Small Potatoes | Feb 13th at 10:21am
There was a surprisingly ample amount to think about in Shaun Donovan’s speech. One of the most interesting ideas, as one of my colleagues at DMI has pointed out, is that bankruptcy reform (permitting modification of mortgages on primary residences) is small potatoes compared to other foreclosure mitigation efforts. Though it’s a proposal that I’ve advocated, it seems like more of a political touchstone (liberals like it, conservatives hate it) than a likely “solution” to the housing crisis. Donovan called the provision a “safety net” and “not the model”. What Donovan made clear is that there will be policy responses on multiple levels (the two most basic being help to already distressed homeowners and assistance for those who will be distressed).
Donovan also approvingly mentioned the $8,000 tax credit for new home purchases by first-time homebuyers (now a real credit and not an interest-free loan) – or at least it was $8K the last time I checked – that is included in the stimulus package. Of course this was a bit of stimulus boosterism, but I just expected Donovan to leave the credit out. Given his other responses to the housing crisis - loan modifications, standards for modifications, targeted bankruptcy reform, measures to mitigate community impacts, capital for the purchase and refinance of existing mortgages – I don’t see how the $8K credit fits in. The credit might slightly increase home purchases – as Ed Glaeser has tackled – but its effects will be limited (that is, assuming that we want to artifically increase home prices, which I for one do not).
Finally, Donovan riffed briefly on Ralph Ellison’s classic Invisible Man. I’ve often thought about the book in relationship to the housing crisis. I wonder if anyone else has thoughts about how the book is relevant to the current times? (Or maybe housing people, which I am only part time, talk about the book all the time?)
Harry Moroz is a research associate at the Drum Major Institute for Public Policy. Harry is a contributor to the The HuffingtonPost and has written for the Philadelphia Inquirer, The Atlantic, and DMIBlog where he writes frequently about housing and urban policy.
