Wednesday, December 26, 2007
Over the Christmas weekend I watched again "It's a Wonderful Life," the great 1947 film about housing and credit (and other things, I suppose). This year, I was struck by a scene early in the film in which the evil financier Potter chastises the saintly operators of the Bailey Building and Loan for granting mortgage loans to those without a solid credit history, including "garlic eaters" who bought pleasant little homes in easy-credit-fueled "Bailey Park."
It occurred to me that the current spate of proposals for laws to toughen mortgage credit requirements is an echo of Potter. (This is not to suggest, of course, that most mortgage lenders over the past decade were spurred by Bailey-like altruism.) The result is that far fewer loans will be given to families without a strong credit history, and far fewer loans made to immigrants and lower-income members of racial minority groups. For land use, this will mean far fewer "Bailey Parks" -- that is, there will be a greatly diminished demand for modest homes. This will translate into a drying up of new construction for small houses -- perhaps for many years -- and a concomitant increase in the demand for apartments, by families who otherwise would have been buying. It remains to be seen whether local government land use law will be able to respond nimbly to these changes in housing demand. It's not always such a wonderful life …