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How the Foreclosure Crisis Shaped Gen Z

Those born into Generation Z became evidence of the failing prospects of the American Dream.

A 16-year-old takes a selfie with her computer and posts it online anonymously. In the image, her laptop screen casts an eerie glow, illuminating her wide eyes and dismayed expression. The paraphernalia of teen life—paper lanterns, photos, a drawing of a panda bear—clutter the background.

It's 2012, but she isn't uploading the selfie to Facebook or Instagram. Instead, she's participating in America Underwater, a Tumblr blog launched by activists to tell the story of the 2008 foreclosure crisis. Below her image, she writes: "My parents can't afford to pay for our house. ... Most 16-year-olds aren't waiting for Bank of America to come steal away their home over an issue that was out of their hands. We stay strong and we are going to fight to save our home!"

While there's been no shortage of postmortems about the 2008 financial crisis, there's been little national attention to its impact on the children and young teens of Generation Z, for whom skyrocketing unemployment and national rates of foreclosure created the backdrop of their early lives.

In 2012, I moved to Northern California's hard-hit Sacramento Valley for two years to study the lasting effects of the mortgage crash on families in lower-middle- and middle-class neighborhoods. Headlines sparked by the 2008 mortgage crisis had petered out by the time I arrived in Sacramento. But over 15 million homeowners across the country were still struggling with underwater mortgages—owing more than their homes are worth.

The most pivotal fight, as my respondents described it, centered on battling big banks to amend these underwater mortgages, which often had originated from suspect lending practices. Hundreds of thousands of families were trapped in the Kafkaesque bureaucracies of corporate banks, like Bank of America and Wells Fargo, struggling to save their homes. The big banks had falsely promised mortgage assistance, vowing to disburse federal funds to prevent evictions. But over 70 percent of homeowners who appealed to lenders for mortgage assistance would be denied, contributing to the highest rate of bank seizures in American history.

At first glance, this is a story about adult homeowners, not their children. Adults were the ones signing mortgage contracts, calculating interest rates, filling out mortgage modification applications, balancing payments for rent against food and electricity bills, and applying for unemployment when the recession took their jobs. But the children of Generation Z were deeply affected.

Foreclosures meant that young people had to leave the homes they had grown up in. This inspired a sense of instability and shame, especially for those who were evicted. Losing a home to foreclosure typically meant that they had to change schools, leaving friends when they needed them most and, often, moving into lower-quality school districts.

Family dynamics changed. Parents were preoccupied and unavailable, spending hours on the phone with bureaucrats from the government or the bank. Other parents became depressed, some even suicidal, unable to manage the disappointments of letting down their families. Marital strife was common among couples struggling with foreclosures, as spouses disagreed about how to handle debts. Money troubles led some parents to divorce, tearing families apart.

On more than one occasion, I worked in neighborhoods where every family on the block had been evicted, disrupting tight social networks and support systems. These were neighborhoods of government workers, teachers, medical aides, and social workers who had spent decades supporting one another through births, deaths, holidays, and illnesses. Many moved out of state, and others relocated hours away to find rentals they could afford.

Educational futures became uncertain. Savings for college went into rescuing homes that were later lost to foreclosure anyway. Safety nets dwindled, and multiple generations suddenly found themselves at close quarters, as formerly middle-class families had no place to go after an eviction. Privacy became a luxury that middle-class families in the Sacramento Valley could no longer afford for their children and teens.

All these dynamics were exacerbated for Gen Z youth in low-income communities of color, which were targeted by subprime lenders and experienced even higher rates of bank seizures. Resources were often already tight for families in low-income residential areas, where young people struggled with gang violence and underfunded schools. For these families, foreclosures pushed them into unstable housing—motels, for instance—and even homelessness.

Those born into Generation Z became evidence of the failing prospects of the American Dream. Many utilized their digital-native predispositions to protest or comment on their situations. Private dramas were lived out in digital public in ways that often seemed aimed at catharsis. These forays online allowed Gen Z'ers to critique and to participate, even if the message they communicated through blogs and social media was that the outcome of their lives was, as the original poster said in America Underwater, out of their hands.

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Understanding Gen Z, a collaboration between Pacific Standard and Stanford's Center for Advanced Study in the Behavioral Sciences, investigates the historical context and social science research that helps explain the next generation. Join our newsletter to see new stories, and let us know your thoughts on Twitter, Facebook, and Instagram.

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