[heavy metal]

So I heard from a real estate agent friend that she's working with a client who is basically having the government buy them a foreclosed house at ~350k value. So if I pay taxes I help pay something like 70+ % of this person's mortgage? Now I'm no "fvck you, I've got mine" conservative and I'm all for stuff like unemployment benefits but this seems a little ridiculous to me.

Anyone care to enlighten me on the particulars of such a program?

Edit: good thing I don't pay taxes (yet) har har

 

[TheMontashu]

So I heard from a real estate agent friend that she's working with a client who is basically having the government buy them a foreclosed house at ~350k value. So if I pay taxes I help pay something like 70+ % of this person's mortgage? Now I'm no "fvck you, I've got mine" conservative and I'm all for stuff like unemployment benefits but this seems a little ridiculous to me.

Anyone care to enlighten me on the particulars of such a program?

Edit: good thing I don't pay taxes (yet) har har

I can only speak for the bay area, but what happened out here (specifically in antioc) is they built a bunch of houses (they probably doubled or trippled the size of this town in a few years) out the outer edge of the bay area with no new schools and didn't widen roadways out there. Then the housing market collapsed, and there were a ton of unsold houses, in some god awful hot town, a 30 minute wait in traffic from the next real town over, and now it's basically as bad as east oakland. Now the way I see it, I don't have a problem with people getting super cheep houses on in that sh!t hole. What I do have a HUGE problem with is making up for some POS developers who have enough money to work section 8 in their favor like that.

 

[dante]

So I heard from a real estate agent friend that she's working with a client who is basically having the government buy them a foreclosed house at ~350k value. So if I pay taxes I help pay something like 70+ % of this person's mortgage? Now I'm no "fvck you, I've got mine" conservative and I'm all for stuff like unemployment benefits but this seems a little ridiculous to me.

Anyone care to enlighten me on the particulars of such a program?

Edit: good thing I don't pay taxes (yet) har har

Sort of. Section 8 housing is subsidized (guaranteed) rent by the government. So your friend is buying up a foreclosed home, and is going to rent it to low-income individuals. The government guarantees the rent for those individuals by actually paying your friend the monthly rent. The low-income individual pays the government a portion of that (so, the government pays your friend $1000/month, and the poor person renting the house pays the government $200, or something similar).

I've known a couple friends who've done it, and since you're suddenly a "landlord" it's quite a bit of work.

 

[heavy metal]

From what I heard they aren't buying the house the section 8er is. No renting, straight section 8 mortgage. I'd heard of section 8 rental vouchers, but this is why I was perplexed. They are just a small local realtor I don't think they have the time or money to buy a house and become a landlord too.

 

[Pesqueeb]

Sort of. Section 8 housing is subsidized (guaranteed) rent by the government. So your friend is buying up a foreclosed home, and is going to rent it to low-income individuals. The government guarantees the rent for those individuals by actually paying your friend the monthly rent. The low-income individual pays the government a portion of that (so, the government pays your friend $1000/month, and the poor person renting the house pays the government $200, or something similar).

I've known a couple friends who've done it, and since you're suddenly a "landlord" it's quite a bit of work.

I can't find it now, but buried somewhere here in PAWN is an amazing post by Mandown about exactly this. It was somehow related to one of our discussions about distribution of wealth IIRC.

 

[Toshi]

http://alliance.unh.edu/section8final.pdf

3% down, 1% from "the family's personal resources." "Generally limited to first-time homeowners." "National minimum income requirement that is equal to 2,000 hours of annual full-time work at the Federal minimum wage." Must demonstrate 30+ hour/week job held for at least a year. "The law provides that the income counted in meeting any minimum income requirement under the homeownership option must come from sources other than welfare assistance."

How much assistance is provided?

The homeownership housing assistance payment will equal the lower of (1) the payment standard minus the total tenant payment or (2) the monthly homeownership expenses minus the total tenant payment. The family is responsible for the monthly homeownership expenses not reimbursed by the housing assistance payment. (Total tenant payment is higher of the minimum rent, 10 percent of monthly income, 30 percent of monthly adjusted income, or the welfare rent.)

The govt does get some equity for its input:

PHAs shall recapture a percentage of homeownership assistance defined in the regulations upon the sale or refinancing of the home.

How much equity is recaptured?

The amount of homeownership assistance subject to recapture shall automatically be reduced over a 10 year period, beginning one year from the purchase date, in annual increments of 10 percent. At the end of the 10 year period, the amount of the homeownership assistance subject to recapture will be zero.

So it's 100% recapture for those in the house 0-1 years, 90% recapture for those in the house 1-2 years, …, 10% recapture for those in the house 9-10 years, and 0% recapture for those in the house 10+ years.

My thoughts:

I do not think Section 8 in general, and this variant of it, is a good idea. It's a huge distortion of the real estate market. It personally was a thorn in my ass when I was searching for apartments to rent in Seattle in 2008-2009: I made too much to qualify for Section 8 but had to stretch for the unsubsidized rents. (As it turned out I found a rare good non-Section 8 deal, but that's not the point.)

If housing prices are so expensive in a given area (e.g., SF Bay Area) such that minimum wage workers are hard to come by since they're not in the area and can't afford/aren't willing to commute in, then what should happen is that those businesses that rely on those workers either work something out on their own with employer-subsidized housing OR they start paying higher wages.

 

[Toshi]

Longer (crossposted) blog post on the above, see link for inline references:

----------------------

Just yesterday Christina Freeland, a Reuters reporter, published an article entitled The Tea Party vs. The 'Freeloader' that caused me to re-examine some of my own beliefs and experiences. In the article, widely republished wherever Reuters is syndicated, she states that "the fundamental distinction for [Tea Partiers] is not state vs. individual, it is the division of the United States into 'workers' vs. 'people who don’t work.'" This jives with the earlier Tea Party demographics report that showed more than half of self-identified Tea Party respondents to feel that the policies of the Obama administration favor the poor. Also apropos is another article from the same day by Andrew Martin, a NY Times reporter, who wrote regarding a new housing program that allows unemployed people to skip their mortgage payments for "12 months or more" while job hunting.

These articles raise several questions in my mind: Are Tea Partiers people who work and deny themselves the "unconstitutional" benefits against which they protest so loudly, or are they actually net recipients of state and federal largesse? Are there actual programs (outside of the tax code, which is not that progressive at all in the mathematical sense of the term) that "discriminate" against working people, if you will? Finally, what's the rationale for modifying loan terms (including allowing for forbearance as in the program above) for unemployed homeowners but not doing the same for those with jobs?

Tea Partiers: Are they consistent in their beliefs and practices?

First up is the question of whether the Tea Partiers' world view is consistent with reality. There certainly are many anecdotes that demonstrate pretty clear hypocrisy by individuals: unemployed Tea Party activists receive unemployment, Social Security, and Medicare benefits feel it's ok since they "deserve it" (as opposed to everyone else?); a Kristallnacht-revering right-wing thug named Mike Vanderboegh was found to be drawing Social Security Disability benefits after publicly decrying "government handouts"; Joe Miller, who ran on an anti-unemployment insurance, 10th Amendment-literalist platform in the 2008 Alaska senate race has a wife on unemployment benefits; and Tea Party darlings Rep. Stephen Fincher and Michelle Bachmann alike both took advantage of hundreds of thousands of dollars (millions in the case of Fincher) in farm subsidies while railing publicly against the very same thing.

So it's clear that at least some individual Tea Party figureheads are hypocrites. Does this hold true more generally? That same April 2010 demographic poll by CBS and the NYTimes that I cited above showed that nearly 75% of Tea Partiers favored smaller government even if spending on domestic programs were cut, but when pressed with specific questions regarding cutting Medicare and Social Security did not support cutting either program.

This suggests that many people railing against "big government" blindly have either not thought out the issue thoroughly, or are blinded by their own anger. I don't think it's such a stretch to suggest that at least part of this anger may arise from the President's race, as their demographics are white and male, "the overwhelming majority… say Mr. Obama does not share the values most Americans live by" (that's code for "he's not like us" as far as I can decipher), and "25 percent think that the administration favors blacks over white -- compared with 11 percent of the general public."

That said, I think the Tea Partiers might be on to something, as there definitely do exist programs that are discriminatory against the honest, hard worker. A perfect example of this is the Section 8 mortgage assistance program.

Section 8 Mortgage Assistance

Did you think that Section 8 housing assistance only applied to urban rental apartments? I did, at least before finding out otherwise today. (For those not familiar with it, if one has a suitably low income then one qualifies for Section 8 assistance, where the government will pay a portion of one's rent. There exist special apartments that can only be rented to Section 8 recipients. I can attest personally from my experience in finding a rental apartment in Seattle that this crowds out those, like me at the time, who make a bit too much to be eligible for Section 8 but not enough to comfortably afford the prevailing rent.)

It turns out that Section 8 also has a provision, introduced in the last days of President Clinton's second term (but not modified during the subsequent two terms of GWB), wherein the government will pay part of one's mortgage. Yes, you read that right: Tax dollars are going to promote homeownership for homeownership's sake by inducing those who would otherwise not be "owning" a house into buying one with direct government assistance.

Don't believe me? Read the rule for yourself here: 24 CFR Parts 5, 903 and 982, Section 8 Homeownership Program; Final Rule.

Key points:

- One must have held a 30+ hour/week position that pays the yearly equivalent of 2000 hrs at the Federal minimum wage for at least a year
- Direct welfare assistance doesn't count towards meeting this minimal yearly wage requirement
- The government does "recapture" some equity, but this declines sharply over time. If 100% is defined as the total amount of government money put towards the mortgage assistance then 100% is recaptured if the tenant holds the house for 0-1 years, 90% is recaptured for tenancy of 1-2 years, …, 10% is recaptured for tenancy of 9-10 years, and 0% is recaptured for tenancy of greater than 10 years.
- Assistance is basically the cost of the mortgage minus the tenant's contribution of the greater of the minimum rent, 10 percent of monthly income, 30 percent of monthly adjusted income, or the welfare rent. I'm not quite sure what "minimum rent" and "welfare rent" mean in this context, but I'm sure it's well below market.

Progressive taxation doesn't bother me in the slightest when the redistribution is in the form of shared services (roads, fire, police, health insurance) or when there's direct aid in the form of, say, food vouchers. Direct payments toward's an otherwise unaffordable mortgage with no equity recaptured after 10 years really does bug me, on the other hand.

That's not right.

Inequitable loan modification

Finally we come to the current push for loan modification and extended (12 month) forbearance for mortgage holders who lose their jobs. While I certainly see the political expediency of supporting such a program--"Obama helped me keep my house!" <weeps on camera and gives a thumbs up>--I think these programs are equally unfair as the above. Getting a mortgage in the first place should have been contingent on an ability to repay it. It wasn't charity. Why then is it justifiable that unemployed people may live in "their" houses for a year without paying while their neighbors must make monthly payments in order to do the same thing?

Note that I don't see eye to eye with those who see walking out on a mortgage and putting up a house up foreclosure as some sort of moral failure, either: The deal was "pay, and you can live in this house." If you decide to not pay and not live in the house then it's a fair bargain for both parties even if the bank may not like the reality that the house is now worth much less than the original amount of the mortgage.

It's a harsh sentiment, but my belief is that if one loses their job and can't come up with an alternate means of finding funds to pay one's mortgage then that house should be foreclosed on immediately and then resold on the open market at the current market price. There's a selfish element in this sentiment, of course, as having more foreclosed houses reach the market will drive down prices (hopefully reaching a bottom exactly when I'll be in the housing market, in 2014), but there are also strong arguments in favor of this from a market efficiency standpoint. Having a bunch of "dead wood" in the system masks the true extent of the weakness of the housing (and job) markets and only will extend the pain--and I don't say this in some bogus "Austrian economics" self-flagellatory way but in the sense that prices, demand, and house availability must reach their true equilibrium sooner or later.

Conclusions

From all the above I conclude that Tea Partiers may just be on to something in their anger, albeit for the wrong reasons. Their anger, as best as I can gather from the outside, is directed at the President (possibly due to his race, possibly due to his academic/elite background), the generally still-crappy economy, and at the changing demographics of the nation. To them, I say: deal with it, and don't come knocking until one sees the contradiction inherent in insisting that the military budget, Medicare, and Social Security be preserved yet "big government" somehow miraculously slimmed. Something must give, and one can't have it both ways.

What does anger me are examples of true undeserved handouts. One such example that I cited in the past was handouts to Wall Street billionaires and their wives under the guise of TALF. Another, new-to-me example is the above: Section 8 mortgage assistance. Of all the things that I feel the government should be doing, providing direct mortgage assistance to promote homeownership by people too poor to qualify for a mortgage on their own is amongst the last. Homeownership is not an end in and of itself that justifies any means of acquiring it, and promoting it to excess is part of the underpinnings of our current economic morass.

One might counter with the argument that businesses in expensive regions of the country (e.g., Bay Area) might then be suddenly short of minimum wage laborers if Section 8 assistance were removed. Said minimum wage workers might not be able to live in the immediate area if true market rent and mortgage prices prevail, and they might not be able or willing to commute a long distance. I see no governmental level problem in this. This is a problem with the wages the businesses are willing to pay, not a problem with the housing market, per se.

There's no right to live in a certain area at a certain, below-market price. There's no right for employers to have a huge pool of eager minimum wage workers, either. If employers truly ran into such a problem then they could either provide subsidized housing on their own dime (effectively raising their wages) or they could face reality and pay a wage at which residents of their neighborhood might consider fair. Either way, I don't want to be paying Joe Sixpack's mortgage in any way, shape, or form, and I'm angry that I'm doing so today.

 

[heavy metal]

Thanks tosh. At first I thought there had to be some other side to this thing but it genuinely stinks and seems to be an assbackward solution to a lack of affordable housing.

 

[TheMontashu]

If housing prices are so expensive in a given area (e.g., SF Bay Area) such that minimum wage workers are hard to come by since they're not in the area and can't afford/aren't willing to commute in, then what should happen is that those businesses that rely on those workers either work something out on their own with employer-subsidized housing OR they start paying higher wages.

On that note, I work at a retail place that pays well (starts at 11 an hour) and about half the store lives 20-30 miles away. If they get a 4 hour we end up with people spending almost half there pay for the day on gas and a bridge toll. There's also no way in hell that you are going to find an apt around here with the kind of hours they give

 

[dante]

<snip>

So....... who's subsidizing the interest on those student loans of yours? It wouldn't be the American taxpayer, would it?

 

[syadasti]

So....... who's subsidizing the interest on those student loans of yours? It wouldn't be the American taxpayer, would it?

Who pays the bills for doctors mistakes in states where there is tort "reform" when costs exceed limits - the taxpayers do and insurance trends haven't improved post "reform". Why do doctors and insurance companies deserve to steal from the system more than poor people - especially the hacks that have hurt their patients. Why do they know better than a jury of their peers?

 

[Toshi]

So....... who's subsidizing the interest on those student loans of yours? It wouldn't be the American taxpayer, would it?

Oh, it's definitely the taxpayer who is subsidizing the interest on about about 24% of my total loan burden. I recognize that I've benefited from public programs--hell, I even attended public school proper for one solitary year during elementary school . (A fuller accounting of the public aid that I've received outside of the usual shared public services includes summer and graduate programs at my state school, UW, several Federal and state level scholarships, my parents being able to write off their mortgage interest all these years, and, yes, a small portion of my student loans being subsidized such that during the one permissable post-graduate year of deferment (vs. forbearance) the taxpayers picked up the interest. I probably missed other things.)

I'm not arguing that those in my position are Randian supermen. I'm not that arrogant and not that naive, and we already have The Joker to cover that position.

What I am arguing is that this particular program seems an egregious example of the "safety net" gone wrong, perverted from its original social goal to further the goal of homeownership for its own shape, however undeserved. Although I'd love to see Section 8 (and rent control in NYC!) disappear completely, I really draw the line with mortgage assistance. Like I say in my post, that just doesn't seem right at all.

 

[Toshi]

Who pays the bills for doctors mistakes in states where there is tort "reform" when costs exceed limits - the taxpayers do and insurance trends haven't improved post "reform". Why do doctors and insurance companies deserve to steal from the system more than poor people - especially the hacks that have hurt their patients. Why do they know better than a jury of their peers?

Tort reform is an issue I haven't really looked into. What I've read shows that it directly contributes to only a very small (~2%) component of total health care costs, but could potentially lower costs much more indirectly through a downturn in the practice of defensive medicine, which I can report is very prevalent these days.

With a disassociation between actual costs, the people ordering studies, and the people receiving them AND an incentive on the provider's part to over-order to reduce one's perceived malpractice risk there's no incentive to save money and practice prudent, textbook medicine.

What is undeniable is that tort reform benefits physicians through lower malpractice rates. See the cited example of Texas ob/gyn malpractice insurance rates on Wikipedia, for instance. While I like that concept personally I don't find it compelling enough in the general public interest to go on a warpath for it. Maybe my tune will change when I'm paying my own malpractice insurance bills in a few years.

 

[gonefirefightin]

Fvck this payout pansy a$$ bullsh1t........this is the kind of crap that gets me steamed.

lazy @ss mofo's need to do there own effin work and pay for there own bidness.

this country is going down the farking tubes

 

[heavy metal]

I think access to a quality education should be way higher of a priority for the taxpayer than getting people in homes they can't afford. Backasswards.

 

[syadasti]

I almost forgot this timely article I read yesterday morning.

The Unexamined Society
By DAVID BROOKS
Published: July 7, 2011

Over the past 50 years, we&#8217;ve seen a number of gigantic policies produce disappointing results &#8212; policies to reduce poverty, homelessness, dropout rates, single-parenting and drug addiction. Many of these policies failed because they were based on an overly simplistic view of human nature. They assumed that people responded in straightforward ways to incentives. Often, they assumed that money could cure behavior problems.

Fortunately, today we are in the middle of a golden age of behavioral research. Thousands of researchers are studying the way actual behavior differs from the way we assume people behave. They are coming up with more accurate theories of who we are, and scores of real-world applications. Here&#8217;s one simple example:

When you renew your driver&#8217;s license, you have a chance to enroll in an organ donation program. In countries like Germany and the U.S., you have to check a box if you want to opt in. Roughly 14 percent of people do. But behavioral scientists have discovered that how you set the defaults is really important. So in other countries, like Poland or France, you have to check a box if you want to opt out. In these countries, more than 90 percent of people participate.

This is a gigantic behavior difference cued by one tiny and costless change in procedure.

Yet in the middle of this golden age of behavioral research, there is a bill working through Congress that would eliminate the National Science Foundation&#8217;s Directorate for Social, Behavioral and Economic Sciences. This is exactly how budgets should not be balanced &#8212; by cutting cheap things that produce enormous future benefits.

Let&#8217;s say you want to reduce poverty. We have two traditional understandings of poverty. The first presumes people are rational. They are pursuing their goals effectively and don&#8217;t need much help in changing their behavior. The second presumes that the poor are afflicted by cultural or psychological dysfunctions that sometimes lead them to behave in shortsighted ways. Neither of these theories has produced much in the way of effective policies.

Eldar Shafir of Princeton and Sendhil Mullainathan of Harvard have recently, with federal help, been exploring a third theory, that scarcity produces its own cognitive traits.

A quick question: What is the starting taxi fare in your city? If you are like most upper-middle-class people, you don&#8217;t know. If you are like many struggling people, you do know. Poorer people have to think hard about a million things that affluent people don&#8217;t. They have to make complicated trade-offs when buying a carton of milk: If I buy milk, I can&#8217;t afford orange juice. They have to decide which utility not to pay.

These questions impose enormous cognitive demands. The brain has limited capacities. If you increase demands on one sort of question, it performs less well on other sorts of questions.

Shafir and Mullainathan gave batteries of tests to Indian sugar farmers. After they sell their harvest, they live in relative prosperity. During this season, the farmers do well on the I.Q. and other tests. But before the harvest, they live amid scarcity and have to think hard about a thousand daily decisions. During these seasons, these same farmers do much worse on the tests. They appear to have lower I.Q.&#8217;s. They have more trouble controlling their attention. They are more shortsighted. Scarcity creates its own psychology.

Princeton students don&#8217;t usually face extreme financial scarcity, but they do face time scarcity. In one game, they had to answer questions in a series of timed rounds, but they could borrow time from future rounds. When they were scrambling amid time scarcity, they were quick to borrow time, and they were nearly oblivious to the usurious interest rates the game organizers were charging. These brilliant Princeton kids were rushing to the equivalent of payday lenders, to their own long-term detriment.

Shafir and Mullainathan have a book coming out next year, exploring how scarcity &#8212; whether of time, money or calories (while dieting) &#8212; affects your psychology. They are also studying how poor people&#8217;s self-perceptions shape behavior. Many people don&#8217;t sign up for the welfare benefits because they are intimidated by the forms. Shafir and Mullainathan asked some people at a Trenton soup kitchen to relive a moment when they felt competent and others to recount a neutral experience. Nearly half of the self-affirming group picked up an available benefits package afterward. Only 16 percent of the neutral group did.

People are complicated. We each have multiple selves, which emerge or don&#8217;t depending on context. If we&#8217;re going to address problems, we need to understand the contexts and how these tendencies emerge or don&#8217;t emerge. We need to design policies around that knowledge. Cutting off financing for this sort of research now is like cutting off navigation financing just as Christopher Columbus hit the shoreline of the New World.

 

[syadasti]

Tort reform is an issue I haven't really looked into. What I've read shows that it directly contributes to only a very small (~2%) component of total health care costs, but could potentially lower costs much more indirectly through a downturn in the practice of defensive medicine, which I can report is very prevalent these days.

It's not as simple and clear cut as politicians and lobbies have marketed it to be. Even The Joker is convinced.

 

[dante]

What I am arguing is that this particular program seems an egregious example of the "safety net" gone wrong, perverted from its original social goal to further the goal of homeownership for its own shape, however undeserved. Although I'd love to see Section 8 (and rent control in NYC!) disappear completely, I really draw the line with mortgage assistance. Like I say in my post, that just doesn't seem right at all.

Yeah, god forbid the federal government step in with mortgage assistance that allows poorer people to get into houses that they couldn't otherwise afford.... unless you're talking about government backing of mortgages, which reduces the interest rate by up to ~2% points and reduces the amount that borrowers would have to pay by thousands of dollars per year. Or the ability to write off property taxes and mortgage interest, reducing the amount that homeowners pay in federal income taxes by several more thousands of dollars. Or FHA loans, which allow people to only put down 3.5% if they meet certain qualifications. Those are GREAT expenditures of federal tax dollars (mainly because *I* benefit from them).

But allowing someone to use their Section 8 voucher in order to *actually* buy a house in targeted low-income areas of the state so that they can have a stable home life and actually work towards home ownership instead of handing over that money to a greedy landlord every month?

By God that's SOCIALISM!!!

Remember, this program is for people who already have a Section 8 voucher that they're using to pay their rent. All this is doing is allowing people to use that voucher to pay for a monthly mortgage instead, with the government using incentives to keep them in that house for as long as possible (with the possibility of enabling the government to recoup it's payout if the person in question sells their house within 10 years, something that's NOT possible if the money is used to pay for monthly rent).

Besides.... if you owned a home, would you rather have a Section 8 RENTAL property next door, or a Section 8 HOME OWNERSHIP property next door?

 

[Toshi]

I don't agree with government backing of mortgages, either. Keep those loans on the bank books so that _they_ take the losses, not taxpayers. I already mentioned the mortgage interest deduction, which would be first on the chopping block (along with corn and general agricultural subsidies) if I were in power.

The difference between Section 8 rental vouchers and this program is that the government already subsidizes the difference between market rent/mortgage price and what the tenant is able to pay, with that subsidy going to the mortgage lender or the rentier. With this program, though, that same subsidy is doubled in that it's given yet again to the renter, er, mortgager as "free" equity provided one stays put for 10 years.

It's not the same.

And, honestly, I'd rather live in a neighborhood with no Section 8 renters. I've been there and done that in both Seattle and Portland, and wasn't impressed by what I saw and heard.

With regard to your implication about home "ownership" creating a virtuous circle, etc., I challenge you to find data that shows the rate of default to be the same between Section 8 and non-Section 8 borrowers. I couldn't find anything, either, but I'm going to go out on a limb here and posit that Section 8 mortgages will be wildly in arrears.

 

[dante]

I don't agree with government backing of mortgages, either. Keep those loans on the bank books so that _they_ take the losses, not taxpayers. I already mentioned the mortgage interest deduction, which would be first on the chopping block (along with corn and general agricultural subsidies) if I were in power.

The difference between Section 8 rental vouchers and this program is that the government already subsidizes the difference between market rent/mortgage price and what the tenant is able to pay, with that subsidy going to the mortgage lender or the rentier. With this program, though, that same subsidy is doubled in that it's given yet again to the renter, er, mortgager as "free" equity provided one stays put for 10 years.

It's not the same.

Huh? Let's say I have a $500/month rental voucher that I was paying to my (greedy, capitalist) landlord. I am paying an additional $250/month in rent. Then I find a foreclosed house around the corner that allows me to buy a house with a small amount down, and my mortgage is $750/month (same as my current rent). Now, instead of being held to the whims of the landlord, I can use that $500 as part of my mortgage payment instead. How exactly is that a "doubled subsidy"? The only difference is that instead of it going through a middle-man (landlord who buys the property and then receives a government check every month that he sends to the mortgage holder), it's allowing the person who's living there to actually own the house.

And, honestly, I'd rather live in a neighborhood with no Section 8 renters. I've been there and done that in both Seattle and Portland, and wasn't impressed by what I saw and heard.

Well, yeah, I wouldn't either, but I'm fully willing to admit to NIMBYism... However, *IF* you had a choice between living next to a Section 8 renter *OR* a Section 8 homeowner, which would you choose? A parade of miscreants who live in the house for 4-6mo at a time before moving on? Or someone who actually takes care of it and plans to live there for 10+ years?

With regard to your implication about home "ownership" creating a virtuous circle, etc., I challenge you to find data that shows the rate of default to be the same between Section 8 and non-Section 8 borrowers. I couldn't find anything, either, but I'm going to go out on a limb here and posit that Section 8 mortgages will be wildly in arrears.

Since Section 8 borrowers (ie, home ownership) seems to be such a tiny percentage of the overall Section 8 program (which in and of itself is only 0.7% of the federal budget), I highly doubt you'll find any such figures. However, I'd bet money that I could find a host of studies showing through time-trend analysis that people who own homes are better off financially than people who rent, net all other factors...

 

[Toshi]

Huh? Let's say I have a $500/month rental voucher that I was paying to my (greedy, capitalist) landlord. I am paying an additional $250/month in rent. Then I find a foreclosed house around the corner that allows me to buy a house with a small amount down, and my mortgage is $750/month (same as my current rent). Now, instead of being held to the whims of the landlord, I can use that $500 as part of my mortgage payment instead. How exactly is that a "doubled subsidy"? The only difference is that instead of it going through a middle-man (landlord who buys the property and then receives a government check every month that he sends to the mortgage holder), it's allowing the person who's living there to actually own the house.

After 10 years of paying the mortgage then the Section 8 mortgage assistance person has been given equity equivalent to 10 years of the subsidy. They already received that subsidy each month in that their monthly bill was $500 less, but now they have been handed a windfall of $500 x 12 x 10 in equity that they'll recoup when they sell the house. In other words, instead of having as much in equity as they put in through their payments, they're getting that PLUS the subsidy that they already received each month in equity.

The renter would merely have gotten that subsidy once over through the lowered rent each month, with no equity to show for it at the end.

Well, yeah, I wouldn't either, but I'm fully willing to admit to NIMBYism... However, *IF* you had a choice between living next to a Section 8 renter *OR* a Section 8 homeowner, which would you choose? A parade of miscreants who live in the house for 4-6mo at a time before moving on? Or someone who actually takes care of it and plans to live there for 10+ years?

You're setting up a scenario with false premises. Where's your evidence that this program actually works and prevents people from moving in, defaulting, hanging onto the place until the foreclosure genie comes at long last many months (years?) later, and trashing it similarly in the meantime?

Since Section 8 borrowers (ie, home ownership) seems to be such a tiny percentage of the overall Section 8 program (which in and of itself is only 0.7% of the federal budget), I highly doubt you'll find any such figures. However, I'd bet money that I could find a host of studies showing through time-trend analysis that people who own homes are better off financially than people who rent, net all other factors...

0.7% of the total Federal budget is a lot of money, actually. NPR's budget is 0.005% of the annual expenditures, for comparison purposes, assuming I can still keep significant figures straight...

I bet you're right with regard to those studies. I also bet that those studies' results aren't applicable to Section 8 people. Normally, home ownership implies financial and social stability. It doesn't create it. Assuming foisting home ownership on those without said stability will create it through magic and good intentions is idiotic, imo.

 

[dante]

After 10 years of paying the mortgage then the Section 8 mortgage assistance person has been given equity equivalent to 10 years of the subsidy. They already received that subsidy each month in that their monthly bill was $500 less, but now they have been handed a windfall of $500 x 12 x 10 in equity that they'll recoup when they sell the house. In other words, instead of having as much in equity as they put in through their payments, they're getting that PLUS the subsidy that they already received each month in equity.

The renter would merely have gotten that subsidy once over through the lowered rent each month, with no equity to show for it at the end.

Yeah, still not following you. The only difference is that it's the resident of the property that gets the long-term benefit instead of a landlord. If you're trying to claim a dual-benefit for the resident, then you'd have to claim that the landlord gets a government benefit under the Section 8 rental rules. The *only* difference is that the resident would get that benefit under Section 8 mortgage rules.

You're setting up a scenario with false premises. Where's your evidence that this program actually works and prevents people from moving in, defaulting, hanging onto the place until the foreclosure genie comes at long last many months (years?) later, and trashing it similarly in the meantime?

And you're setting up strawman scenarios with zero evidence as well. You have no evidence that the program *doesn't* work. However, we do know that home ownership (and the equity involved in it) is one of the greatest factors to wealth-building for Ameicans, and even more so for the poorest / minority Americans.

Nonetheless, homeownership has become a critical factor in moving up
the economic ladder. Home equity is the largest single source of
household wealth for most Americans. Median net wealth for
homeowners exceeds $78,400, while renters accumulate less than
$2,300, or3 percent of this amount. For homeowners, almost 60
percent of their wealth is in the form of home equity. For minority
homeowners, home equity is an even more important component of
wealth, representing more than three-fourths of their median net wealth
of approxi-mately $48,300, almost 100 times the median wealth of the
average black renter (barely $500). For owners in the lowest income
brackets as well, equity in single-family homes constitutes more than
half their wealth.

http://www.huduser.org/publications/txt/hdbrf2.txt

Look, the process of buying our house made me VERY aware of the fact that money begets money, and poverty begets poverty. We were lucky enough (and worked hard enough) that we were able to buy a house with 20% down. Because of that, our mortgage/interest/taxes were $100 less per month than if we were to rent a similar-sized house. After we refinanced, we're saving close to $250/month over renting, and if we'd bought a foreclosure a short ways away we'd be saving $500-600/month instead. Because we *had* money (due to parents putting us both through school as well as financial choices we've made since), we were able to gain/save *more* money. And apparently NPR agrees..... Read up on the High Cost of Being Poor and tell me that that's an efficient use of our consumption dollars.

So if we can break that cycle, while paying *the exact same amount in federal expenditures as we had before*, you're saying we shouldn't do it based purely on principal? You might be the first Libertarian I've ever met who will put ideology over pragmatism...

I bet you're right with regard to those studies. I also bet that those studies' results aren't applicable to Section 8 people. Normally, home ownership implies financial and social stability. It doesn't create it. Assuming foisting home ownership on those without said stability will create it through magic and good intentions is idiotic, imo.

Uh, based on the links I posted above from NPR and the WashPo, I'd say that certain aspects of home ownership *does* create some financial and social stability. When the cost of buying a home in Cleveland is $420/month, and the cost of renting is $750/month, then yes, home ownership *does* create wealth. Just imagine if my $500 example was true in that case: instead of the government sending $500 to the landlord every month, the government sends $420 to the mortgage company instead. The homeowner has an extra $250 to spend, the taxpayer saves $80/month, and the only person who would disagree with the idea that that's a good move is you, because of your ideology.

 

[dante]

By the way, anyone else find it more than a coincidence that Toshi's Jokerian turn towards libertarianism is occurring right around the time that he's going from "poor college student" to "soon-to-be-rich-doctor"?

 

[Toshi]

I actually was more libertarian--or at least argued their position--for ****s and giggles and to rile up my fellow classmates, at least--during undergrad. I drifted to the straight liberal side during med school. Now I'm coming back to my roots as more and more things anger me as a prematurely old man.

Also relevant to this is that I took a freshman course on something, can't remember what--debate?--at Harvard and one of the topics was rental control in NYC. I think I argued the side of pro-rent control since that was what was assigned, but I realized at that time that I didn't think rent control is a good idea.

 

[Toshi]

Yeah, still not following you. The only difference is that it's the resident of the property that gets the long-term benefit instead of a landlord. If you're trying to claim a dual-benefit for the resident, then you'd have to claim that the landlord gets a government benefit under the Section 8 rental rules. The *only* difference is that the resident would get that benefit under Section 8 mortgage rules.

So if we can break that cycle, while paying *the exact same amount in federal expenditures as we had before*, you're saying we shouldn't do it based purely on principal? You might be the first Libertarian I've ever met who will put ideology over pragmatism...

Libertarians would put ideology over pragmatism, wouldn't they? Utilitarians would be the ones who would do the opposite.

I see where you're coming from from the government-side cost perspective. The government puts in X dollars each month, and then ultimately sees nothing of the money in the end in either scenario, sure. The rentier does get the "benefit" of having a market rent paid to them in the renting scenario, while the mortgage assistant tenant gets the benefit of having a gift of the difference in equity between their contribution and market mortgage rates in the alternate scenario. I guess I don't count the benefit to the rentier because he/she could rent the apartment out at market rates by their definition if there weren't Section 8 interference.

 

[Toshi]

And you're setting up strawman scenarios with zero evidence as well. You have no evidence that the program *doesn't* work. However, we do know that home ownership (and the equity involved in it) is one of the greatest factors to wealth-building for Ameicans, and even more so for the poorest / minority Americans.

http://www.huduser.org/publications/txt/hdbrf2.txt

Good site. Here's another thing to read from that very same place: http://www.huduser.org/periodicals/cityscpe/vol3num2/unanswer.pdf

Although the shortcomings of public housing and other project-based, low-income housing programs are well documented, little research is available on the social benefits of mixed-income housing. Its advocates seem to believe that if concentrating poverty in public housing engenders chronic welfare dependency and other social pathologies, then mixing differing income groups will produce more desirable social outcomes. Exposure to the routines of working families, it is suggested, may make the children of poor families more likely to adopt the values, expectations, and behavior necessary for formal employment. However, there is inconclusive research on the extent to which physical proximity between the poor and the nonpoor leads to desired outcomes.

They mention the NIMBYesque phenomenon that I myself demonstrate having lived in such a mixed-income housing development (in Portland):

Middle- and moderate-income households obviously have many more housing options than the poor. When subsidized housing becomes available, it is usually much easier to rent units to low-income households than to eligible households with higher incomes. Unless the regional housing market is extremely tight and there is a severe scarcity of affordable units, moderate- and middle-income households can easily opt not to reside in mixed-income housing. And they will decline to do so unless the development is appealing in some way—perhaps more appealing than conventional middle-income housing.

In looking at Lake Parc Place, a mixed-income development in Chicago, they found that employment rates declined over time for both the middle-income and low-income/subsidized groups. In other words, there was no evidence to "support the notion of positive employment benefits from mixed-income housing." (p 78)

Finally, their conclusion:

Mixed-income housing may be the current direction of U.S. housing policy, but its effectiveness remains open to question. At present there is little understanding of its social benefits, costs, and necessary preconditions. Until the questions raised here about these aspects have been answered, advocacy of mixed-income housing will be based largely on faith and on dissatisfaction with the previous thrust of low-income housing policy.

While Carl Sagan is right in that absence of evidence doesn't imply evidence of absence, I don't see any good evidence to suggest that Section 8 social engineering works. On the other hand, there's plenty of anecdotal evidence such as from yours truly that suggests that mixed-income housing is noisier and rowdier than might be expected otherwise.

 

[Toshi]

And you're setting up strawman scenarios with zero evidence as well. You have no evidence that the program *doesn't* work. However, we do know that home ownership (and the equity involved in it) is one of the greatest factors to wealth-building for Ameicans, and even more so for the poorest / minority Americans.

http://www.huduser.org/publications/txt/hdbrf2.txt

Going back to this text file you posted: where's the proof of causation vs. mere causation with equity, wealth, well-being, etc.? Also hidden below in that same file is evidence that seems to support my own strawman argument... no?

ndeed, newly published research on FHA-insured mortgages indicate that default risk is higher among black and lower income borrowers, although the explanation for this finding is far from clear.

 

[Pesqueeb]

By the way, anyone else find it more than a coincidence that Toshi's Jokerian turn towards libertarianism is occurring right around the time that he's going from "poor college student" to "soon-to-be-rich-doctor"?

 

[TheMontashu]

After 10 years of paying the mortgage then the Section 8 mortgage assistance person has been given equity equivalent to 10 years of the subsidy. They already received that subsidy each month in that their monthly bill was $500 less, but now they have been handed a windfall of $500 x 12 x 10 in equity that they'll recoup when they sell the house. In other words, instead of having as much in equity as they put in through their payments, they're getting that PLUS the subsidy that they already received each month in equity.

The renter would merely have gotten that subsidy once over through the lowered rent each month, with no equity to show for it at the end.

That's because home ownership is an investment, and renting just adds to cost of living. It doesn't cost the tax payers more money. It basically, instead of forcing people to give the money they already receive, allows them to invest in themselves instead. Consider this as well, if we are actually trying to help people, think of how much better off those kids living on section 8 will be if they aren't changing schools every year or 2.

Don't forget too, that in places around here, we have entire unsold towns worth of new homes being section 8ed, because they are too far from everything. Even if you WANTED to make them rent, those houses are still unsold by the developers.

 

[Silver]

This underscores why the Democrats don't want to means test SS benefits.

Once it becomes something that the "poor" benefit from, its amazing how fast the middle class with their mortgage deductions and the rich with their vacation home mortgage deductions become activists, isn't it?

edit: I should make clear that isn't a swipe at Toshi either. Until dante pointed out all the things that benefit my personal financial situation, I was reading this thinking, "How in the fvck is this a good idea?"

 

[Toshi]

I hate the rich, too. Don't worry.

Capital gains should be taxed like normal income, at the appropriate marginal rate based on total income. The mortgage and health insurance tax breaks need to go, as they benefit the people who need them the least.

While I acknowledge that there are many things in the tax code and financial structure of this country that favor rich people, or at least non-destitute people, I still think this mortgage assistance program (and rent control, and forced attempts at mixed-income intermingling in some bizarre attempt to get people to "grow up and be more fiscally responsible") is a fundamentally bad idea.

 

[Toshi]

Sort of related to the original post topic but not the table above: http://ocrdata.ed.gov/ <-- look up school district or school specific information.

 

[Silver]

Sort of related to the original post topic but not the table above: http://ocrdata.ed.gov/ <-- look up school district or school specific information.

And look at that-the two highest responses in that survey are both programs that would benefit those leaning toward the higher end of the income scale.

Also laughing my ass off at the 40% of GI Bill users that think they aren't using government programs. Being that stupid should disqualify you from GI Bill benefits, no?

 

[dante]

Libertarians would put ideology over pragmatism, wouldn't they? Utilitarians would be the ones who would do the opposite.

I see where you're coming from from the government-side cost perspective. The government puts in X dollars each month, and then ultimately sees nothing of the money in the end in either scenario, sure. The rentier does get the "benefit" of having a market rent paid to them in the renting scenario, while the mortgage assistant tenant gets the benefit of having a gift of the difference in equity between their contribution and market mortgage rates in the alternate scenario. I guess I don't count the benefit to the rentier because he/she could rent the apartment out at market rates by their definition if there weren't Section 8 interference.

You apparently haven't seen some of the sh!tholes that Section 8 multi-unit housing is located in. Without the government guarantee of payment, there would be no incentive for anyone to buy these buildings and rent them out for the pittance that they'd be able to get for "market rate". Think of it this way: Section 8 vouchers bridge the gap between what people are able to pay, and what landlords would be willing to rent for. This is based off of some of the slums I saw in Rochester, NY, but if a poor person was only able to pay $100/month in rent, and a theoretical landlord would need to charge $400/month in order to buy a place, fix it, and cover his costs (mortgage) + profit, if there weren't Section 8 housing vouchers, there wouldn't be any incentive for a landlord to do it. At least that's the case of a former coworker who owned a few properties... If it wasn't for the government stepping in to guarantee rent, he never would have bought the house in the first place.

 

[Toshi]

Ok, if pressed to choose between benefiting slumlords and slumees I'd pick the latter. If I had my druthers the whole program would go away.

 

[dante]

Ok, if pressed to choose between benefiting slumlords and slumees I'd pick the latter. If I had my druthers the whole program would go away.

And poor people live where in your utopian society?

 

[Silver]

And poor people live where in your utopian society?

Detroit.

 

[Toshi]

With their parents? In downtown Detroit? (They can all telecommute to work.) In shelters if they're really that hard off?

Edit: Sniped by Silver on the same thought. Well done.

 

[heavy metal]

I still think that if we heavily subsidized education, and invested some time to make sure it was relevant education we would be better off for it. Different means, same end...

Mortgage subsidies for any tax bracket is such a contrived way to boost home ownership. Dollar for dollar I can't see it being more effective than teaching somebody to do something useful.

By the way the section 8 house in question in the op is pretty far from being a slum. Can't speak for you city folk though.

 

[Toshi]

http://www.nytimes.com/2011/07/11/business/economy/as-government-aid-fades-so-may-the-recovery.html

Bottom right table in particular. Shows the Teabagger stereotypes to be, well, wrong.