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3 Business and Finance Law Review 170 (2020)


The United States has been suffering from a housing crisis that existed long before the proliferation of sub-prime loans and the Great Recession of 2008-2009. For decades, millions of gainfully employed workers have been institutionally excluded from homeownership, simply because they work in the informal economy. Because of this, the economic growth of households in this demographic has been stymied by discriminatory banking policies that heavily prioritize short-term profit maximization over borrower reliability, or loan viability. Many of those affected are historically disenfranchised people, who systematically have been excluded from the American dream of “a chicken in every pot and a car in every garage,” simply for failing to belong to the narrow demographic for whom home loans were originally designed.

Approximately 37% of working adults in the United States today undertake some type of informal work, and 16% of working adults are employed on a full-time basis in the informal sector. It is a segment of the working population that funds an imposing amount of sales tax revenue. These are not the people who lost their homes in The Great Recession of 2008. Indeed, approximately 70% of the subprime loans issued in 2006 were to upper and upper-middle income borrowers in wealthy neighborhoods, and not middle-class working households, or middle-class neighborhoods. It is still the case today that, for workers of the informal economy, homeownership is largely unavailable due to institutional barriers, no matter how modest the home or neighborhood, and no matter how reliable the loan applicant is.

This article describes the lost macro-economic opportunity in failing to provide home loans to qualified households in the informal economy, then providing a survey of solutions with successful track records. These solutions fall with a framework I refer to as inclusive economics. My analysis focuses on one segment of informal economy: the cultural economy, which largely operates in cash and exemplifies how inclusive economics can create wealth in a sustainable way that includes historically dis-enfranchised households.