For 20 years, Steamboat resident Rob Douglas was a Washington, D.C. private detective specializing in homicide, political corruption and terrorism. Since 1998, Douglas has been a commentator on local, state and national politics in Washington, D.C., Maryland and Colorado. To reach Rob Douglas, email rdouglas@SteamboatToday.com.

For 20 years, Steamboat resident Rob Douglas was a Washington, D.C. private detective specializing in homicide, political corruption and terrorism. Since 1998, Douglas has been a commentator on local, state and national politics in Washington, D.C., Maryland and Colorado. To reach Rob Douglas, email rdouglas@SteamboatToday.com.

Rob Douglas: Rethink affordable housing

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Rob Douglas

Rob Douglas' column appears Fridays in the Steamboat Today. He can be reached at rdouglas@SteamboatToday.com.

Find more columns by Douglas here.

The Wall Street Journal recently published an article examining a policy question facing the presidential candidates titled "Homeownership Push Is Rethought." The question posed in the article is, "How aggressively should a new administration promote homeownership?"

Arguably, the same issues that require the next administration in Washington to rethink the promotion of homeownership - given the collapse of Fannie Mae and Freddie Mac - require our local governments in Routt County to rethink how aggressively they promote affordable housing. But before discussing those issues, a brief refresher is in order about how our nation arrived at the current financial crisis.

As the Journal piece notes, "During the 1990s, Washington pushed Fannie and Freddie to expand their role providing loans for low- and middle-income borrowers. In 2002, the Bush administration charted a more aggressive course by pushing for lower down payments and touting vouchers that would allow public-housing tenants to one day own homes. : In 2004, President George W. Bush campaigned on lower barriers to homeownership as part of the domestic agenda for his second term. The Republican Party platform that year singled out the down payment as the 'most significant barrier to homeownership.'"

As a result, for more than a decade, policy makers of both political parties in Washington prodded the mortgage industry into relaxing lending standards. This government interference in the free market eventually led to the point where millions of borrowers could purchase homes with poor or non-existent credit histories; no documentation of income; little or no down payment; or other factors that previously had prevented mortgages.

To illustrate how absurd mortgage lending became, illegal immigrants - who, by definition, are unable to document lawful income - received mortgages with the knowledge and assent of the federal government.

Yes, perversely enough, the same federal government legally required to apprehend and deport illegal immigrants was encouraging them to apply for mortgages and buy homes.

Predictably - despite credit default swaps and other financial derivatives created to spread financial risk from mortgages granted because of the demands of politicians instead of the fiscal soundness of borrowers - the financial chickens came home to roost. When the debt-heavy chickens landed, the roost collapsed along with our housing and financial services industries.

The resulting shrapnel from the housing collapse now is ricocheting through the world's economy. In response, the same Washington policy makers who instigated this fiasco are nationalizing entire industries, as the American free market system that worked for 200 years is cast aside as a relic for students to study in history class.

Bye-bye, capitalism.

Hello, socialism.

Perhaps, before we repeat similar mistakes here in the valley, we should retreat from the knee-jerk social engineering government policies surrounding local housing development and ask the same question now before our nation's leaders, but with a local twist.

How aggressively should our local governments promote affordable housing?

Arguably, government should play no role in promoting affordable housing.

Why?

Because there will be affordable housing if the free market is left to work unfettered. But it has been so long since there were truly free markets in this valley, this state and this country that we no longer can imagine allowing market forces to work unencumbered of government interference - as well-meaning as that interference might be.

Perhaps it is human nature. Perhaps it is the innate do-gooder in all of us. For some reason we, as a society, always feel the need to petition government to fix every perceived problem instead of trusting and allowing individuals to arrive at solutions.

Yet, the history in this country, from the smallest city council to the federal government, is one replete with failure when it comes to providing housing. There is no reason to think our local governments will succeed where all others have failed.

Let the free market work. It would be a refreshing change of pace in these times of government-created economic crisis.

But, as it appears a majority of our local officials do not trust individuals and the private sector to work through housing issues, there is an even more compelling reason the quest for affordable housing should be placed on hold. To the joy of dyed-in-the-wool free market zealots, the collapse of the government-induced housing bubble may just yet provide plenty of affordable housing here - long before redundant layers of local bureaucracy can.

To reach Rob Douglas, e-mail Rob.Douglas@Comcast.net

Comments

bigfatdog 6 years, 2 months ago

Rob, what do you mean government can't fix everything? Come on... get on the train...you are becoming a minority. Socialism is "in" in the usa and your civil liberties, independent thought, hard work and personal responsibilities are out. just look around.. the City's social host ordinance, gov will fix everything and we, the people, will all be better!!

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Fred Duckels 6 years, 2 months ago

Amen Rob: I blogged awhile back speaking out about our affordable housing ownership situation. On one hand we try ot cool down an overheated economy, the other hand is into affordable housing to fuel the situation. To date our affordable ownership situation was made under totally different economic times. It may have produced situations that are unworkable today. We are possibly creating layer on layer of micromanagement. Politicians and staffs can polish resumes promoting such, It sounds good at election time but we need to bury this and let the markets work as they have for the better part of the last two hundred years. It might seem like the good old days again.

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Scott Wedel 6 years, 2 months ago

First, it was not Fannie Mae and Freddie Mac that led to the boom in no down mortgages. Those were offered elsewhere (such as WAMA) first and Fannie and Freddie were pushed to also accept some of those mortgages, but they were also among the first to stop accepting them. As a percentage of their entire portfolio, these so-called Alt-A mortgages makes a far smaller percentage of Freddie and Fannie's holdings that numerous other banks and savings and loans. Fannie and Freddie were among the first to fail because they had so little capital backing so many mortgages (which allowed them to have mortgages at lower interest rates) that even a 4% foreclosure rate was more than they could take.

Thus, blaming Fannie and Freddie for this mess is simply to not understand recent history.

Second, it makes no logical sense to link government assisted slightly lower mortgage interest rate to local so-called affordable housing. The demand for housing in SB sets the price well above what locals working local jobs could ever afford. The "free market" solution to that would be to eliminate zoning and freely allow annexation in order to create enough supply so that there would be low cost housing. That would be the end of open space in these valleys and thus probably be a case of the cure being worse than the disease.

If there is to be zoning and limited ability to annex into SB then the free market solution to that is that locals working local jobs whom want to own their home have to decide how small of a house and how far away they want to live. It is the intent of affordable housing programs to try to create some ownership opportunities for the local workers in the otherwise unaffordable local community.

I dislike most affordable housing programs because they are such a gross distortion of the free market and yet try to deny it. Thus, they end up having all sorts of unintended consequences such as basically trapping the owner into taking a big financial and lifestyle hit if they move and so on.

But there it is simply false to suggest that the free market would ever reach a point where housing in SB was affordable to local workers without allowing unchecked growth into every local valley.

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JLM 6 years, 2 months ago

Affordable housing and home ownership are not the same thing. Much of the recent political debate has been focused on home ownership while ignoring practical affordable housing. SBS needs affordable housing.

For a worker, affordable housing may be a fairly priced and affordable apartment rather than fee simple ownership of a detached single family dwelling.

The American dream understandably is seen through the prism of the detached single family dwelling and the ability to regularly cut a patch of grass which is exclusively ones own.

Land values, zoning restrictions and building codes are what make a certain volume of living space differ so greatly in cost. SBS has very expensive land, fairly stingy zoning and tough building codes.

To make housing more affordable each of these factors will have to be addressed. Find, create, support cheaper land with more generous density, smaller setbacks and sideyards and with more attached housing.

In the final analysis, a strong economy provides good jobs which underpin the largest purchase that most Americans will make --- housing. The most difficult element of the housing purchase is the downpayment.

A zero capital gains tax rate on a self funded private housing down payment account would be a creative way to ensure that the homeowner has some skin in the game and would ensure that loans are fairly underwritten to reflect real market risks.

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