Why do we need more housing insanity?

In a post appropriately titled "Housing Insanity," Megan McArdle expresses astonishment over the fact that despite the horrendous consequences of the housing bubble and its fallout, the federal government is going full steam ahead to promote no equity home purchases:

If you want to know why us libertarian types are skeptical of the government's ability to prevent housing market bubbles, well, I give you Exhibit 9,824: the government's new $1000 down housing program.

No, really. The government has apparently decided, in its infinite wisdom, that what the American economy really needs are more homebuyers with no equity.

Reading the details (100 percent financed vanilla mortgage, unemployed no problem, not even a mortgage insurance requirement) it all makes the head spin. Noting that "commentators left and right can agree that this is not a good idea" (because zero equity buyers have to suddenly sell their houses, they'll be unable to pay even brokerage fees and closing costs), McArdle speculates that the reason behind the reckless policy might be votes:
The government is less worried about protecting itself from default than protecting itself from voters who want to buy a home at cheap rates. Small wonder they've decided to "help" low income homeowners into dangerous loans.
Insane as such a policy is, reports like this make me worry that getting votes might not be the only reason behind them.

A fundamental debate is occurring throughout America regarding who is best able to make decisions regarding the use of property -- individuals in a free market or government officials. Nowhere is this debate more prominent than through local zoning and planning controls often referred to as "smart growth."

Genesee County has taken government control of private property to a whole new level with the Land Bank; a centerpiece of the Genesee County Urban Land Redevelopment Initiative. Utilizing the legal authority of PA 123 of 1999, which makes it easier for local government to obtain tax reverted property, county officials have aggressively moved to acquire tax- foreclosed properties. According to an investigation by Cathy Shafran of WJRT in Flint, the Land Bank is now responsible for more than 7,000 properties, including 2,300 abandoned homes.

Private ownership of property has been a mainstay of the American political and economic system since the founding of the country. Private property rights are guaranteed in both the U.S. and Michigan Constitutions. Americans have been traditionally supportive of government ownership of property when it serves a public purpose such as a school, highway or park. The Genesee County Land Bank, however, seems to go well beyond the traditional purposes of government ownership of property. The county is in effect acting as a real estate agent and landlord. Some have accused the county of being a slum landlord due to the blighted condition of much of the property y in the Land Bank.

And,
The very existence of the Land Bank sends a chilling message to property owners as well as potential real estate investors. County officials have a free reign to implement their utopian vision of smart growth land use policy through the Land Bank. It is not hard to imagine the removal or relocation of entire neighborhoods "with the community's needs in mind."
Right. Tear down the houses to end "sprawl." Move people into denser housing! Make them use public transportation! East German worker style housing where people are crowded together and told what to do is their idea of a "utopia."

Now, while the above is just local government action, I worry that left-wing ideas get shared, and that the idea might be beginning to sink in that the ultimate beneficiaries of foreclosures in general might simply be government.

If so, then it doesn't take much imagination to understand why encouraging irresponsible risk-taking and failure (in the name of "fairness," of course) would be seen as another way to hasten the destruction of private property.

So maybe the government's housing policy isn't as insane as it seems.

MORE: Glenn Reynolds thinks the problem is that these people are idiots.

Idiots who've been entrusted with nuclear weapons, and their economic equivalents.
At least idiocy is a somewhat more reassuring explanation than my little fit of paranoid speculation.

Problem is, it takes the patience of a Zen master (which is a lot more patience than I have) to be reassured by the thought that the government is run by idiots.

posted by Eric on 08.06.10 at 11:24 AM





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Comments

It's funny, I always kind of think of you as someone who thinks somewhat like me except more optimistic or maybe more trusting of people or maybe just less paranoid, or all three.

Every now and then you outdo even my cynicism, paranoia and general mistrust of humankind.

These posts always scare me a lot.

Veeshir   ·  August 6, 2010 03:44 PM

Well, I'm generally an optimist, but I tend to be very suspicious of people who see failure as success. They have a vested interest in screwing things up! Worse is better!

Eric Scheie   ·  August 6, 2010 04:27 PM

I don't think these fools realize that if they continue it will not be good for them.

Parasites can have a very good thing going if they don't weaken the host too much. If they make the host sick, the host will fight back. Antibodies will develop. Fever will develop. Rejection of the foreign invader will develop.

Simon's Law:
It is unwise to attribute to malice alone that which can be attributed to malice and stupidity.

M. Simon   ·  August 6, 2010 05:08 PM

I split that baby by understanding stupidity as a style of malice.

guy on internet   ·  August 6, 2010 05:29 PM

They may be too stupid to understand the maliciousness of their policies. Of course, whether they're stupid or malicious, they probably think they're good!

Eric Scheie   ·  August 6, 2010 07:12 PM

After all, this is the Administration of the double-down. If at first you don't succeed, try, try , again. I would buy a house w $1000 down only if I had access to a printing press.

Gringo   ·  August 8, 2010 11:52 PM

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