I start my Monday morning by checking out the Daily Herald’s website to see what wonderful things that I have missed over the weekend. The last few weekends have not really been weekends “off”, I think I work harder and longer on the weekend than I do doing the week. However, my weekends consist of work that I do for me and I tend to avoid the computer, the websites, the blogs and forums.
Anyway, I come back to read a letter to the editor in the Daily Herald from a representative of the Wisconsin Builders Association. The letter basically states that the government should not allow the $8,000 tax credit to first time home buyers to end. Not only should this credit continue, it should be eligible to anyone who purchases a primary residence.
I understand that this person represents the Builders Association so he is looking out for his bottom line and the bottom lines of his members and therefore his comments should be taken with a grain of salt. I also understand that as President-Elect of the Wisconsin Apartment Association, that in my comments to that letter I am also looking out for my bottom line and the bottom lines of our members, so my comments should be taken with a grain of salt as well.
However, I will allow you, the readers to just appreciate that there is more to the story than you hear from the builders and the Realtors. And, although my side of the story may be skewed in my favor maybe a little more than it should be, the truth of the entire situation is probably somewhere in between. And, without voices like mine, there is no “in between” to go to.
In his letter, Jerry Deschane, Wisconsin Builders Association, Madison, states “In virtually every decline since World War II, housing has been the catalyst to lead the nation out of recession.” I would call that an accurate statement. However, one has to realize that with baby-boomers maturing to that age where they could afford homes, there was a demand for housing. Therefore increasing the supply of housing made basic economic sense, and the good-paying jobs that come from home-building helped to spur the economy.
However, that well is not without end. Building housing for the sake of building housing when the supporting demand isn’t there will tend to create an over-supply. And, as anyone who has taken an Econ 101 course will tell you, increasing supply over the demand will put downward pressure on prices. Downward pressure on prices tends to lower housing values. Ooops.
And, demand is going down. The supply needed to accommodate the baby boomers should in theory be more than adequate to supply the next generations, as the boomers transition out of owner-occupied housing to assisted living facilities, condos, and to be painfully honest – cemeteries.
Also, this current economic downtown is not the same as those in the past. It is hard to convince me that asking housing construction to pull us out of this recession is a good idea when it should be clear to most that housing was a HUGE catalyst in putting us into this situation.
The government, for too long, instead of having a balanced housing policy that promoted various types of housing for various needs instead focused on one thing and one thing only – HOME OWNERSHIP. This policy of “home ownership at any cost” instilled in people that they truly weren’t American until they owned a home. If you rented, you were simply not as good as home owners, not as desirable, second class citizens.
And fiscal policies were made that made it easier to buy homes. Interest rates held ridiculously low and easily manipulated by the government by creating secondary markets where banks could sell their mortgages. By not having to worry about the risk of default, many banks loosened their lending guidelines on “conforming” loans. Then you had the sub-prime lenders, doing anything they could to close the deal – manipulating appraisals, not even looking at income. (I know of one example where they approved a monthly mortgage payment that was MORE than the monthly social security income payment of the borrower.) Deregulation then allowed these mortgages to also hit the secondary market, with investors not really knowing that these loans were sub-prime and not conforming.
Housing became speculative. People would by and sell houses like they do stocks. Buy it, watch it go up in value 10-15%, then sell it and pull a quick profit, then use that profit to do it again. The trick was NOT to be the one holding the real estate when the music stopped. So, forgive me if I am hesitant to allow what I see as a primary cause of our current economic situation (a one-sided housing policy and over-aggressive building) to be given a shot to fix what it created.
A few months ago, I was invited to a meeting held by the Wausau Community Development department as a part of a focus group on housing. At that time, those of us attending that meeting were told by the person that oversees the Section 8 housing voucher program in Marathon County that the waiting list was over 3 years long, that at that time, it had been 4-5 months since anyone had even gotten off of the waiting list, and the largest need in Marathon County was for 2 Bedroom, rent-subsidized apartments.
These are not people who have been affected by job loss because of the bad economy. These are people who are on disability, or cannot work, or are not able to get a job with a living wage. Some of the people are victims of the economy, but the waiting list was measured in years even when the economy was going gang-busters.
So, if we have this need for 2 Bedroom, tax-subsidized apartments, why not build more? We could, but I guess I personally don’t understand how that makes sense when there is sufficient supply of market-rate 2 Bedroom units to fill that need. I would love to make some of my 2 Bedroom units based on income and only collect the rent they could afford instead of market rent, but I am pretty sure the people who actually get the rent I collect (the mortgage holder, the tax collector, the utility companies, etc) would not be happy with that decision. The Section 8 voucher program allows people to rent market rate apartments while only paying what they can afford. The government pays the landlord the difference between that the family can afford, and what market rate is.
This program is severely under-funded. It has been under-funded for some time. And as the government comes up with more programs to help us out of this recession, such as “Cash for Clunkers” and this $8,000 home-buyers tax credit, there is less money available to fund programs for those truly in need, for those people who have been in need even when times were good.
How many cars were “bought” by the government for $4,500 each? Each clunker the government gave $4,500 for is a family’s housing for a YEAR. That’s, right, a year or more depending on the household income. A family that can’t afford safe, code-compliant housing that have been on the Section 8 waiting list for YEARS. Each clunker could have paid for a year of housing.
How many people decided that $8,000 tax credit was the reason they were going to buy a house, if it wasn’t for that tax credit, they wouldn’t have purchased? How many got the credit when they were going to buy anyway and just happened to be looking to buy at the right time? I ask because we are giving $8,000 to families to make a purchase they can (hopefully afford) that they were going to make anyway. At the same time, that same $8,000 put into the Section 8 program instead would have been able to provide a family with a safe place to live for 2 years, a family that will never be able to afford a home and it will be a luxury for them just to have someplace safe; that meets housing codes.
Don’t get me wrong, a housing policy that favors multi-family over owner-occupied is just as doomed to fail with unintended consequences as the “home ownership at any cost” policy did. What we need, is a BALANCED housing policy.
Our elected leaders need to look at history, they need to look at how we got here. Because, those that do not learn from history are doomed to repeat it.