The unsurprising failure of Denver’s ‘affordable housing’ ordinance

Randal O’Toole of the Independence Institute confirms what we’ve known all along–that forced affordable housing programs don’t work and amount to government engineering of local real estate markets.

Fortunately, Longmont City Council under Mayor Bryan Baum repealed its Inclusionary Zoning ordinance in 2011.  But in true far-left fashion, the city of Boulder continues its affordable housing program at an outlandish 20% mandate to builders.

The unsurprising failure of Denver’s ‘affordable housing’ ordinance

The unsurprising failure of Denver’s ‘affordable housing’ ordinance

By Randal O’Toole

Denver’s urban-growth boundary has made housing expensive. More than a decade ago, the city blamed “failure by the private market to produce enough affordable housing” (see p. 5). To fix this “failure,” the city required developers to build “affordable housing.” Now, the city admits that this ordinance is a failure. Continue reading

Do-gooders who do no good

While posting over at Longmont Foreclosures I thought this weeks entry was relevant to the upcoming election.  Not only do we have a councilmember (Karen Benker – and she’s not alone) who wears her “helping the homeless” badge a little too prominently, and the possibly unethical political influence with the whole HOPE situation, but also a candidate (Kaye Fissinger) who benefited from the affordable housing program under Ms. Benkers watch.

It’s no wonder the whole concept of public financing of campaigns was brought up, why not?  You’ve subsidized at least one candidate already (via a house), how much more would it cost to buy someones signs and advertisements?  A pittance by comparison.  Did you also know some of those subsidized homes have been foreclosed on?  Pay in the beginning, and again at the end – what a deal!  How much better can it get?

(remainder from Longmont Foreclosures August 29 report)
Ward 2 (Karen Benker‘s ward) had double the other two wards combined in new foreclosures this week..  There were 11 new foreclosures reported in Longmont this week, with a total of 60 in the paper.  Ward 2 is not far behind the leader (Ward 1) in foreclosures, and will soon top 100 since this site began in April.

Councilmembers (especially Ward 2’s Karen Benker) continually try to get more people into homes they probably can’t afford.  These public do-gooders do anything but good for these peoples pride, which is probably permanently damaged by getting into a home (or car, see Cash For Clunkers) they never would be able to make payments on consistently, and the subsequent humiliation of default.  To those people, I say these government types who you think are your friend, giving you subsidies that they can later brag about and campaign on, only exacerbate and continue the cycle of poverty for most of the people they encounter.

Helping people in off the street and out of the cold is one thing.  Exploiting people for personal gain, and putting them in a potentially financially destructive situation is another. Just a setup for failure – the more people that figure it out the better.  And sooner rather than later.

Longmonts foreclosures, and other governmental failures

Just a snapshot for those that still think things are going so swimmingly in Longmont. Below is a map (which should automatically update) of foreclosures throughout the city. The first week I started tracking these was April 11th, which is why Blue (the first color I used) is predominant, as it depicts new and old foreclosures in that newspaper section. Afterwards, the other colors are just the new additions by week.

View Longmont Foreclosures in a larger map

In the KEY below, you can see new and total entries by week. These are in the Saturday Longmont Times-Call in the Classifieds D section, and these take up most of the Classifieds section. It appears that these foreclosures must run for five (5) consecutive weeks in the paper. Other information included in these foreclosures (which I did not include here) are the names of the people that are on the deeds, the amount originally loaned, the loan balance, and the date of auction.

Blue= 4/11/09 16 new entries (41 total)
Red= 4/18/09 20 new entries (55 total)
Green= 4/25/09 8 new entries (47 total)
Yellow= 5/2/09 9 new entries (48 total)

I waited until I had a few weeks of data to see trends before posting this map and these numbers. One thing to keep in mind when looking at the total numbers when 50 or so don’t seem so bad – there are surely many more, they’ve just run out their 5 week requirement to be published in the paper. While things peaked on 4/18/09, the new and total numbers are fairly stable and the total number is actually higher than the first tracking week of 4/11/09.

One troubling thing when looking deeper into the foreclosures is the differences between the original loan and the amount owed. No doubt there are always seconds and lines of credit taken out on a home when it’s appreciating. But many of these homes were bought (or refinanced) when values were already sliding, so enough appreciation to get a second appears unlikely. Some loans were short term and some looked like no payments were ever made at all. Still others could have been loans over 100% of the homes value.

Stealing from the future
Just a hypothetical, philosophical question here: how is taking out several thousand dollars on a second/line of credit (some are over $20k), and then just walking away not stealing? Is it really any surprise that banks are failing all over the country given this situation? Many were forced into dealing in these sub-prime mortgages or face sanctions from the government (thanks to Barney Frank and friends), and lent money to people with income/debt ratios that were set-ups for failure – for the lender and borrower – and we all are paying for it, and will for decades.

Cold hard truths
Not everyone can buy or own a home. Putting someone into a home they can’t afford, instead of renting permanently or temporarily to save money, is not doing that person a favor. In every one of these foreclosure notices is a story; many paid several thousand dollars (again, some over $20k) lowering their balance, only to lose their home (and all the money they paid into it) trying to keep their word on a loan.

Meanwhile, while these people are struggling to hold on (some surely are still in these homes), the City of Longmont is playing tiddlywinks with more people who can’t afford homes and throwing money at affordable housing programs. Great, more future failure. If the next fact doesn’t bother you, nothing will: In a recent City Council meeting, it was revealed that some homes in the affordable housing program have gone into foreclosure. But that’s not all – not only did you (if you’re a taxpayer) help fund getting someone into one of these homes, some of these people got out seconds/lines of credit, trashed the house, left it, and took the money from the second/line of credit with them – which you will also help fund. Taking it in the front end, and the back.

End affordable housing
This is surely not going to make me popular, but someone has to say it.
Longmont should temporarily (or better yet, permanently) end all funding in its budget for affordable housing. First, help, where possible, people in foreclosure, if they are suitable candidates – in other words, can they keep up payments? Second, (and this is after foreclosure candidates are taken care of) look into affordable renting assistance. Isn’t the overall goal to get people off of the streets and into warm places? That doesn’t necessarily mean home ownership, and it’s a mistake (in my opinion) to make that risky leap, for the city and the potential affordable housing candidate.

Rights, not guarantees
The Declaration of Independence says you have the right to “life, liberty, and the pursuit of happiness” – which was actually a tweak on a passage from the Virginia Declaration of Rights‘ “the enjoyment of life and liberty, with the means of acquiring and possessing property, and pursuing and obtaining happiness and safety” – which itself was a tweak on John Locke‘s “no one ought to harm another in his life, health, liberty, or possessions“. These are rights, not guarantees, not promises, and definitely not endowed by a government entity like some program that gives away breaks on homes at the expense of others (taxpayers in this case). This is not to say government can’t help in these situations, it can and should. But it needs to do it smarter and differently.

One example
I’m going to disagree with someone I rarely disagree with, Councilmember Mary Blue, who I believe is perhaps one of the best councilmembers we currently have. She made a statement about not being able to tell the difference between the affordable homes, the Habitat for Humanity homes, and the regular homes in her neighborhood. Ironically, a couple of weeks before she said this during a council meeting, a friend of mine who lives in the same neighborhood painted a completely different picture – that the ratio of these homes is too high, that some bigger homes are wedged and surrounded by these smaller homes that stick out and bring down home values making it nearly impossible to sell – regardless of the market. Some of these homes have also been abandoned. Whatever positives came from these homes was apparently only temporary.

That is one but one example of this failed system, as is the foreclosure map above, and you probably are aware of stories in your own neighborhood along these lines. People can point blame in whichever direction that helps make their own personal points: banks, sub-prime lenders, borrowers, over-regulation, under-regulation, unemployment, or bad luck. For more than one reason, my pick is bad government, whether elected or appointed bureaucrats, nationally and locally. What’s being done nationally and locally is not helping, only exacerbating and extending the misery.

You’ve heard of pro/anti/smart growth, this isn’t about big/small government, it’s about smart government. Currently, ours isn’t very.