Addressing the Housing Market Crisis
THE HOUSING MARKET collapse that is ravaging working-class families will go down as one of the greatest economic failures in modern American history. It is estimated by the nonpartisan Pew Center for the States that between 7,000 and 8,000 families are filing for foreclosure on their homes every day. But foreclosures are only the beginning of a damning economic outlook that ripples deep into the economy.
When the housing market dips, the national economy dives. Slow home sales cause homebuilders to balk. When residential construction projects slow down, construction jobs disappear.
Since 2006, for example, the American construction industry has shed 457,000 jobs. The construction of fewer homes means fewer new kitchens and basements for manufacturers to place their appliances and other products. The loss of manufacturing jobs follows. Job losses combine with slumping home sales to depress consumer confidence, causing a slowdown in spending that ultimately shrinks the economy.
It is no wonder that last month consumer confidence fell to its slowest rate of growth since the 2001 recession.
State and local governments have also shared in the hardship. New Jersey's economy, which is already drowning in debt, is enduring tremendous losses in revenue with each foreclosed property.
At a more local level, the Federal Reserve Bank of Chicago recently released a study that found a direct link connecting increased crime to high-foreclosure areas. Many foreclosed vacant properties that once housed families have been overtaken by vagrants, drug abusers and thugs. Municipal governments have had no choice but to increase police, firefighter and emergency medical services in the neighborhoods where vacant homes are blighting communities.
Despite these dire conditions, as recently as June 2007, Alphonso Jackson, who was then serving as the top official in the Department Housing and Urban Development irresponsibly predicted that "this spring we will see the market again begin to soar."
Market remains listless
Well, spring has arrived, but the soaring market that Jackson promised has not. Unfortunately, Jackson's poor prognostication symbolizes years of miscalculations made by the Bush administration. It recklessly sought any means of increasing homeownership without regard to the incredible risks being taken on by homeowners and America's leading financial lenders.
The House of Representatives struck a new tone in Washington last week by approving a comprehensive package of programs designed to begin seriously addressing the trouble in America's housing market. New landmark measures were approved that would help families facing foreclosure keep their homes, assist other families trying to avoid foreclosure, increase home sales and provide for the recovery of communities that have been stained by empty houses caught in the foreclosure process.
For the millions of families at risk of foreclosure, the Neighborhood Stabilization Act would expand a Federal Housing Administration program so that borrowers in danger of losing their homes could refinance into affordable government-insured mortgages. In addition, it would reach into our communities with a new $15 billion loan program for states to acquire and rehabilitate vacant homes in the neighborhoods most deeply affected by foreclosures.
Potential home buyers who are sitting on the sidelines in fear of being sucked into an unsteady housing market will also have an opportunity to benefit.
I am particularly pleased with the inclusion of a new refundable $7,500 tax credit for first-time homebuyers. The credit will work like an interest-free, 15-year loan to motivate potential buyers and spur home purchases.
It is expected by the National Association of Realtors to generate about one million sales to first-time home buyers and stimulate nearly $130 billion in new economic activity.
Aid for veterans
Beyond these main provisions are targeted features that reach many of those who have been hit hardest by the economic downturn. Under the measure, veterans will be eligible for increased loan limits, middle-income earners will receive larger standard deductions on property taxes, seniors will have expanded access to reverse mortgages and low-income families will enjoy new housing opportunities.
Since the primary investment of most Americans is in their home, ending the foreclosure crisis is tantamount to America's economic recovery. Federal Reserve Chairman Ben Bernanke said it best when he endorsed the type of congressional action we took by stating, "Doing what you can to avoid preventable foreclosures is not just in the interest of lenders and borrowers. It's in everybody's interest."
I hope the president is listening carefully. Bush must take responsibility for the struggling economy, lay down his veto pen and work with Congress to enact real reforms.
Rep. Bill Pascrell Jr., D-Paterson, represents the 8th Congressional District.