I’ve noted before that one of the reasons we don’t get good housing policy in this country, to the detriment of the larger economy, is that the media by and large doesn’t understand it. When Ed Henry shows that he doesn’t know how home loans work, it means more than just a commentary about the ignorance of one media personality. It means that more complex issues about housing policy have no chance of moving past the demagoguery stage.
That’s what I thought when I saw this story from ABC News about how taxpayers are paying for mowing lawns! Oh noes! Taxpayer money is being wasted on lawn mowers! This is terrible!
First of all, taxpayers fund the upkeep of the National Mall and all other national parks, so this is not an unprecedented event. And I think taxpayers are by and large happy with the service. But wait, these are the lawns of empty homes! Why don’t we just make those horrible people who “bought too much house” do the work?
It turns out that Jonathan Karl and the ABC news team are merely describing the upkeep of vacant properties by Fannie Mae and Freddie Mac. These are assets that can be resold or rented out, but not if they are allowed to fall into disrepair. In fact, many municipalities force holders of vacant properties to maintain them, to reduce blight, which has knock-on effects across the economy, particularly lowering property values. There have been lots of stories of banks shirking their anti-blight responsibilities. But in this tale, Fannie and Freddie are dinged for fulfilling their duties, because it costs taxpayers money. This is not a “bizarre and expensive side effect of the housing market collapse,” but a natural consequence of REO (real estate owned) properties.
There’s no sense of the long run here. If Fannie and Freddie do a good job of upkeep, if they mow the lawn and fix the cabinets, eventually the house can be resold or rented out. Karl responds to this in the piece like it’s a scam, and not market dynamics.
There’s also a completely superfluous and disconnected quote from a housing expert:
“We’ve got to get the government out of the housing market, the mortgage market,” said Guy Cecala, CEO and publisher of Inside Mortgage Finance Publications. “That’s very difficult to do when the housing market is on its knees.”
That has nothing to do with this policy. If you wanted to make a policy argument, you could say that Fannie and Freddie need to do everything possible to avoid vacant properties generally, by reducing principal or other modification strategies to keep families in their homes. You could even say that Fannie and Freddie should allow borrowers to shift from owning to renting, keeping them in the community and allowing them to pay affordable rent at a market rate.
What you cannot say is that upkeep on vacant homes is just too expensive. Is the implication that we shouldn’t do it? That we should let houses – assets – fall apart, so they can no longer be sold?
This is one reason why we get bad housing policy. Misinformed analysis cannot hold banks’ or policymakers’ feet to the fire. They will have no idea when those policymakers set in motion events that rip people off. If we had a decent set of media analysts, a horrific policy like HAMP could have never happened.