BC: OUTSIDE THE BOX
..
..
..
..
..
.
..
..
.
..
.
.
.
.
.
..
.
.
An Eminent Domain Solution
I've been saying that part of the problem is too many houses. And, I've been trying to take this into account in suggested solutions. How do we productively keep houses off the market for long enough for demand to catch up with supply? The answer, it seems to me, is to upgrade the structures to net energy neutral homes through retrofitting. Bring them up to Architecture 2030 stadards: architecture2030.org
This is great. It stimulates the economy through the work done on the retrofits. It stabilizes the housing market since you know the upgraded houses will sell for something but they are not sitting around depressing prices right now. It warns the building sector not to build new homes because the retrofits will be coming on the market.
But, how to get the homes? I suggested limiting the purchase of toxic securities to $0.10 on the dollar and being sure that we get a hold of the whole liability. That could do it. But, I'm thinking that the way to get banks to really consider working with their customers more would be to use eminent domain. The Supreme Court has said this can be used very broadly, even to transfer property from one private owner to another. So, instead of working form the paper side, what I suggest is that the government excercise eminent domain for every forclosure, paying $0.10 on the dollar value of the mortgage. This keeps all foreclosed properties off the market until they are retrofitted at least, and possibly longer in a housing depressed area. Based on the price paid, we can afford to keep these unit vacant (or rented) for some time since the return on investment should be about 30%. Banks, knowing that they can't get more that 10% if they foreclose, will try to come to terms that aviod foreclosure so the number of houses we actually aquire will be as few as possible. At the same time, the toxic securities will have a particular valuation and thus become liquidatable, ending the credit feeze up.
Why have so few looked at the problem from the reverse. As the US has between 8,000 - 10,000 foreclosures every week or is it every day, the partial answer would be to stop these house coming onto the market as distress sales. Use your $700 billion to purchase the property at whatever the local market rate is less a generous discount - bank takes a loss - but do not eject the ex-mortgagee but keep him/her in the house as a tenant. An occupied house keeps more value. The goverment takes a rent, some return. Upgrade the house and then over time release them back to the market or sell it Thatcher like back to the tenant.
This give the market a floor, the banks know the value of the debt, but the US helps the majority of its citizens rather than the minority. Since you have nationalised banks nationalising some housing cannot be that hard. |
