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