Rant: The War on Renters

Aspiring presidents vs. aspiring homeowners

Paul Thornton from the July 2008 issue

One of the biggest obstacles to my dream of owning a home any time in the near future would be the election of Hillary Clinton.

Or Barack Obama.

Or John McCain.

All three senators hope to move into new digs come January, but they want the rest of us to sit tight and stay put. While you won’t hear the Oval Office wannabes coming out explicitly in favor of the astronomically high home prices that stand between renters and ownership, each candidate seeks to prevent the housing bubble’s post-boom correction from flooding the market with millions of relatively cheap properties.

In their concerted attempt to “keep Americans in their homes,” Clinton, Obama, and McCain have called for the federal government to spend billions of dollars to curtail foreclosures and shield Americans from the consequences of their own risky investment decisions. Makes you think the candidates are on your side.

Not if you’re a renter. Foreclosures boost the supply of housing at a faster than expected clip. With supply for potential buyers (i.e., renters) increasing, home prices stand to fall (albeit modestly) to less insane levels, particularly in overheated areas such as Southern California, the region I call home. That increasing supply of housing and those lower prices could be why a Zogby poll released in April showed that, despite the economy’s tailspin, most Americans think now is a good time to buy a home.

And here, dear renters, is where our electoral triumvirate comes in to foil us.

Clinton’s proposal is the most far-reaching. The junior senator from New York would stop foreclosures by fiat—a proposal that wins the “I Didn’t Know a President Could Do That” award—and spend around $30 billion on restructuring troubled mortgages. Obama stops short of Clinton’s 90-day “moratorium,” but the Illinois pol also wants to inject $30 billion into the mortgage market.

Until the middle of April, McCain was alone among the major presidential aspirants in calling bullshit on this idea. The Arizona senator’s line on the mortgage meltdown—that he would refuse to “play election-year politics with the housing crisis,” as quoted in the Los Angeles Times—showed such deference to the free market, it was too good to last. So it didn’t. By April the straight talker was peddling his own multibillion-dollar borrower assistance package—which, he insisted, would help only “deserving” borrowers, of course.

Lost in the rush to help troubled borrowers is an understanding of what this crisis isn’t: a situation in which “Americans are losing their homes.” More accurately, borrowers who can no longer afford their mortgage payments are becoming—gasp!—renters. “Americans are living in other people’s homes” doesn’t quite tug at the heartstrings the same way, which is part of the reason you’re not hearing about it.

Also lost in the flood of campaign promises is the housing bubble’s true crisis, which barely anyone in Washington cares to mention. In 2001 renters who wanted to buy a house in Los Angeles County could expect to spend about $200,000, roughly the area’s median home price at the time. By the peak of the housing bubble in 2007, the median price had shot up to about $550,000, which the California Association of Realtors estimated would easily take more than $100,000 in annual pre-tax income for a family to afford.

Wrap your civic-minded intellect around that one: more than $100,000 a year to afford a modest home. Candidates, there’s your crisis—and thankfully, the market is already taking care of it, through the correction of foreclosures and the resulting increase in the supply of available housing. All a President Clinton, Obama, or McCain would have to do is watch from the Oval Office as that great American dream of homeownership becomes more and more accessible to the likes of me. Unless, that is, the next president is against affordable housing.

Paul Thornton is an assistant articles editor at the Los Angeles Times editorial page.

Comments

Fluffy|6.4.08 @ 12:31PM|#

Mocking your advertisers, eh?

I guess Reason is truly a nonprofit.

[Drink.]

|6.4.08 @ 12:36PM|#

I love it when liberal lunacy (whether spewing from Democrat or Republican) is exposed for what it is.

Old Bull Lee|6.4.08 @ 12:46PM|#

I just started looking for a house when the crisis was on the way. Once it started, I made sure to get my buy over with before the higher prices came, along with the extra paperwork and restrictions.

No doubt the so-called protections from predatory lenders will be in the form of pages and pages of disclosures borrowers will sign without reading, just like they do now.

T|6.4.08 @ 12:50PM|#

Can't I just click on the angry renter guy and get the same argument?

|6.4.08 @ 12:50PM|#

This is not a liberal conservative issue as much as it is a generational issue. The baby boomers all own homes and have profited greatly as now nearly two generations have been priced out of home ownership in many areas. Whereas, the baby boom got a nice home and a yard, the succeeding generations get a two bedroom condo at the bargain price of 500K or if they want a two plus hour commute a home in the suburbs. The boomers own all of the homes in the inner suburbs and those go for big dollars. Everyone used to be for affordable housing. That was until sometime in the 1990s when the baby boom discovered equity. Now affordable housing is called a housing bust. The over grown adolescents that are the baby boom now run to big daddy and momma government and demand a bail out and easy credit to "keep people in their homes" and "keep the American dream alive", which is just code for "let us keep our equity". Meanwhile, everyone who is too young or too poor to have benefited from the housing boom gets stuck paying taxes so the benighted "worst generation" can afford to ease into a long, prosperous and unproductive retirement. McCain is one of them so it is not surprising he is covering their ass. Obama is so out of touch that he probably thinks that he earned that big ass house Rezko gave him.

|6.4.08 @ 1:18PM|#

liberalism and populism are not the same thing.
this is populism at it's worst.
Try getting elected by telling the baby boomers to suck it up and live with their own mistakes. It won't work.

ed|6.4.08 @ 1:28PM|#

Lots of wholesale generalizing above.
Blame the boomers for all your problems.
Whaaaa!

|6.4.08 @ 1:34PM|#

"Lots of wholesale generalizing above.
Blame the boomers for all your problems"

I don't have any problems except with the government who feels the need to prop up home prices to an artificially high level for the benefit of influential upper middle class voters who tend to be baby boomers. I only have a problem when people start whining for government bailouts because their home investment didn't turn out like it does on Flip This House. The people who bought houses to actually live in and that they can afford, aren't affected by the housing bust beyond equity. I am sorry Ed but you can't have my tax dollars to prop up your home value. That is your problem not mine.

|6.4.08 @ 1:53PM|#

Plenty of my Gen-Xer peers got caught up in this financial short-sightedness, too. You can't nail this one solely (or even primarily) on Boomers. Idiots who think they can keep making the quick buck for no work are present in any generation.

And buck up, Mr. Thornton. I'm in your boat as a fellow "angry renter," but look at it this way. None of these three presidential idiot has the power to repeal the laws of supply and demand. And if they tried to rig the financial system to do what they (or at least Hillary) wanted to do, housing prices would still coming crashing down...because we'd all be out on the street corner trying to sell apples.

That's the most distressing thing about their statements on this issue--three supposedly intelligent people with such professed ignorance about finance. I'm sure it's just "bread and circuses" talk, though--no of it actually will happen.

|6.4.08 @ 1:54PM|#

Take a lesson from me, kids. Preview your comments *before* you post.

Bingo|6.4.08 @ 2:14PM|#

Baby boomers suck, Gen-Xers suck too. Millenials suck but at least we're young enough to still point fingers ;)

|6.4.08 @ 2:40PM|#

Obama is so out of touch that he probably thinks that he earned that big ass house Rezko gave him.

Well, maybe he did. Who really knows what he did for Rezko, after all?

Baby boomers suck, Gen-Xers suck too.

I agree. Of course, I fall into the gap between the two.

Billy Joel|6.4.08 @ 2:42PM|#

We didn't start the fire
It was always burning
Since the world's been turning
We didn't start the fire
No we didn't light it
But we tried to fight it

Old Bull Lee|6.4.08 @ 2:51PM|#

I thank you in advance for that song being stuck in my head for the next two days.

kinnath|6.4.08 @ 3:00PM|#

Let's see what we've learned so far:

If you spend 80 years or so preventing forest fires from clearing downed trees and underbrush, the first fire that gets out of hand produces a catastrophe.

If you spend 100 years or so building levees to keep the river from overflowing its banks, the first time the levees are breached, a catashrophe results.

If let stupid people bid the price of commodities to artificially high prices by using the power of the government guarentee no one gets hurt, then . . . . sorry, we haven't learned that one yet.

|6.4.08 @ 3:01PM|#

Assigning people to generations is stupid and arbitrary anyway. Depending on the wag who's doing the assignment, I've been a Gen-Xer, Gen-Yer, or Millenial at various times in my life, since the boundary between Gen-X and whatever the currently fashionable name for the generation after them is constantly moving between 1980 and 1985.

T|6.4.08 @ 3:06PM|#

I've been a Gen-Xer, Gen-Yer, or Millenial at various times in my life, since the boundary between Gen-X and whatever the currently fashionable name for the generation after them is constantly moving between 1980 and 1985.

Damn indecisive youth of today. Pick a generation and stick with it, even in the face of those who would classify you as something else. I'll just call y'all young punks "damn whippersnappers" and leave it at that.

|6.4.08 @ 3:31PM|#

T,

Well the thing is, I have much more in common with the people just across the boundary than I do with people born in 1965 or 1999, who purportedly are in my generation.

T|6.4.08 @ 4:08PM|#

Well the thing is, I have much more in common with the people just across the boundary than I do with people born in 1965 or 1999, who purportedly are in my generation.

Kids today. You're supposed to march in lockstep with a significant portion of your generational cohort. It's how the media comes up with the retarded trend stories they whip out during slow news periods, and allows third-rate pop sociologists endless bloviation material. Find something in common with your so-called peers or watch as the entire commentariat starts to crumble. You wouldn't want that on your conscience, would you?

|6.4.08 @ 4:09PM|#

Populism is simply another word for liberalism in my book. It's government interference and free handouts to a select group of people at the expense of another group of people.

Old Bull Lee|6.4.08 @ 4:12PM|#

NAL - I would have agreed you several years ago, but neoconservatism seems to me a kind of conservative populism, combining the handouts with the government-sponsored moral crusading.

robc|6.4.08 @ 4:23PM|#

Old Bull Lee,

Neoconservatism is Trotskyism, so its a form of liberalism too.

|6.4.08 @ 4:30PM|#

I, and others, have pointed out on these very pages the upside of the housing bubble bursting and the negative effects that will be caused by government intervention.

Oh goody! The bubble finally burst! George, we can finally afford to get that 3 BR ranch we've dreamed about.

Not so fast Ellen, banking, construction and deadbeat borrower interests have the ears of the presidential candidates' and congress.

I, for one, welcome our bankin|6.4.08 @ 5:43PM|#

The 3rd amendment says they can't quarter troops in our houses....but it said nothing about bankers.

ANGRY RENTER|6.5.08 @ 2:33AM|#

THIS THREAD WAS FUCKING TEDIOUS!

|6.5.08 @ 7:43AM|#

The outrageous part is that these people can still easily own homes- by moving from $700,000 homes to more modest ones. Renters' next best option, if they're run out of rent money, is the public housing wait list. Yet the homeowners get the bailout.

|6.5.08 @ 5:00PM|#

Good article; need about a million more of them and maybe a PAC and/or a few lobbyists, and maybe McCain will get back on the right side of the issue.

Then again, as I've said before, I don't have a problem helping deserving borrowers, as long as the criteria for "deserving" is stringent enough. Own only one house which you live in, bought for less than 3x your annual real (not lied about) gross income, put 20+% down (your real money, not another loan), and are now struggling to make the payments? By all means, you may have some assistance in restructuring your payments to enable you to pay back the full amount with interest over a longer time period.

If you don't meet the criteria above, you're not deserving of anything but foreclosure. Want handouts? Move to China.

|6.12.08 @ 1:01PM|#

Other lessons apparently not learned yet:

1. The Laws of Economics don't give a rat's ass what generation you belong to.

2. The Fed is NOT part of the government. They are a group of private bankers.

3. Credit cards are NOT money.