Inevitable inequity in the housing plan
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‘Finessing ‘Moral Hazard’ Is Tough in Housing Plan,’ published Saturday in the Wall Street Journal, looks at some of the arguments put forth by the plan’s critics, many of which have been discussed here at L.A. Land. But here’s one I hadn’t thought of:
Someone working two or three jobs to make ends meet, for instance, may decide to give up one job in order to show a lower income. ‘Five years ago, if you really wanted to buy a house, you would do whatever you could to show every income source to make it as high as possible,’ says Tom Lawler, an independent housing economist. Now, borrowers seeking help ‘will want to show a low income.’ Borrowers with substantial assets but moderate incomes may also be able to get help, he adds.
The whole issue of who will qualify for the modifications and who won’t seems to be filled with land mines. Offering a counterpoint was ‘Obama recovery plan stimulates whining’ Monday at latimes.com:
... a certain amount of inequity is built into any government assistance program, but it gets trumped by society’s needs in times like these. ‘Life is unfair,’ Tom Davidoff, a real estate expert at UC Berkeley’s Haas School of Business, observes apropos of the housing bill. ‘We’re doing this so the economy won’t crash.’
OK. So maybe inequity is inevitable. Just a wild idea, but why not limit those who get the mods to only being able to keep a small percentage of any appreciation down the road, like 2% a year, and the rest goes back to taxpayers at resale? (Low sales to family members not allowed.) Oh, that would probably end up in the hands of the lenders anyway. Perhaps L.A. Landers have other creative ideas. The floor is open.
-- Lauren Beale
Photo: A home in San Antonio under the threat of foreclosure. Credit: Eric Gay / Associated Press