Spurred by a blurb on today's REALTOR(R) Magazine Daily, I got to thinking about low income housing. for those that have read a few of my posts, you may think that I am unfriendly towards low income housing... but quite the opposite is true.
Not only do I think that low income housing is an imperative, but I also think that it should be owned, not rented. I think that communities function much better with owner occupied properties.
Here is part of the blurb:
A San Diego city-county task force is considering ways to buy empty homes ahead of speculators and reserve them for lower-wage workers.
So, after saying all of that, I have a problem with the above statement. I have a big problem with it.
Instead of trying to use the government to prevent speculators from buying the homes, why not work with investors to find ways to develop the property for low income families? Later in the story, it is pointed out that local governments are seeking federal help, and the federal government wants to help with grants and other spending. But, instead, why not get the investors... the people that have the money... involved in the process, and let THEM fund it instead of taxpayers (spelled t-h-e r-e-s-t o-f u-s). We already know from scores of examples that government instituted programs and actions are generally less efficient and more costly than private efforts. So, even with a profit motive, if the local governments would set up a target and leave the investors alone, it is likely that there would be a desired result faster and for less money than if multiple levels of government, and the required "authorities" and the long bidding processes, etc., are involved.
What will likely be the result of San Diego blocking these properties is that they will become city administered rental properties. This will allow them to ensure their continued low rent. And, like most of the low income rental housing, they will cost more to operate than they take in, and much of what they take in will be federal subsidies. For the money, they will be incredibly sub-standard.
*** This is an aside*** There was a federally subsidized project here in Atlanta that cost the average resident about $250/month. The federal government was paying about $1800/month per unit to keep it operating. It was a cesspool of crime and conditions. At the same time I rented a nice two bedroom apartment in a safe community for under $800/month.
If the various governments got involved to assist with down payments, and interest buy-downs, a $50,000 property could be had for less than $500/month including taxes and a HOA fee. A $35,000 property could be owned for less than $300/month.
Encouraging a developer to bring a condo development to market with units targeted at these types of prices, possibly allowing tax concessions on other properties the developer has, would be much better. With ownership ans investment, those in the community would feel a sense of pride in their ownership.
Allow people to be responsible, and they will be.
There won't be a continued drain on the budgets of the governments, and there won't be need for numerous authorities and layers to implement the process. Instead, there will be a tax base, lower crime, and increased opportunities surrounding those developments.
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Oh lord Lane, here I go. DISCLAIMER: I have been sick and on meds for a couple of days BUT I wouldn't write it if I didn't believe it. For people reading this you need to know that I have a great deal of respect for Lane. He is one of the few people from AR I have had a bagel with and he's a very humble and intelligent man.
Lane, you wrote "Allow people to be responsible, and they will be." That would be so nice - it really would - if it were only true. Do people need housing they can afford? YES! Do all people deserve housing they can afford? NO! Two quick points and I won't steal anymore blogspace: 1) Chances are the reason they need that affordable housing is because they continually trash their credit and work history. I've seen the credit of many of them and many of them have hundreds and hundreds of late and missed payments. 2) That's the cry that started the whole subprime mess "the lenders are excluding the poor and disenfranchised from participating in the American Dream by not providing them equal access to credit.
Now to clarify - I know you're talking about people who have actually tried to prove they deserve the shot at home ownership and I agree: they deserve it. Here is another logistic for you to consider: If banks and lenders are expected to offer the financing there is a huge consideration. It costs the same to originate a $35,000 loan as it does to originate a $250,000 loan. True the commissions are lower but the processing costs, research costs, appraisals, copies, faxing, on and on ... same cost. In Georgia only Federally Chartered Banks can get away with raping the poor to offset that cost. The maximum allowed under the Georgia Fair lending act is 5% of the total LOAN amount for ALL origination fees including all settlement costs. On a $250,000 loan the broker can make 2% and it will hardly effect the transaction cost. However, the attorney fees, credit fees and underwriting fees alone would bust GaFLA on a $35,000 loan. So now the government also has to find a way to provide the financing. Not saying it can't and should not be done just saying it's a major logistics decision and the private sector will have none of it. Maybe George Soros will fund it and prove he's not the penultimate hypocrite.
Funny, Marietta and most of Cobb County is getting rid of low cost housing by having investors pick them up and speculate until the new projects are started.