October 23, 2011
Seicshnaydre on Public Housing and Racial Segregation in Post-Katrina New Orleans
Stacy Seicshnaydre (Tulane) has posted How Government Housing Perpetuates Racial Segregation: Lessons from Post-Katrina New Orleans, 60 Cath. L. Rev. 661 (2011). In it, she explores how quantity-minded public housing advocacy and NIMBY-style public housing resistance has combined to perpetuate the racial segregation that federal law prohibits. Here's the abstract:
This Article contends that post-Katrina New Orleans exemplifies the exclusionary dynamic in which government-assisted housing operates throughout America and the fundamental failure of American housing policy at the federal, state, and local levels to prevent the racial segregation that inevitably results. Federal law has prohibited racial segregation in government-housing programs for decades, yet it has proven difficult to reverse entrenched patterns of segregation in these programs. Patterns of racial segregation have been particularly intractable in New Orleans, which, prior to Hurricane Katrina in 2005, boasted the second-highest level of poverty concentration in the nation and relatively high levels of poverty concentration in all of the major government-housing programs. Furthermore, low-income white residents in pre-Katrina New Orleans had greater access to middle-income neighborhoods throughout the metropolitan area of New Orleans than low-income black residents, who were overwhelmingly concentrated into high-poverty neighborhoods.
Hurricane Katrina, with its massive levee failures and neighborhood flooding, offered an opportunity for New Orleans to emerge as a more inclusive region; new government-assisted housing could have helped facilitate inclusion, while also responding to the regional-housing needs of the area. However, rental housing bans proliferated throughout the region, primarily in communities that had previously served as affordable suburban alternatives for lower- and middle-income whites in prior decades. These communities sought not only to prevent the development of new rental housing, but also to limit the repair of rental housing that preexisted the storm. At the same time, other communities in metropolitan New Orleans that were the least affordable, most homogeneous, and nationally recognized as desirable places to live were not targeted for government-assisted housing, and thus did not pass similar sweeping rental bans. Therefore, rather than using recovery efforts to reverse racially segregated housing patterns, the region took steps to exacerbate them.
This Article describes a perennial dynamic of two impulses pulling in opposite directions—the anywhere-ist and nowhere-ist impulses, which conspire to perpetuate segregation. The anywhere-ists are primarily focused on securing as much federally assisted housing as possible; the nowhere-ists are primarily focused on keeping it out of their communities. This dynamic has created a “path of least resistance,” whereby government-assisted housing continues to be provided in places where it already exists or in places that are already open and affordable.
Ultimately, federal intervention in the housing market must encompass more than providing a subsidy. It must open neighborhoods not already open, make affordable what is not already affordable, enable housing subsidies to act as gateways to educational and employment opportunity, and inform families historically excluded from housing markets about their choices. Any federal housing interventions that are not so designed will almost certainly exacerbate existing racial segregation and poverty concentration, as they have done for decades, and—as post-Katrina New Orleans illustrates—as they will continue to do, again and again and again.
October 13, 2011
Chan, Sharygin, Been, & Haughwout on What Happens to Distressed Mortgage Borrowers and Their Homes
Sewin Chan (NYU Wagner School), Claudia Sharygin (NYU Furman Center), Vicki Been (NYU Law), and Andrew Haughwout (Federal Reserve Bank--NY) have posted Pathways after Default: What Happens to Distressed Mortgage Borrowers and Their Homes? The abstract:
We use a detailed dataset of seriously delinquent mortgages to examine the dynamic process of mortgage default – from initial delinquency and default to final resolution of the loan and disposition of the property. We estimate a two-stage competing risk hazard model to assess the factors associated with whether a borrower behind on mortgage payments receives a legal notice of foreclosure, and with what ultimately happens to the borrower and property. In particular, we focus on a borrower’s ability to avoid a foreclosure auction by getting a modification, by refinancing the loan, or by selling the property. We find that the outcomes of the foreclosure process are significantly related to: the terms of the loan; the borrower’s credit history; current loan-to-value and the presence of a junior lien; the borrower’s post-default payment behavior; the borrower’s participation in foreclosure counseling; neighborhood characteristics such as foreclosure rates, recent house price depreciation and median income; and the borrower’s race and ethnicity.
October 10, 2011
Anderson and Plaut on Implicit Racial Bias and Residential Racial Segregation
Michelle Wilde Anderson (Cal-Berkeley) and Victoria Plaut (Cal-Berkeley) have posted Property Law: Implicit Bias and the Resilience of Spatial Colorlines, a chapter in Implicit Racial Bias Across the Law (forthcoming 2011, Cambridge U. Press, Levinson & Smith, eds). Here's the abstract:
Subjectivity and discretion exert tremendous influence over property and our built environment. From members of a city council to planning commissioners, from bank actuaries to developers, from tax assessors to neighbors, individuals constantly and silently make consequential judgments. How much is a home worth? How trustworthy is a credit-seeker? Is a proposed development, land use, or landowner suitable for this community? Is this neighborhood safe? Current research in psychology can tell us much about how we make such decisions and how the race of parties involved can shape those outcomes. This chapter investigates the application of unconscious bias research to property and land use decisions that affect where people live, work, shop, and travel - decisions that in turn affect household wealth, educational opportunity, health, and personal safety.
October 05, 2011
Orszag on Renting our way to a Housing Recovery
Peter Orszag, former OMB director for the Obama Administration, has a piece in Bloomberg where he argues that the U.S. Can Rent Its Way Toward a Housing Recovery:
No matter what the government might try to do to break the housing-economy cycle, the deleveraging process will still be painful and take some time. But that’s not an argument against action; just because a headache can still hurt some even if you take aspirin doesn’t mean you should skip the aspirin. One thing the Obama administration could do now -- probably with Republican support -- would be to attack the oversupply of housing stock by allowing a tax write-off for investors who buy empty properties and rent them out.
Very interesting. If renting is the new owning, there might be something to this idea. I'm generally in favor of reducing rather than increasing tax incentives to promote real estate purchases, but if Orszag's proposal were narrowly tailored towards purchases specifically for rental housing, it might make some sense.
September 21, 2011
Anderson on Dissolving Cities
Michelle Wilde Anderson (Berkeley) has posted Dissolving Cities, forthcoming in the Yale Law Journal, 2012. The abstract:
During the twentieth century, 3,000 new cities took shape across America. Stucco subdivisions sprawled and law followed, enabling suburbs to adopt independent governments. That story is familiar. But meanwhile, something else was also happening. A smaller but sizable number of cities were dying, closing down their municipal governments and returning to dependence on counties. Some were ghost towns, emptied of population. In those places, jobs were lost and families struggled; crops died off and industries moved on. A larger group of dead cities were humming with civic life: places with people but no longer with a separate government. In these cities, citizens from the political left and right, often in coalition, rose up to eliminate their local governments.
As an end in itself, understanding these changes would be worthwhile. But this past has not passed. An unprecedented groundswell of cities and citizens are currently considering disincorporation in response to economic crisis, tax pressure, and population loss. The dissolution law they are turning to, as it is written in state codes and as it is understood in theory, is immature and thin. Cities’ experiences with dissolution are unknown, constraining our ability to judge the values it serves or undermines. If dissolution is to grow in importance as part of the legal machinery of urban decline - as cities themselves are asking it to become - we must understand what it meant in the decades that passed before.
Dissolving Cities tells the story of municipal dissolution. It is an article of law, theory, and urban history - a reminder that urban growth and local government fragmentation, which have long dominated academic discourse on cities, may not be the upward ratchet we have assumed them to be. Cities can die (legally at least), and when they do, they raise critical questions about decline, governance, taxes, race, and community.
This is a critically important topic for the future of land use in American communities, and Prof. Anderson's article looks like a must-read piece.
September 15, 2011
Juergensmeyer & Nicholas on Growth Management in the Recession
Julian Conrad Juergensmeyer (Georgia State) and James C. Nicholas (Florida) have posted Loving Growth Management in the Time of Recession, published in The Urban Lawyer, vol. 42 (2011). The abstract:
The current deep and long lasting recession has challenged the value of local government growth management programs – especially those which rely heavily on developer funded infrastructure finance programs such as impact fees. An examination of the characteristics of the current recession reveal that its severity is due in large part to excessive exuberance in housing development in the years preceding the burst of the housing bubble. Many local governments intensified the consequences of over-building by adopting ambitious infrastructure programs funded by impact and other fees charged to developers upon the issuance of building permits or other development approval actions. With residential building permit issuance at near zero in many formerly double-digit growth areas, local governments can no longer pay for nor do they need much of the planned or already constructed infrastructure. The authors advocate greater restraint by local governments in accepting growth projections and issuing bonds to be repaid through impact fee collection. Most importantly, the authors suggest as a pre-condition of development approval requiring developers to submit market studies establishing probable market demand for the proposed development.
September 08, 2011
Furman Center launches SHIP
Some exciting news from NYU's Furman Center for Real Estate & Urban Policy:
We are thrilled to announce the launch of our Subsidized Housing Information Project (SHIP), a new resource designed to provide housing agencies, community organizations, tenants and the affordable housing industry with the information they need to develop effective preservation strategies.
The SHIP database contains extensive information on nearly 235,000 units of privately-owned, subsidized affordable rental housing in New York City. Compiled from 50 different public and private data sources, the information is accessible through a user-friendly, interactive data search tool available on our website.
Our Institute for Affordable Housing Policy has simultaneously released the State of New York City’s Subsidized Housing report, which provides a comprehensive analysis of the properties in the SHIP database, and identifies opportunities to preserve affordable housing in the coming years. Another online tool, the Directory of New York City Affordable Housing Programs (Beta) summarizes nearly 200 programs that have been used in New York City to develop affordable housing since the 1930s.
The SHIP was made possible through a collaboration with the New York City Department of Housing Preservation and Development, the New York City Housing Development Corporation, New York State Homes and Community Renewal, and the U.S. Department of Housing and Urban Development, and support from the John D. and Catherine T. MacArthur Foundation, the F.B. Heron Foundation and NYU Law alumnus Herbert Z. Gold (¢40). The New York City Council has also committed to support technical assistance and training for community-based organizations on how to use the database in their preservation efforts and advocacy. We have also received invaluable guidance and support from members of the SHIP Advisory Committee, the IAHP Advisory Board and dozens of affordable housing experts.
September 07, 2011
Glaeser on Rethinking the Federal Bias Toward Homeownership
Harvard economist Edward Glaeser--author of much fascinating work on land use and urban development, including his latest book, Triumph of the City-- has posted his latest article, Rethinking the Federal Bias Toward Homeownership, forthcoming in HUD's Cityscape: A Journal of Policy Development and Research, Vol. 13, No. 2 (2011). The abstract:
The most fundamental fact about rental housing in the United States is that rental units are overwhelmingly in multifamily structures. This fact surely reflects the agency problems associated with renting single-family dwellings, and it should influence all discussions of rental housing policy. Policies that encourage homeowning are implicitly encouraging people to move away from higher density living; policies that discourage renting are implicitly discouraging multifamily buildings. Two major distortions shape the rental housing market, both of which are created by the public sector. Federal pro-homeownership policies, such as the home mortgage interest deduction, weaken the rental market and the cities where rental markets thrive. Local policies that discourage tall buildings likewise ensure that Americans have fewer rental options. The economic vitality of cities and the environmental consequences of large suburban homes with long commutes both support arguments for reducing these distortions.
A very important argument; I'm looking forward to reading the whole thing.
September 01, 2011
Learning from Brooklyn
Before I got co-op approval on my rental in Forest Hills, Queens (where I now live), I spent a week or so sharing apartments and houses in Boro Park and Canarsie. These are two very different neighborhoods, but from a planning perspective both are of some interest.
I spent the weekend of August 4 sharing an apartment in Boro Park. Boro Park is a heavily Hasidic neighborhood teeming with large families in a zip code with over 75,000 people per square mile, almost three times the NYC average. Some commentators argue that density and large families are inconsistent- but Boro Park shows otherwise. In Boro Park, the average age is 29, well below the statewide average (35).
Then I spent a few days at a bed and breakfast in Canarsie, at the eastern edge of Brooklyn (that is, the part furthest from Manhattan). Canarsie has been hit with many of the major bad urban planning ideas of the 50s and 60s: it includes a couple of housing projects, is not too far from another, and is mostly cut off from the water by an expressway. And because it is so far from Manhattan, it is not appealing to people looking for short commutes.
Not surprisingly, Canarsie has never been a wealthy neighborhood; at some point in the late 20th century it transitioned from a Jewish/Italian working class area to a Caribbean-American working class area. But it is by no means one one of Brooklyn’s worst neighborhoods. Canarsie's poverty rate is lower than the Brooklyn average, and I was willing to walk through the public housing on the way to the subway; even though I wouldn’t do it at night it doesn’t seem threatening during the day.
To me the interesting questions in Canarsie aren't what went wrong: they are: what went right? And given the decline of many inner suburbs, does Canarsie have a future?
August 29, 2011
Nichols on Tenant Protections under the PTFA
Elan Stavros Nichols (Michigan State) has posted Unanswered Questions Under the PTFA: Exploring the Extent of Tenant Protections in Foreclosed Properties, forthcoming in the Journal of Affordable Housing, Vol. 20, No. 2, Winter 2011. The abstract:
The somewhat new Federal Protecting Tenants at Foreclosure Act (the “PTFA”), as recently amended, still leaves many questions of interpretation in states with the foreclosure by advertisement process, and in states with laws related to issues on which the PTFA is silent. The PTFA is vague in places, and does not address certain issues raised by the foreclosure processes in certain states, where state law is not clearly preempted.
This article will examine how the PTFA, including the recent amendments and any recent judicial and advisory opinions, applies in states with the foreclosure by advertisement process (as opposed to judicial foreclosure). The article will use Michigan as a case study for this inquiry, briefly discussing other states with a similar process. In so doing, the article will discuss issues raised in these states concerning matters on which the PTFA’s terms are vague or wholly silent.
To that end, this article picks up where the article, “Interpreting the Protecting Tenants at Foreclosure Act of 2009,” 19 J. of Affordable Housing & Community Dev Law 205 (Winter, 2010), by Allyson Gold, left off. Of particular assistance will be the recent statutory amendments, any relevant case law, interpretive statements from the Department of Housing and Urban Development, and the “working interpretation” adopted by legal services providers and others agencies dealing with the foreclosure crisis. Consequently, this article will conclude with a proposal for a reasonably fair interpretation of the PTFA in states with foreclosure by advertisement and in states where the PTFA is not expressly preempted but still leaves questions.
August 24, 2011
NYU Furman Center on Mortgage Lending in the Recession
The NYU Furman Cente for Real Estate and Urban Policy has published some great stuff over the last few weeks. Here's one of their terrific recent reports:
We are pleased to share with you the latest publication from the Furman Center’s Institute for Affordable Housing Policy, Navigating Uncertain Waters: Mortgage Lending in the Wake of the Great Recession.
This report summarizes our February 4, 2011 Roundtable of the same name, and provides an in-depth exploration of credit availability and lending patterns during the recession. The event brought together 75 policymakers and academics from across the nation to assist government, the mortgage industry, academics, and non-profits address the challenge of mortgage credit need and availability through informed discussion and research.
By publishing this report, we aim to make the discussion and insights shared during the Roundtable available to a wider audience. We hope you find the materials informative, and we look forward to receiving your feedback.
June 20, 2011
Ziegler and Laitos on Property Rights, Housing, and the American Constitution
Edward H. Ziegler (Denver) and Jan G. Laitos (Denver) have posted Property Rights, Housing, and the American Constitution: The Social Benefits of Property Rights Protection, Government Interventions, and the European Court on Human Rights’ Hutten-Czapska Decision, Indiana International & Comparative Law Review, Vol. 21, No. 25, 2011. The abstract:
Nations around the world utilize government interventions to promote the availability and affordability of housing. This article focuses on various types of government regulatory interventions, such as rent controls, building dedications and exactions, and density and growth controls on housing. These interventions are common in the United States and in other countries and may contribute to inefficient resource allocation and poor housing outcomes. This article examines whether these types of government interventions may require, in particular cases in the United States, judicially required compensatory damages for affected property owners. The social costs of these forms of government intervention are examined from the perspective of the benefits accruing from a regime of property rights protection. This article further explains that there is some existing precedent under international human rights norms, as illustrated by the Hutten-Czapska v. Poland decision, for the standards used in the United States for protecting the property rights of owners and developers of housing from excessive and unwise government regulation.
June 05, 2011
Homeowner Forecloses on Bank
Yes, you read that right. A homewoner in Collier County, Florida foreclosed on a bank branch! Bank of America gets Padlocked after Homeowner Forecloses on It.
It started five months ago when Bank of America filed foreclosure papers on the home of a couple, who didn't owe a dime on their home.
The couple said they paid cash for the house.
The case went to court and the homeowners were able to prove they didn't owe Bank of America anything on the house. In fact, it was proven that the couple never even had a mortgage bill to pay.
A Collier County Judge agreed and after the hearing, Bank of America was ordered, by the court to pay the legal fees of the homeowners', Maurenn Nyergers and her husband.
The Judge said the bank wrongfully tried to foreclose on the Nyergers' house.
So, how did it end with bank being foreclosed on? After more than 5 months of the judge's ruling, the bank still hadn't paid the legal fees, and the homeowner's attorney did exactly what the bank tried to do to the homeowners. He seized the bank's assets.
About an hour after the sheriff locked the doors, the bank branch manager handed the attorney a check. Nice to see at least one instance of good news for Florida homeowners in the foreclosure crisis. Thanks to Dru Stevenson and Louie Rodriguez for the pointer.
May 29, 2011
Reiss on Foundations of Federal Housing Policy
David J. Reiss (Brooklyn) has posted Foundations of Federal Housing Policy, a chapter in the book COMMUNITY, HOME, AND IDENTITY, Michael Diamond, Terry Turnipseed, eds., 2011. The abstract:
Federal housing policy is heavily funded and made up of a morass of programs. This book chapter provides a taxonomy of goals for housing policy. The chapter first asks what the aim of housing policy is. In other words, what can a well-designed and executed housing policy achieve? The answer to this question is not at all clear-cut. Some argue that the aim of housing policy is to allow all Americans to live in safe, well-maintained and affordable housing. Others argue for a more modest aim – achieving an income transfer to low- and moderate-income families that mandates that the income transferred is consumed in increased housing. And yet others argue that the main aim is to create a nation of homeowner-citizens, a goal which hearkens back to Jefferson’s idealized “yeoman farmer” and continues through to George W. Bush’s "ownership society."
Beginning with these possibilities, I identify and categorize various "principles" of American housing policy. This is an important exercise because 80 plus years of housing policy; hundreds of billions of dollars; and literally hundreds of different housing programs have all conspired to confuse the essential aims of American housing policy. This chapter seeks to clarify debates surrounding American housing policy as the Obama Administration puts its own stamp on this field.
Looks like a fascinating contribution on a very important topic.
May 25, 2011
HUD's HOME Program Attacked and Defended
Under the title "Million-Dollar Wasteland", the Washington Post has published a series of investigative articles attacking the effectiveness of HOME, HUD's principal source of targeted funding for community-based development of affordable housing. The reporters' data analysis lead them to conclude that more than 700 affordable housing projects granted more than $400 million in HUD funds are "delayed or abandoned." In a posted response, HUD says its own review shows that most of these supposedly failed projects are "actually completed and occupied." Unsurprisingly in this fiscal climate, congressional leaders have called for an investigation into the HOME program (Post follow-up story). No doubt more to follow.
May 20, 2011
Today I will be proud to participate in Commencement at South Texas College of Law. We're thrilled to have Houston Mayor Annise Parker as our keynote speaker. But shortly before Mayor Parker begins speaking, she will order hundreds of buildings destroyed all across the city.
No, it's not the May 21 Rapture. It's Demolition Day!
With the donated help of the Houston Contractors Association, 99 abandoned, dangerous buildings will be bulldozed as part of Mayor Annise Parker's 2nd annual Demo Day. Some of these structures are in your neighborhood. Click here to see addresses for the 99 buildings http://www.houstontx.gov/citizensnet/hcasites.pdf.
Mayor Parker and District D Houston City Council Member Wanda Adams will help kick off Demo Day Saturday, May 21, 2011 9:00 a.m.
Initiated in 2010, Demo Day is a one-day concentrated effort to rid neighborhoods of abandoned and dangerous buildings that often serve as havens for drugs, prostitution and other crimes. This year's effort will extend beyond one day to include the demolition of approximately 300 more derelict structures over the summer months. This second batch of demolitions will be carried out by City contractors once the buildings have undergone asbestos abatement. Click here to see the complete list of about 400 structures http://www.houstontx.gov/citizensnet/demoinitiative.pdf.
There has been a lot of attention given to the problem of abandoned and derelict properties from several angles recently, from the foreclosure crisis, to dying cities & neighborhoods, to crime & disorder, to blight and eminent domain. "Demolition Day" sounds like a cool movie title, but more importantly it looks like Mayor Parker has an innovative approach to the problem.
May 19, 2011
Ramapo Village Spent $450,000 in Losing Battle over Discriminatory Zoning
Most land use professors are familiar with the town of Ramapo, New York, whose phased-growth program was upheld as constitutional nearly 40 years ago. Among other things, the court in the famed Ramapo case found that the town’s program was “far from being exclusionary” and sought only to “provide a balanced and cohesive community.” Interestingly, certain land use controls in one Ramapo village have proven far more vulnerable to constitutional challenge for their exclusionary effects.
Recently, the Village of Airmont (which is located within Ramapo) settled a lawsuit filed under the RLUIPA and Fair Housing Act relating to the Village’s zoning prohibition on boarding schools. The Manhattan U.S. Attorney’s office brought its claim against the Village back in 2005 after the Village denied a permit application from the Hasidic Jewish Congregation Mischknois Lavier Yakov to construct a religious boarding school in the community.
According to recent stories in the Wall Street Journal and elsewhere, the Village finally settled the lawsuit a couple of weeks ago after expending more than $450,000 in legal fees. The May 9 consent decree formalizing the settlement gives the Village until October 15, 2011, to amend its zoning code to allow construction of the religious school and to otherwise bring its code into compliance with federal laws “prohibiting discrimination and unreasonable imposition on religious freedom.”
This isn’t the first time that Airmont has effectively lost a discriminatory zoning claim. According to the New York Times, the Village previously had to amend its zoning ordinances in response to a 1991 Fair Housing Act claim contesting a zoning prohibition on the use of private homes as places of worship.
These constitutional zoning challenges in the decades following the Ramapo case offer at least some support for the theory offered by Fred Bosselman back in the 1970s (see generally 1 Fla. St. L. Rev. 234, 248-50 (1973)) that exclusionary motives were partly behind the town’s famous phased-growth scheme.
May 18, 2011
Rose on the Rights of Tenants of Residential Properties in Foreclosure
Henry Rose (Loyola-Chicago) has posted The Due Process Rights of Residential Tenants in Mortgage Foreclosure Cases, 41 N. M. L. Rev. ___ (forthcoming 2011). Here's the abstract:
The purpose of this article is to explore the rights of tenants who reside in buildings undergoing foreclosure to receive notice and an opportunity to be heard when foreclosures threaten to terminate their tenancies. The federal Protecting Tenants at Foreclosure Act of 2009 (PTFA) will significantly reduce the incidence of residential tenancies being terminated as a result of foreclosure. However, PTFA offers weak procedural protections if the mortgagee or the person who acquires ownership pursuant to a foreclosure seeks to terminate the tenancies of residents in the foreclosed building. In those states that require judicial foreclosures, the Due Process Clause of the Fourteenth Amendment to the United States Constitution should afford tenants faced with termination of their tenancies due to foreclosure with notice and an opportunity to be heard before their tenancies are terminated. In states that allow non-judicial foreclosures, Due Process protections are not likely to be available to tenants due to a lack of state action in the foreclosure process. PTFA should be amended to afford all tenants, including those who reside in non-judicial foreclosure states, with notice and an opportunity to be heard before their tenancies are terminated pursuant to a foreclosure.
May 18, 2011 in Affordable Housing, Federal Government, Financial Crisis, Housing, Landlord-Tenant, Mortgage Crisis, Mortgages, Property, Property Rights, Real Estate Transactions, Scholarship | Permalink | Comments (0) | TrackBack
May 15, 2011
Washington Post Investigative Report on HUD
Courtesy of Mark Edwards at Property Prof, a link to what looks like an important and troubling report, Million-Dollar Wasteland: HUD's Mismanagement of America's Affordable Housing. Here's Edwards' initial reaction:
Given that Congress is looking for areas to budget-cut, I suspect this series could be a game-changer for HUD. That's unfortunate, because the need for affordable housing in the United States is enormous. No doubt there is waste at HUD. But I suspect that the committed and well-intentioned people at HUD are trapped in a downward spiral: they aren't given enough resources to adequately oversee the projects they fund; the projects they fund are wasteful; so their resources are cut.
April 23, 2011
Reiss on Fannie, Freddie, and the Future of Federal Housing Finance Policy
David J. Reiss (Brooklyn) has posted Fannie Mae, Freddie Mac, and the Future of Federal Housing Finance Policy: A Study of Regulatory Privilege, published in the Alabama Law Review, vol. 61 (2010). The abstract:
The federal government recently placed Fannie Mae and Freddie Mac, the government-chartered, privately owned mortgage finance companies, in conservatorship. These two massive companies are profit-driven, but as government-sponsored enterprises they also have a government-mandated mission to provide liquidity and stability to the United States mortgage market and to achieve certain affordable housing goals. How the two companies should exit their conservatorship has implications that reach throughout the global financial markets and are of key importance to the future of American housing finance policy.
While the American taxpayer will be required to fund a bailout of the two companies that will be measured in the hundreds of billions of dollars, the current state of affairs presents an opportunity to reform the two companies and the manner in which the residential mortgage market is structured. Few scholars, however, have provided a framework in which to conceptualize the possibilities for reform.
This Article employs regulatory theory to construct such a framework. A critical insight of this body of literature is that regulatory privilege should be presumed to be inconsistent with a competitive market, unless proven otherwise. The federal government's special treatment of Fannie and Freddie is an extraordinary regulatory privilege in terms of its absolute value, its impact on its competitors and its cost to the federal government. Regulatory theory thereby clarifies how Fannie and Freddie have relied upon their hybrid public/private structure to obtain and protect economic rents at the expense of taxpayers as well as Fannie and Freddie's competitors.
Once analyzed in the context of regulatory theory, Fannie and Freddie's future seems clear. They should be privatized so that they can compete on an even playing field with other financial institutions and their public functions should be assumed by pure government actors. While this is a radical solution and one that would have been considered politically naive until the recent credit crisis, it is now a serious option that should garner additional attention once its rationale is set forth.
An important and innovative analysis; we're fortunate to have a number of sophisticated takes on the transactional finance system coming out right now.
April 23, 2011 in Affordable Housing, Development, Federal Government, Finance, Financial Crisis, Globalism, History, Housing, Mortgage Crisis, Mortgages, Scholarship | Permalink | Comments (0) | TrackBack