Spotted by DBC Reed in the New York Post Times:
The Obama administration’s much-anticipated report on redesigning the government’s role in housing finance, published Friday, is not solely a proposal to dissolve the unpopular finance companies Fannie Mae and Freddie Mac.
It is also a more audacious call for the federal government to cut back its broadly popular, long-running campaign to help Americans own homes. The three ideas that the report outlines for replacing Fannie and Freddie all would raise the cost of mortgage loans and push homeownership beyond the reach of some families.
That fact is already generating opposition in Congress and among groups like community banks and consumer advocates. But administration officials said they had concluded the country could no longer afford to sustain its commitment to minting homeowners. Better to help some people rent.*
From the red corner:
“I’m encouraged to see the administration included a number of reform ideas that track closely with my own,” said Representative Scott Garrett, the New Jersey Republican who heads the subcommittee that oversees Fannie and Freddie.
From the blue corner:
Some of the White House’s usual allies, meanwhile, reacted with anger. “Gutting Fannie and Freddie is the most irresponsible housing proposal yet from this administration,” said Representative Dennis Cardoza, a Democrat from the Central Valley in California. “How is Joe Six-Pack ever going to be able to afford a home?”
1. Now, we don't know why the Republican guy supports this, but it's better to be right for the wrong reasons than to be wrong for stupid reasons.
2. Mr Cardoza appears to subscribe to the view that house prices are a given, and that cheap credit helps "Joe Six-Pack" afford a house. That is nonsense of course, as is the assumption that "replacing Fannie and Freddie... would raise the cost of mortgage loans and push homeownership beyond the reach of some families."
3. What they overlook is that cheaper credit just pushes up house prices, so "Joe Six-Pack" is running to stand still. The US administration went mad with extending cheap home loans to all and sundry in the late 1990s, and although the level of home ownership rose from 66% to 69% by 2004, it has now fallen back to the pre-madness level of 66%. So on the whole, people are worse off than when they started.
4. Another interesting comparison is with Canada, where the banks didn't go mad and there are no particular subsidies to buying or owning a home, and where home ownership levels remained stable at 68% throughout. In the UK, the level of home ownership fell by three per cent during the bubble years.
* Subsidising rents is probably even stupider than subsidising home ownership, because all this does is drive up rents, so all the subsidies end up in the pockets of people wealthy enough to buy up a slice of a limited supply of housing to rent it to those who are now priced out and forced to rent.
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21 comments:
"Subsidising rents is probably even stupider than subsidising home ownership...."
Good point, but logic and sound finance means nothing to British lefties and their U.S counterparts. Take our enormous housing benefit budget for example, at £20bn p/a they could build 200,000 homes assuming construction costs of £100k each, and as we know gov't taxes 50% of the economy so you could roughly double that to 400,000 homes per year every year. 2 or 3 years of that and we could have solved the 'housing' crisis (assuming they kept them in public ownership and rented them out really cheap)
But this simply wouldn't do as lefties don't really want to solve society's problems; it would put them out of a job. So instead they advocate policies that cause hardship and then claim that they need more resources (taxpayers' cash) to 'help' the 'vulnerable'.
CD, remember that only a third of the £20 bn Housing Benefit budget is paid out to private landlords in cash (and yes, this should be got rid of, pronto), the bulk of this is an accounting entry between DWP and local councils relating to social housing.
But I completely agree that building social housing is an infinitely better use of public money than giving it to private landlords (whatever the precise maths of this are).
And I completely agree on most lefties having no intention of actually solving anything.
Maybe a return to social housing could provide a politically acceptable (compared with LVT) partial solution, combined with a vastly simplified tax and welfare system. We have a history of social housing too unlike the U.S so the public wouldn't necessarily treat is as a proxy for communism.
My parents took advantage of the Right to Buy scheme during the 80's and compared with some of the crap thrown up by developers today it was well built decent sized semi. Those in their 20's on average wages can only dream of enjoying such luxury!
Of course this would mean going backwards, but at least a little less money was pissed up the wall.
Mark is right here. Although before we start talking about Republicans being right, it's worth bearing in mind that this is a policy created by a President who's a Democrat...
Dave: Sorry, we're not building council houses in the UK and ran down the council housing stock *because of lefties*? I agree with your prescription, but let's be clear: we moved away from that model because Mrs Thatcher thought that people who "owned" their houses were more likely to vote Tory.
@john b
Agree on both points.If you Google the article (BTW its in the New York Times not Post)the headline shows the Democrats are the hardliners"Administration calls for cutting aid to home buyers".The report concerned contains such frankly unbelievable lines as "This does n't mean that our goal is for all Americans to be homeowners"
Of late the Republicans have been the Homeownerist party with GW Bush
inugurating something he called America's Ownership Society.His Fact Sheet America's Ownership Society is still on the Net containing such statements as "The President believes that homeownership is the cornerstone of America's vibrant communities."
This was kept on the Net all the way through the American housing bubble and its collapse.
However if you read Ownership Society on Wikipedia ,its pretty clear the Republicans nicked all the ideas from the British Conservatives, particularly Thatcher.
JB, IIRC, the lax lending policy (and scrapping Glass-Steagall etc) was kicked off by Cliton, Bush took it to extremes and Obame has so far continued Bush's fine work on bailing out banks. So they're equally to blame on the whole.
And Chefdave has a point. When the Lib-Cons suggested reducing HB paid to private landlords by a tiny little bit, all the lefties wailed and wailed about 'social cleansing', it's relatively few lefties who stated the bleedin' obvious.
DBC, I have amended.
Whoever was behind this plan in the USA, it is quite clear that it has not achieved its most basic aim - to increase the number of owner-occupiers, it has reduced the number. That is the key to all this - Home-Owner-Ism does not work, not even measured by its own criteria!!
I still can't see the advantage of having all social housing publicly owned. I can see a vast disadvantage, though - if your local authority is a crap landlord, you've nowhere else to go, unless you move into the next district, which is hardly an option unless you live in London (and not much of one there even).
B, some council housing is not very well managed*, but quite what management/ownership structure would be least-bad is quite separate to the simple observation that paying HB to private landlords is a criminal waste of public money.
* There are 4 million people on the waiting list, so clearly it's not that badly managed, or at least the lower price more than compensates. And if you're in social housing and don't like it, well stop whining and move out, somebody else will be happy to move in.
@MW
The Housing market in the US has been badly affected by racism and other forms of discrimination which showed up very obviously in ghettos formed by "redlining"(see Wikipedia).It is fair to say that a lot of the American efforts to spread homeownership have been coupled with a determination to give equal opportunities in housing to redlined black people most of all.This emphasis can be traced through Johnson, Carter Clinton and most strongly GW Bush: his Fact sheet on America's Ownership Society is very anti racist.
The originators of Homeownerism in the UK were never this virtuous.
DBC, agreed, Clinton & Bush may or may not have genuinely believed that lending more money to African-Americans was A Good Thing, but as we know, the policy completely failed.
I've seen other research that says it's not that banks discriminate against people because of colour, it's simply that coloured Americans tend to have lower incomes, so the lax lending policy was tackling symptoms not causes.
In any event, Thatcher's Right To Buy was sold to the gullible electorate as a way of helping working class people 'onto the housing ladder', so swap their underclass for ours and it's the same thing.
@ Bayard, it's not the optimum solution, but at least the taxpayer has a tangible asset at the end of it. We're only talking £20bn pa here against a housing market worth £4trn (0.5% in other words) so it wouldn't be time to unite in solidarity and start singing The Red Flag.
It would just be nice if the gov't stopped living out the film Brewster's Millions with public cash. We can't afford to pay for their fantasies anymore.
"And if you're in social housing and don't like it, well stop whining and move out, somebody else will be happy to move in."
Come on, that's a stupid remark and you know it. The facts that 1. social housing is in short supply thanks to Mrs T and 2. the providers of social housing are in a monopoly position is no excuse for the monopolists to offer a crap deal. Something bad may be better than nothing, but that's not a good and sufficient reason for it to be bad when it could easily be better for the same cost.
CD I'm not suggesting the state pays for privately owned social housing, therefore the cost of providing that housing to the state will be nil. MW has stated many times that Local Authorities make a modest profit on their housing, so what's to prevent a private-sector social housing landlord doing the same. I used to live on a housing estate where the majority of houses (2 & 3 bed terraced) were owned by the Peabody Trust (in those days a private organisation). Their tenants actually got a better deal that LA ones, in that the rents were similar, but the repairs and maintenance were always done promptly. Not all private sector landlords model themselves on Rachman, you know.
B, Thatcher AND Labour sold it off, not an issue, build some more. Social housing is clearly NOT a monopoly, it's about 20% of all housing on average and maybe 50% in some boroughs. Social housing providers are not, by and large, part of the Home-Owner-Ist cartel.
It's easy for outsiders to slag off social housing, but as a matter of fact most people in social housing are reasonably happy with it (taking price and quality into account).
And hooray for the Peabody Trust, of course. I see no harm in councils sub-contracting whole tower blocks or estates to private management companies (or 'charities' or tenants' committees) who are allowed to keep about 5% or 10% of the rent, that'll lead to a least bad outcome. Or go the whole hog, and sell it all off and claw back the land rent element via LVT, again a win-win for everybody.
"It's easy for outsiders to slag off social housing, but as a matter of fact most people in social housing are reasonably happy with it"
Quite. As the coalition recently pointed out, one of the biggest problems associated with council housing is that the tenants like it so much they're passing their agreements down to their kids, thus depriving others of social housing even though technically they may be more deserving. That doesn't sound like an unsatisfactory situation to me!
Experience has taught us that council housing is often badly run, bureaucratic, and has the potential to cause social problems as lots of poor people our housed in close proximity to one another; it can be pretty crap, there's no getting away from that. But all shortcomings aside, I'd still prefer it's increase if we're going to continue with the home-ownerist model where landowners get to bag all the surplus cash.
It can provide a vital sanctuary for those that would be unable to survive if thrown to the wolves.
CD: "has the potential to cause social problems as lots of poor people our housed in close proximity to one another"
In my limited experience, the main downside with social housing is that one 'problem family' can ruin things for a whole tower block or a whole estate ('a pinch of shit spoils a bucket of porridge'). If I ended up in social housing, I wouldn't mind the condensation or the lift that doesn't work, it's the thought of ending up next door to some petty criminals and thugs who allow their pitbull to crap in the doorway that worries me.
Anyway, when I'm in charge, we'll build a big new council estate in the middle of a field in the middle of nowhere and social tenants who cause trouble will be shipped off to there (effectively an open prison, where food and water are air-dropped in by helicopter once a week).
The quality of life for the 90% or 95% of well-behaved tenants who stay put will increase enormously.
"Social housing is clearly NOT a monopoly, it's about 20% of all housing on average and maybe 50% in some boroughs."
I didn't say social housing was a monopoly, I said that the providers of social housing often have a monopoly of providing social housing.
"It's easy for outsiders to slag off social housing, but as a matter of fact most people in social housing are reasonably happy with it"
My remarks about the crapness of social housing landlords come from knowing people who have suffered from that crapness. There certainly used to be some splendid social housing and I'm sure there are still LAs where the provision of such is done competently. That doesn't change the fact that if you end up suffering from your LA having a badly run housing department, you don't have much many options to do anything about it.
B, I'm not disputing that some (or most?) social housing is badly run in a number of ways.
So rather than pointing that out, why not see if you can think up a few general rules which would mean it were run better? I've suggested a few above (and there are plenty more where they came from, e.g. scrap needocracy and make it just price and waiting list rationing - if the waiting list is too long, then hike the prices or build more, just like any business), what do you think we could do?
The Peabody Trust remains out of Government control but hardly shews how well the private sector provides affordable housing.When laissez faire was at its height and the private sector was in the ascendancy we got the horrific housing depicted in Engels' Condition of the Working-class.Peabody tried to do something about it but he was an American philanthropist and there was a sweet FA reaction from the British ruling-class-though Peabody was adored officially and given a State funeral.As the cotton factories that had thoroughly messed up Engels' Manchester were built on child labour,it is not surprising that the working-class started looking to the public or mutual provision of houses and other necessities as the private sector was a dead loss,except for a 5 year period in the 1930's when there was a great deal of ribbon development resulting from dirt cheap land prices and low interest rates from us coming off the Gold Standard- circumstances that have not coincided since.
DBC, hang about here...
Back in the day, housing was provided by factory owners, and their main concern was to have as many workers as possible living as near as possible to the factory, there were no 'private housing' providers competing on quality or price, it was 'work related accommodation' or nothing.
Sure, some factory owners like Titus Salt were a tad more enlightened (or a tad less exploitative) than others, but quality of housing was not really important; what was important was having all your workers live within a few minutes' walking distance, and if they got the sack they lost their house as well. Measured by that low standard, private housing was a riotous success!
PS, my grandparents got a really nice council house (by the standards prevailing at the time, i.e. a semi detached with an indoor lavvy and everything) in the 1930s and lived there until the 1970s or 1980s.
Factory owners rarely provided housing in C19th Britain. I can think of no big developments in London,for instance. Peabody was not a factory owner and ,in fact,was centred businesswise on L'Pool.
A good balanced account if you distrust Engels ,who was only 24 at the time and not a hardened Communist, or Charles Booth (or General Booth!)is the website :British Library Built Environment Victorians.
An anecdote:while visiting a commercial site in a middling West Country town in the 70's, we were shown a bricked-up Victorian "court" behind a row of shops that had been accessed by a tunnel at ground level beween two shops and consisted of a row of four disused but raintight terraced houses reached by a three-foot wide path:no gas,no electicity ,no mains water, no sewerage.They must have carried the communal privy bucket out into the streetfor disposal.
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