Wednesday, August 10, 2011

Any Questions About This?

Somehow the whole concept of private property, free markets, supply/demand, Adam Smith's invisible hand, and the role of government was omitted from the training of the Chief Executive Officer of the Nation.

What questions come to mind when you read this tidbit:

Fannie and Freddie Become National Landlords 

At first glance, I ask whether Fannie and Freddie are the owners. There is a distinct difference between property which the corrupt federal mortgage facilitators actually funded and those private mortgage loans which the government merely guaranteed. Some very clear lines would have to be drawn regarding who has what rights in this. Without a close look that pesky Constitutional provision about being deprived of property without due process seems to come into play.

Then, who is going to rent these formerly private residences? If Fannie and Freddie rent them to the same sort of folks to whom they issued mortgages in the first place, i.e. those with neither income, credit rating or demonstrable capability to pay; how is this going to do anything?

Who will be responsible for maintenance and upkeep of the properties. I lived once in a new neighborhood with newly built homes. Over a period of a bit more than 10 years, many of the original owners were reassigned or moved but elected to keep the property and rent it out. It didn't take long before you could easily identify the rentals from the owned homes. Yards unkempt, fences down, paint peeling, windows broken, inoperative vehicles in the driveways, all indicative of a group without a vested interest in the property.

What impact does this availability of government owned and hence subsidized rentals have on the marketplace. Say I own a six unit condo and seek to rent it for my own business. Can I compete with Uncle Sam who offers the two buildings down the block to "worthy applicants."

And, of course, there will be inevitable issues of how the rentals will be allocated and what quotas for neighborhood diversity will be overlaid on the program. Social engineering will run rampant.

Mao and Lenin ran a program a lot like this, I think. Expect to see a lot of uniformly gray houses on the streets in a few years.

1 comment:

an Donalbane said...

The best outcome for property owners in the vicinity of significantly large numbers of foreclosures is for the government to aggresssively offload those properties into the private sector. After all, the government is an incompetent landlord.

Several years ago a HOA somewhere in Fort Worth attempted to get an injunction against HUD to prevent the marketing of repo'd properties, on the basis that it'd lower property values in the neighborhood. While this was arguably true in the short term, it was manifestly myopic, as continuing to have those white elephants sitting idle did more to depress property values than having a quick fire sale and getting it over with.

While it's possible a guy who buys a distressed property has a competitive advantage at selling time, I can virtually guarantee he's probably going to hang as tight as he can to maximize his equity margin.

The prudent thing for the complainers to have done would have been to buy the properties themselves, if they possessed the means, flip them, and make a tidy little profit.