Rescuing The Housing Market
A reader suggested a topic on government rental subsides and housing prices. “My weekend topic suggestion is how Section 8 and other government programs that assist the poor with their housing costs act to set an artificial floor under the real estate prices. The housing vouchers are in my opinion nothing but a pass through to the landlord.”
“I know landlords that had modest houses that rent for $850-1100/mo to people who don’t work, but get housing subsidized by the state of NY in the Albany area. & this was ten years ago! These rates imply you must make $50 grand a year just to compete with the people on welfare.”
The New York Times. “For decades the Antelope Valley was just a remote sweep of small towns. More recently, the area boomed and the population grew exponentially as scrub brush gave way to relatively inexpensive housing. Then came the bust. Thousands of houses sat foreclosed or vacant, while others were bought up by investors who did not necessarily live in the city but were eager to rent out the space. That left a prime opportunity for Section 8 recipients, who were thrilled by the relative bargains.”
“There is a widespread resentment against the influx of Section 8 participants in the area. The local newspaper, The Antelope Valley Press, prominently features stories about people with any kind of Section 8 violation. ‘I hate Section 8′ became almost a rallying cry — a Facebook page by that name featured pictures of some rental homes. In January, the garage of one such home was spray painted with a racial epithet and the ‘I hate Section 8′ message.”
“In many instances, the compliance investigations have led to recipients losing their vouchers. According to the lawsuit, more than half of the county’s proposed revocations came from the two cities, though fewer than 20 percent of the county’s roughly 21,000 Section 8 voucher recipients live in them. ‘They’ve made criminals out of everyone associated with Section 8,’ said Jesse Smith, a leader of the local N.A.A.C.P., which is a plaintiff in the lawsuit. ‘They just want to keep everything the way it was for the good-old-boy network.’”
“Section 8 housing vouchers were created under the Nixon administration as a way to break up poor enclaves in urban centers and allow more people to move to the suburbs, where they could, potentially, get better jobs and their children could go to better schools. Recipients are typically required to spend about a third of their monthly income on rent. In Los Angeles, there is a 10-year waiting list for the vouchers. Once a resident has a voucher terminated, it is difficult to have it reinstated.”
From ABC News. “Uncle Sam is landlord for at least 90 thousand homes that owners lost to foreclosure, and tens of thousands more in the pipeline. The Federal Housing Finance Agency (FHFA) is asking for information from industry and the public on what might be done with the inventory currently held by mortgage giants Fannie Mae, Freddie Mac, and the Federal Housing Administration. One option: turning foreclosures held by the government into rental homes.”
“That way, cheap foreclosures would not compete with other houses on the sales market.”
The Post & Courier. “Strapped as it is for funds, the government could still make a big contribution to economic recovery if Republicans and Democrats can agree to finance the orderly rescue of the real estate market for housing. The government already stands to lose $400 billion or more in this market because it guarantees most home mortgages, and many of these will fail. Indeed, it already owns about 250,000 foreclosed homes, The Associated Press reports.”
“It would be far better to bite the bullet now and create a government fund to absorb a significant part the remaining housing losses yet to go on bank balance sheets in exchange for financial community commitments to keep people in their houses through mortgage modifications.”
“As it did in resolving the terrible savings and loan crisis of the 1980s and early 1990s, the government could also take possession of abandoned properties and wait for a favorable moment to resell them. One step in the right direction came Wednesday from the Federal Housing Finance Agency which announced that it is seeking advice from investors on how to rent foreclosed properties in the federal inventory to keep them from dragging down property values in their neighborhoods.”
“Rescuing the housing market offers a better way to use federal funds to revive the economy than subsidizing public sector jobs.”
