Housel admits s/he’s riled up about the $3 Billion plan to give more rope to unemployed home owners underwater with their mortgages:
The message from Washington could not be any clearer: If you have a mortgage on the roof over your head, your well-being is backed by the nation’s full faith and credit. If you have a lease on the roof over your head, well, best of luck to you.
This, too, is very telling:
Without a doubt, losing your home in foreclosure is emotionally devastating. But doesn’t the same hold true for renters who face eviction? So much has been reported about the foreclosure crisis that few noticed the nationwide eviction rate soared 127% in 2009. Don’t these struggling renters deserve equal treatment among their homeowning neighbors?
But there’s also the efficiency arguments, and it’s nice to see one finally made in public:
Ironically, legions of unemployed homeowners may be jobless in part because they’re homeowners. The inability to sell your house, usually because it’s underwater, chokes off mobility, which is an absolute necessity when looking for a new job. This is especially true in a recession, when job opportunities are fragmented region by region. If your home prevents you from moving to where the jobs are, you’d be better off without it.
And smarter buyers–people who avoided the bubble–are getting treated like people who need extra scrutiny, and they face higher barriers to market entry than perhaps necessary because banks are holding them to a higher standard they held dumb buyers four years ago–people who mortgaged themselves to the hilt to buy houses that weren’t worth what they paid for them. So those smart buyers are perhaps not getting in to help get more movement in the market to relieve struggling homeowners or banks holding assets.
There is an argument for protecting the dumb buyers because of information problems and also because it is important to keep people sheltered–and owner-occupied housing is shelter. But it’s very interesting that we think dumb owner-occupiers are worthy of shelter when renters are not worthy of such protection.
I suspect that Obama’s plan has less to do with protecting individual homeowners than it does protecting banks and certain cities where the foreclosure burden is likely to be heavy.
I doubt Richard Florida is right about the direction of causation between renters and “innovation.” It is more likely a productive of high-demand, high-value land that makes owning hard difficult in major mega-cities; the renter factor doesn’t drive the demand, it’s a product thereof.