Relief for Housing Debacle Lies Within Reach

We are excellent hand wringers in The United States. If someone points out an issue, we are easily led to fret and stew about it. It seems that far too few of us understand that seeing a problem or realizing that there is an injustice is just the seed of action. most of us have not developed the skills to turn awareness of an issue into positive action to solve the problem. For the media it is like shooting fish in a barrel. Especially in our saturated state, with crisis after crisis vying for our attention, little if anything gets done to solve one crisis before we are led away to the next one. The impetus for creating lasting, positive change gets diluted by each successive crisis. I could list a series of issues that have enamored the public's imagination, some have even had large sums of money and human capital thrown at them, but they are still stewing away on a back burner in their discreet location, out of sight, out of mind, unresolved.

The "housing crisis" was spawned by people without conscience, who had unbridled enthusiasm and shady practices of greedy bankers, underhanded appraisers and some who were just riding the wave of insanity that swept over the financiers and market generally. The extractive approach to the housing market generally, American people, and their pocketbooks specifically led to one of the biggest hits that our economy has taken in our history. Even those who are treading water in homes that are paid off, or those making payments on homes that are losing value are continuing to be hurt by morally bankrupt practices of lending that spurred this crisis. As the homes down the street, or next door continue to lose value, everyone's equity is drying up. They used to say, buy the worst house in the best neighborhood if you want to make money in real estate, the theory being that you would a.) Save money every month due to the fact that you had less debt. b.)Fix it up and reap big rewards down the road for having improved the housing stock of the whole neighborhood. And, c.)Benefit generally from the upscale neighborhood in a variety of ways.

In the better neighborhood, your children would go to school with a "higher class" of people, the parks and green space would be more plentiful, nearby services and goods would be closer and higher quality because of being in a better neighborhood. Over time, driving less and continuing to reap these rewards would have compounding effects. The neighbors would appreciate you fixing up the dog of a house in their neighborhood because you would improve the quality of their investment as well. This was the prevailing wisdom about how to achieve the American Dream on a budget worked, for the better part of our history. The current state we are in is characterized by the exact opposite effect. The whole process has been turned on it's head, but buying the most expensive home you can afford, in the worst neighborhood is not the best course of action in this climate either. Prices are continuing to spiral down, even after the precipitous decline of a few years ago. Homes that have lost thirty percent of their value drag down the worth of their neighbor's homes as well. The schools are hurting because of reduced budgets, the parks are maintained poorly because cities are trying to save money, most of the commercial space nearby is going empty as businesses continue to fail, which in turn requires us to travel further for lesser quality goods and services. Neighbors are now preoccupied with how much they have lost on paper and don't appreciate that your home renovation is on hold until the economy, or market improve.

I believe that there is a good solution to the crisis, one that would gently punish banks and free those who had nothing to do with creating the current crisis from having to deal with the unfair fallout caused by greed and deception in the marketplace of housing. The benefits of this approach will far outweigh the costs and the plan takes but a moment to describe. Imagine a giant recovery force, one that would have the power to transform our culture from the inside out. A volunteer workforce of immense proportion, perhaps millions of people helping to create a better society. What if people could be rewarded for community service by having a reasonably-priced place to live? What if these people absorbed the vacant homes across America? What I propose would be a three-tiered program, allowing people to choose their own level of buy in and their own level of reward. The only thing that would be required is the will, and several problems would be solved simultaneously. We would create a home-buyers program, but unlike the last one that just gave tax credit for purchases, which bails out banks, trickling a pittance to the actual home buyers, this would require more commitment on the part of buyers and reward them substantially, while giving a pittance to the banks. It is time for the banks to pay for the harm that they have created and this would be a small step that we could take to show them what they would stand to lose if they try these shenanigans again.

Potential buyers would be able to choose a one-year, five year or ten year agreement. During that time, the government would commit to pay their house payment. Because the government would be investing in the people, the program participants would be required to volunteer with a local, non-religious, school or charity, giving service to their community. The one-year plan would produce a benefit that would act as a down-payment. At the end of the year, the purchaser would get a loan from a bank and begin making payments. The five year plan would offset 20% of the cost of the home as well as require no down payment, and the ten year participation level would cut the home's cost by 50% as well as requiring no down-payment. In essence, the government would be on the hook for the total cost of housing for these people, but the real kicker would be that for the massive benefit of stabilizing the housing market, banks would have to sacrifice as well as the American taxpayer. They would not be allowed to charge any interest on these loans until the agreement between the feds and the home buyer expired. Anyone who has purchased a home should have gotten a repayment schedule at closing and, if they looked at it, seen the massive charges for interest, especially in the first years of the loan repayment process. All of these charges would be non-existent and therefore the benefit would be accruing to the homeowner, their neighborhood, their buying power and the local communities that these foreclosed homes are in.

The real benefits would accrue to communities that would have more teacher's aids, after school program assistants, mentors, providers of adult services, people to assist in a variety of ways, making the community stronger. We are deserving of solutions that reward people for doing good, and well, but we must put a stop to systems that exploit others of the gain of a select few. This idea has the power to benefit many millions of people at the expense of just a few. The same few that caused the mess in the first place. As for the taxes that would be spent on housing, I would rather that the government spent no money at all, but that is unreasonable to expect in this age of corporate welfare and bail outs.