Three years ago, with home values escalating, local governments were consumed with worry about “affordable” housing.
So elected officials concocted all kinds of schemes to put people in homes they otherwise wouldn’t be able to afford. There were calls for expanded housing subsidies and “inclusionary zoning” mandates on developers, which require builders to sell a certain percentage of homes in any new community at below-market prices to lower-income residents.
In Nevada, public employee unions used the boom to seek huge pay raises. The City Council took money allocated for “low-income housing” and created a down-payment assistance and rental subsidy program for teachers that remains in effect.
Of course, the high home prices that prompted all these proposals have disappeared. Last month, sales of existing homes fell to their lowest level in almost a decade, and the median price for a home dropped for the fifth straight month. The number of homes facing foreclosure jumped 57 percent in January when compared with the same month a year ago.
Nevada leads the nation in foreclosures, with one filing for every 167 households. In Las Vegas, foreclosures have dropped the median price of a single-family home 17.3 percent from a year ago, to $249,900.
The “affordable housing” problem has nearly corrected itself, creating buying opportunities for families who couldn’t afford a home only a year ago.
But politicians are now consumed with worry about home foreclosures. Sen. Hillary Clinton wants a 90-day moratorium on foreclosures and a five-year freeze on adjustable-rate mortgages. Sen. Barack Obama favors creating a fund to cover refinance costs and allowing bankruptcy judges the freedom to modify mortgage payments for upside-down homeowners, a change included in a bill Senate Majority Leader Harry Reid is demanding the White House accept.
All of these proposals are intended to prevent the sale of foreclosed homes to private buyers, which keeps prices artificially high. Politicians can then claim that continued subsidies and other programs put in place to shift more housing costs onto taxpayers are justified.
Welcome to the world of government, where political interventions in the marketplace lead to more political interventions.
But they’ll eventually get it right — if it takes every last dime of your money.