Homeowners of Texas (HOT) is a nonprofit consumer advocacy working to enact legislative reforms that ensure Texas contractors, insurance companies, lenders, service providers, and taxing authorities operate on a level playing field with Texas homeowners.
This is some of the best analysis I've seen, but it still doesn't consider the role of builder lobbyists and the impact of stimulus programs like mortgage interest tax deductions, property tax deductions, home buyer tax credits, federal mortgage guarantees, builder loan guarantees, artificially low interest rates, and down payment assistance. We already have an oversupply of housing and a shadow inventory not yet counted and yet we still subsidize homeownership and homebuilding? Why? Artificial stimulus, such as those listed above, causes market failures in a free market society when they favor special interests over competitors and public interests. Who are the real beneficiaries of these programs? If buyer stimulus artificially inflates home values, how does the consumer benefit? Aren’t these programs really to benefit big builders, realtors and lenders? How much money did the bill’s sponsors get from them? What would happen if the stimulus stopped - all of it? Wayne Caswell Communications Director Homeowners of Texas www.homeownersoftexas.org
We have an oversupply of housing and a shadow inventory not yet counted and we still subsidize homeownership. Washington has been adding even more housing stimulus and deepening the federal commitment to the old housing strategy, making it harder to move to a new one. Artificial stimulus, such as those below, cause market failures in a free market society when they are written to favor special interests over their competitors. Who are the real beneficiaries? Is it the consumer or the builders, bankers, and realtors? 1. Mortgage Interest Tax Deductions. 2. Artificially Low Interest Rates and Adjustable Rate Mortgages. 3. Tax Credits promoted first time home buyers as free money and extensions to repeat buyers. Like a drug, it got the housing industry addicted. Extending the credit just worsened the problem. 4. Low Down Payments. The USDA has a zero-down home loan program, and Texas has begun its own down payment assistance program. These were homebuilder initiated proposals that are primarily aimed at generating wealth for builders, realtors, mortgage lenders, and Wall Street. Government officials knew, or should have known, that zero-down loans would put borrowers at risk and taxpayers on the hook. That's because buyers with little or no skin in the game would be more likely to default on loans and go into foreclosure when inflated home values fall below what is owed, or when property taxes or adjustable interest rates rise, or when employment or medical problems arise. 5. Down Payment Assistance. It was a way to put more renters into homes and line the pockets of homebuilders. FHA rules made the down payment issue worse by allowing volume builders to give buyers the required 3% down payment through third-party non-profit corporations such as Nehemiah Corporation in California. Builders gave money to Nehemiah, who then gifted the funds to the buyer for a small fee paid by the builder. 6. Federal Mortgage Insurance. Banks used to want 20% down now will gladly lend with just 3% down or less when the loans are federally insured. FHA, VA, Freddie Mac and Fannie Mae now guarantee some 80% of all mortgages and have insured 96.5% of new mortgages so far this year, putting even more risk burden on taxpayers. 7. Net Operating Loss Carryback. The extension of this tax provision allowed big builders to re-file their tax forms and get over $2.6 billion in rebates from taxpayers, a windfall they've been using to buy up land at discounted prices and to disadvantage smaller builders.
