Henry Administration learns NOTHING from the recent housing crisis
Posted by Mike Sylvester - 3/20/10 @ 8:06 pm - Filed Under City Council, Featured, Local Politics
The News-Sentinel has a piece you should read entitled “City sets aside $300,000 for down-payment assistance.”
A huge bubble was created in the US housing market for a variety of reasons. This housing bubble burst in 2008 and housing prices plunged.
Apparently the City of Fort Wayne learned absolutely nothing from the recent housing debacle. The City of Fort Wayne will continue its abysmal policy of spending tax dollars to help low income people purchase homes.
Believe it or not the City will spend up to $10,000 per house helping low income people purchase houses.
It is amazing to me that government continues to refuse to learn from their past mistakes. This program should be immediately closed and not another dollar should be spent on it. There is no reason in this world that the City of Fort Wayne should select a few “lucky” families and help them buy a house that they often cannot afford.
Good Grief.
Mike Sylvester
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8 Responses to “Henry Administration learns NOTHING from the recent housing crisis”
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I don’t believe there is any societal value in government promoting home ownership. In fact, given the recent housing meltdown I think a strong argument could be made that government promotion of home ownership has been a net drain on the economy.
Encouraging people who make less than $40k to buy homes in this economy is counter-productive. The economy is fragile and if these people lose their job then they are going to be worse off than if they didn’t have a mortgage.
If Henry wants to do something then he can focus on creating jobs not mortgages…
Gents
City of Fort Wayne is using its Community Development Block Grant HOME Dollars that it receives from the Federal Government.
One could return them to Washington which would leave more for programs like the one in Rock Island, IL which I helped start that has helped 464 families buy homes since 1998 with only three foreclosures of which two were worked out without the bank or the borrower losing money.
Successful programs like those in Rock Island provide stringent screening, home buying counseling, and intervention early in the process when a homebuyer begins to get behind.
I agree that not everyone should be a homebuyer and I agree even more that we should not intervene in housing markets as much as we do.
But the greatest culprit is not the HOME program or Hope VI or Fannie Mae or Freddie Mac. It’s the deduction of mortgage interest from our income taxes that has most distorted our home buying decisions and contributed to a gigantic home value bubble across all income ranges.
Miss you guys
Dan
Dan,
I appreciate your comments.
I agree that the mortgage interest right off should be eliminated; however, so should Fannie and Freddie!
Mike
Dan - Miss you too - but, I don’t believe that your statement is correct - WE DO NOT DEDUCT MORTGAGE INTEREST FROM OUR INCOME TAX BILL- but we do deduct the amount of our mortgage interest from our taxable income in the process of determining the tax due.
And, just why is this a huge contributor to the overvaluing of the homes we live in? I do remember when our local banks were chastised for not loaning to people who could not meet the conservative banking rules that existed 20 years ago!! This is what started this whole thing! (Unless you want to go back to the early 1930’s when our country started on becoming another world power with a socialist political system!!)
[...] Henry Administration learns NOTHING from the recent housing crisis … [...]
John
You are correct about deduction from income not from tax due. One too many last evening . . . It has contributed by giving people of all incomes an incentive to buy more house than they need. The average new home between 1970 increased from 1600 square feet to 2400 square feet while average household family size decreased from 2.9 people to 2.4 people. I suggest that our subsidy of mortgages combined with our subsidy of auto transportation is what started the bubble making that intensified as we shipped manufacturing abroad and built an entire economy around home building and exotic secondary market financial instruments.
We did become more socialist in the 1930’s and by taking some of the edges off capitalism we survived a decade that bred much worse results in other nations.
But it was capitalists that rigged the system in the 1980’s by shipping real jobs overseas and de-regulating banking and turning our economy into sectors of real estate development and financing that were unsustainable.
Dan,
I agree 100% with your comment. I would add that we need to get back to a society that incentivises savings and production. One way to do this would be to require higher levels of downpayments - something that went completely haywire during the securitization craze of the last 10 years.
If you can save 15-20% of the cost of your future home then you are likely financially responsible and have a higher degree of financial stability than those who cannot…
John and Dan,
Actually home mortgage interest is only deductable from taxable income if your itemize your tax deductions. If you do not have enough deductions then you take the standard deduction!
So it would be more accurate to say that certain taxpayers get to deduct their mortgage interest.
Also realize that high income taxapyers slowly lose some of their itemized dedcutions!
Mike