Ryan Holeywell | July 17, 2015
An estimated 500,000 Texans – primarily Mexican-Americans living along the border – live in communities that lack access to basic necessities such as clean drinking water, paved roads or electricity, according to a report published by the Dallas Fed earlier this spring.
The study sheds light on more than 2,200 communities known as “colonias” where the poverty rate is almost three times the national average and residents –who lack the income or credit to obtain other forms of housing – often build their own homes.
Kinder Institute senior editor Ryan Holeywell spoke with report co-author Emily Ryder Perlmeter, a community development analyst at the Dallas Fed, about the conditions in the colonias and how they’ve changed over the last 20 years.
This interviewed has been edited and condensed.
Ryan Holeywell: What, exactly, is a colonia, and why is this something the Fed wanted to study?
Emily Ryder Perlmeter: It’s the Spanish word for “neighborhood.” In this context, it’s a neighborhood that lacks what people consider basic living necessities – sewer systems, drinkable water, electricity or paved roads – really anything considered safe or sanitary housing.
A few states have colonias. They’re generally within 150 miles of the border with Mexico. Texas has the highest concentration of colonias, with an estimated half-million people living there.
In 1996, the Federal Reserve’s community affairs department released a study that tried to draw attention to the fact that there are American citizens in our state who don’t have access to things considered basic necessities. These are communities that look much more like third-world communities than American communities.
About two years ago, we decided to do a follow-up study. There’s been so much more attention and funding in these areas. We wanted to see where they are now.
RH: Who lives in colonias, and what sort of circumstances led them there?
ERP: About 73 percent of colonia residents are American citizens. For children, the rate closely mirrors the citizenship rate of Texas and the U.S. as a whole – about 94 percent. So it’s an increasingly American population. They’re typically Mexican-American – about 96 percent. It’s also a young population. The average age is 27, which is about a decade younger than the U.S. as a whole.
A lot of these communities started off as farm worker and migrant settlements. There’s a lack of affordable housing opportunities. There would be landowners who were able to split their property into lots and sell their land to people with low income and few alternatives. There wasn’t a lot of oversight. The residents actually purchased the land without any infrastructure and without housing units. Then they used found materials and pieced together these tiny houses, and as they got more money, they could add to their home.
They didn’t own the land. They make the purchases through a “contract for deed” sale. That meant they don’t own the title to their home or any improvements they make. They’re not building equity. In the end, the thought is they’d get the deeds, but the people who owned the deed could basically take the land back at any time with hardly any repercussions.
A lot of this has changed as various bills passed over the last 20 years. Contracts for deeds are still legal, but they have to be recorded. A lot of the time, it doesn’t actually happen. When you have an unrecorded contract for a deed, the level of informality is so severe that you basically have no government protection or legal recourse. There’s nothing that says you own the house. They’re pushing unrecorded deeds. They don’t even need to provide a clean title.
RH: Why do people wind up living in these conditions?
ERP: Many buyers won’t meet the requirements for a traditional mortgage or mainstream banking institution. Their credit scores are too low, or they have no credit, in addition to not having the proper income.
The other thing we found, in cases where they might have the option to go with a traditional loan, is that a lot of families – especially immigrants – have had negative experiences with mainstream banking. They may not trust them or speak the same language.
RH: Has the state made progress in improving the colonias?
ERP: Progress has definitely been made. Whereas things were largely uncounted before, the Texas Secretary of State has started recording the level of infrastructure within the colonias and putting a ton of funding into improving the infrastructure. It’s tens of millions of dollars, and they were able to account for the improvements they made.
Since 2006, about 100 colonias have moved out from being categorized as “red,” which have the worst conditions. Definitely many more colonias have access to potable water, legal plats and drainage. There’s still a lot of work to be done and a significant number of colonias that need to move on from the “red” category.
RH: How did we allow this to happen in the United States? What conditions created this environment?
ERP: There was almost no oversight. You get into rural communities along the border, where they don’t pay close attention to what’s going on or the leaders aren’t empowered. Things have gotten better. For a time, people weren’t even aware of this. Now a lot of funding has gone into these communities, but it will take a lot more money and a lot more time and effort to get all the government agencies on board to fix these issues.
Sometimes, when you fix one thing, you have unintended consequences. Say you improve infrastructure in one colonia so much that it greatly increases the price of the land and housing. Unless economic opportunities change, they can’t afford as much. As residents spend more on their lots, they have less money to spend on their housing. They may not be able to afford to connect to utilities, or if their housing is not up to code, they must pay fines and make costly renovations to qualify for utility connection.
It’s a trap. If they’re already scraping together to make ends meet, and the price of the land goes up, the quality of their housing doesn’t always improve. You could have land with paved roads and access to drinkable water, but the housing is so dilapidated because residents are paying fines rather than saving for their own housing.
RH: Did you find any success stories? What programs are doing the most to improve the colonias?
ERP: A lot of colonia residents are entrepreneurs. If they’re locked out of traditional jobs in the formal labor market, they’ll make a taco stand in their yard or they’ll piece together their money to sell clothes or toys at a flea market. They’ll do whatever it is to make ends meet.
One of the most interesting stories is a woman named Leticia Jones. She had tried a few ways to make money. Her strength was cooking, and she was trying to get loans through things like payday lenders or title lenders with very high interest rates to build a small cooking and catering business of her own. She ended up suffering because she wasn’t involved with a traditional lender.
A nonprofit micro lender called the LiftFund stepped in. They provide very low interest rates to people who don’t quality for traditional loans. It helped reduce her debt and get her out of a cycle. She’s now part of the of the formal banking system. She has a growing catering system and her daughter is learning business.
RH: What’s the outlook for colonias?
ERP: I like to look at things from a quantitative perspective. When you look at the numbers, they’re bleak. The poverty rate is three times greater than the country as a whole. You have a lot of residents who don’t speak English as well. And 55 percent of colonias residents have less than a high school diploma. You have awful statistics.
Beneath the surface, you see areas of success, where colonia residents were involved in helping their own communities. They’re very resilient. They worked with Texas A&M on a water filtration project, making these simple filters so they can drink water. The education system is tough for parents to navigate because of the language barrier and their own education barrier. So there’s a community group called ARISE that essentially created their own PTAs, in which the administration come to them. There’s a problem with tire dumping where they’re all lined up against the road. A couple of groups have been cutting them up and making them into really cool flower pots.
I hope I’ll find even more improvements. I really think education is improving, and the next generation will reach higher and higher. I think the affordable housing concerns won’t be completely solved, but the banks will be lending to nonprofit housing developments so people can live in sanitary conditions in their own homes.
Twenty years ago, nobody had access to safe drinking water. We’re starting to see a reduction in that, but we have other health problems like diabetes.
These people lack capital, pretty much in all ways – except social capital. They’re incredibly tight-knight communities, and they work together.