Health, wealth and foreclosure

Losing your home to foreclosure can be bad for your health. Watching your neighbors lose their homes to foreclosure can be just as debilitating.  And the cost of the additional visits to emergency rooms caused by communitywide foreclosures among those caught up in the foreclosure crisis are staggering.

Health and home mortgages? Foreclosures and emergency room visits? Distressed homeowners and kidney failure?  Is there really a connection?

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That’s what I and my colleague Erdal Tekin discovered when we looked specifically at communities hit hardest by the housing crisis in four states—Arizona, California, Florida, and New Jersey—and compared them to the number of heart attacks and stroke as well as treatment for conditions related to hypertension and mental health. Writ large, our findings indicate that nationwide the 2.82 million foreclosures in 2009 resulted in an additional 2.21 million emergency hospital visits—an increase in hospitalizations that cost a whopping $5.6 billion in that year alone.

Economists and health experts alike have documented a relationship between wealth and health, and between changes in wealth and changes in health. But the links between losing one’s home or worrying about it when neighbors lose theirs and a rise in visits to hospital emergency rooms may come as a surprise to academics and homeowners.  The implications, though, are startling.

Housing, of course, is the principal store of wealth for middle class families as well as the most important asset the breadwinners in these families can turn to in order to finance the cost of a sudden medical emergency. Losing access to that asset through foreclosure or because the value of your house is “underwater” (such that one cannot borrow against it) means the cost of a sudden medical emergency is exponentially devastating.  Medical debts are one of the largest drivers of bankruptcy in the United States, causing 62 percent of bankruptcies in 2007, according to a study published in The American Journal of Medicine.

Many middle class Americans are only one medical emergency away from bankruptcy without even factoring in the loss of a home or the inability to sell their homes due the sharply deteriorated community housing values. Our findings about foreclosures and health indicate that the well being of average American families is even more tenuous than previously thought.

What’s worse, those hit by the foreclosure crisis in one way or another we’re already the least able to weather it financially—low-income families (particularly among ethnic or racial minorities) that were striving the hardest to climb the bottom rungs of the middle class by investing in their own homes.  The Center for Responsible Lending found that in 2011 about 12 percent of Latino homeowners and 10 percent of black homeowners experienced foreclosure, and that overall 7 percent of low-income homeowners and 6 percent of middle-income homeowners suffered the same fate. And these percentages do not include the far higher number of homeowners who are late on their mortgages by several payments and also distressed financially, emotionally, and physically.

Now it could be that a sudden wave of serious mental and physical illness swept through neighborhoods experiencing higher rates of foreclosure or that the overall higher rates of poor health among low-income wage earners contributed to the inability of some of them to cover their monthly mortgage payments. But our study accounted for both factors, examining unemployment rates and sudden visits to emergency rooms in the years prior to 2009. We also factored in whether people moving in or out of high-foreclosure neighborhoods might account for the higher number of visits to the hospital. Our findings remained the same.

The relationship between experiencing foreclosure or living in a neighborhood with high foreclosure rates and more frequent and costly visits to the hospital should be factored into our nation’s health and housing policies. Distressed homeowners need access to preventative medical care that would allow them to more safely cope with the health threats posed by foreclosure.  And institutions that provide home mortgages must be closely regulated to ensure that they do not  threaten the financial well being of homeowners with sudden surges in interest rates or other predatory practices. 

Perhaps it’s time for policymakers to consider the role of home mortgages in “Health Impact Assessments ” to improve communities’ public health.

Currie is the Henry Putnam Professor of Economics and Public Affairs and director of the Center for Health and Well-Being at Princeton University.  Her forthcoming study, “Is There a Link Between Foreclosure and Health,” with co-author Georgia State University economics professor Erdal Tekin will be published later this year in the American Economics Journal: Economic Policy.