010
, Fields et al. 2007
, Ross and Squires 2011
In order to pay the mortgage, homeowner families may cut back on other basic expenses, such as food or medical care. More broadly research shows that a family’s financial trouble can negatively affect children’s outcomes, such as academic performance and behavioral development (Pribesh and Downey 1999
). For rental properties, landlords may cut back on maintenance to pay the mortgage on the building.
If the bank does take ownership of the home, family budgets can be strained by the unexpected moving costs. Renter families, as well as owners, will be confronted by this challenge, possibly losing their security deposit and needing to cover the first and last month’s rent in a new apartment.
Renters in properties that receive a foreclosure notice are also more likely to move. Under the ‘Protecting Tenants at Foreclosure Act of 2009’ tenants have the right to stay in place for 90 days or until the end of their lease. However, many tenants do not know their rights and anecdotal evidence suggests that landlords pressure their tenants to leave to increase the value of the property at sale.
Families unable to find new housing can end up living with family or friends, or in the worst case, leading to homelessness. In general, households (particularly low-income households) who also have to make housing choices quickly are more likely to end up in poor-quality housing and neighborhoods with fewer community assets and connections (Moving to Opportunity/Chicago). However, a study of students in public schools in Baltimore and Washington, DC found that students who moved because of foreclosure moved to similar neighborhoods as those who moved due to other reasons (Pettit and Comey 2012
). Other national research using a small sample shows similar findings, but more local studies need to be done to know about how new and old neighborhoods compare in different housing markets (Molloy and Shan 2011
). Even if the neighborhoods are of similar quality, a new area may mean disruption of social networks and supports for the family.back to top
Changing SchoolsPhoto credits (top to bottom): Gates of Ballston, Arlington VA -- Courtesy of AHC, Inc.; Eaton Row, New Haven CT -- Courtesy of Jonathan Rose Companies LLC
In addition to the family stress mentioned above, foreclosure can also influence a child’s educational outcomes through increased school instability. Children living in foreclosed homes are more likely to switch schools the following year than their peers. This holds true even in districts with liberal school choice policies. Changing schools, especially in the middle of the school year, has been shown to hinder children’s academic performance (Hanushek et al. 2004
). Disruptive moves are linked to children’s academic problems, such as grade retention, failure to complete school, and a lack of interpersonal skills (Scanlon and Devine 2001
There’s little research on how school switching due to foreclosure in particular affects children’s schools or performance compared to moves for other reasons. In research to date, whether or not children’s destination schools compared to the origin ones varied depending on the city. (Pettit and Comey 2012
Children whose families do not experience foreclosure themselves, but who live in neighborhoods with many foreclosures can also suffer the consequences of this crisis since high rates of student mobility can disrupt classrooms.back to topDecreased public services
Jurisdictions bear direct and indirect costs from foreclosed properties. Direct costs relate to the administrative process and upkeep of the foreclosed properties themselves. In Chicago, the cost of foreclosure was estimated to range from a few hundred dollars to more than $30,000 (Apgar and Duda 2005). Indirect costs stem from foreclosed homes selling at a discount and the resulting reduction the prices of homes nearby (Frame 2010). The fall in home prices results in lower property tax incomes. While there hasn’t been systematic study of these effects, it follows that localities hard hit by foreclosure have reduced funding available for schools and other social services for children. back to topPolicy and Program Strategies
Local school and housing policies can provide some protection for children living in foreclosed homes. Currently organizations that work with foreclosure (e.g. housing counselors) and those that work with children (e.g schools) rarely work together. Institutions working in different spheres need to form partnerships to minimize the effects of foreclosures on children.For School Officials
For Housing Counselors
- Public school officials and principals should learn about local foreclosure trends in order to target outreach to students in highly affected schools and their families, including referrals to social services and housing counseling.
- School districts should allow students to remain enrolled in their original school for the duration of the school year even if a foreclosure happens midyear and students move outside of the school boundary area. This will maintain consistency for the students and their families, as well as reduce instability in the classroom. See the Poverty & Race Research Action Council’s handbook, Improving Education for Mobile Students.
- Foreclosure may result in doubling up and homelessness. Principals and school administrators should identify students eligible for benefits under the McKinney-Vento Homeless Assistance Act, such as the right to stay in the origin school and transportation subsidies. See the National Law Center on Homelessness & Poverty’s guide, Education of Homeless Children & Youth: The Guide to Their Rights.
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- Housing counselors should tell families going through foreclosure about the potential negative effects on their children of switching schools midyear, and provide information about available school support services and the school policies regarding mid-year moves. The National Center for Homeless Education offers a sample pamphlet for families and other resources.
- Counselors should connect displaced families with housing search and rapid rehousing assistance.
- To protect renters, counselors should provide outreach and counseling that specifically address the rights of renters in foreclosed properties (many counseling programs focus on helping homeowners alone). For suggestions on particular policies, see how to Protect Renters Living in Foreclosed Properties.
- Counselors can partner with highly affected schools to do financial education outreach to parents.