March 7, 2016
Monday’s Adjudication Roundup
- The New York Court of Appeals reinstated suit against Donald Trump for defrauding customers of Trump University finding that the state did not take too long to bring suit.
- The Battery Park City Authority pled to the Second Circuit to not revive claims against licensed asbestos handlers responsible for cleanup work near Ground Zero, arguing that the claims are time barred.
- New York federal judge did not dismiss class action brought by a Belgian investment fund against Bank of New York Mellon for failing as trustee in $1.2 billion in residential mortgage-backed securities.
March 7, 2016 | Permalink | No Comments
March 4, 2016
Why Doctors Buy Bigger Homes Than Lawyers
Realtor.com quoted me in Why Doctors Buy Bigger Homes Than Lawyers (and What It Means to You). It reads, in part,
Take that, Alan Dershowitz: Although both doctors and lawyers can typically afford better-than-decent-sized homes, a new working paper from the National Bureau of Economic Research found that in states with a certain legal provision, physicians’ houses are bigger. Often much bigger.
So what’s the deal? It seems to come down to two factors: First, the skyrocketing costs of financially devastating medical malpractice suits; second, a once-obscure provision called “homestead exception” which can protect the assets of doctors in some states from being wiped out by those suits when they invest their cash in their homes.
“We have been interested in understanding how does that pervasive aspect of a physician’s career influence the decisions they make … whether it means they invest more in houses to protect themselves against liability,” Anupam Jena, an associate professor of health care policy at Harvard Medical School and a co-author of the paper, tells the Washington Post.
Here’s how homestead exception works: If creditors are hounding you for unsecured debts—as opposed to secure ones, like your mortgage—they can’t take your home as collateral, as long as you declare bankruptcy. In fact, they can’t even place a lien on the property to collect when you sell. These exemptions vary by state: Some, such as New Jersey, have no such safeguard; in California, individuals’ homes are protected up to $75,000 (which generally won’t get you past the front porch).
Yet a handful of states—Arkansas, Florida, Iowa, Kansas, Oklahoma, and Texas, as well as the District of Columbia—have unlimited homestead exemption. Doctors in those states bought homes that were 13% more expensive than the homes of doctors elsewhere. The homes of medical doctors (and dentists, who are essentially in the same medical malpractice boat) were markedly more expensive than the homes of professionals making similar salaries—even lawyers, who know a thing or two about malpractice suits. The authors drew from U.S. Census Bureau data on 3 million households about profession, household income, and home value.
So why should you care? Because homestead exemptions apply to you, too—even if the closest you come to the medical profession is annual checkups and late night reruns of “ER.”
* * *
But don’t get the wrong idea: The homestead exemption isn’t a bulletproof way to ward off foreclosure. Remember, it applies only to unsecured debt such as credit cards—not secured debt like your mortgage.
“If you borrow money for a home, the homestead exemption typically does not apply,” says David Reiss, research director at the Center for Urban Business Entrepreneurship at Brooklyn Law School. In other words, if you don’t pay your mortgage and default on your loan, your lender can foreclose and seize your home.
And we’re not saying you should run from your creditors, because eventually they’ll catch up to you. But if you are in financial straits and scared sick of losing your house, check your local homestead exemption laws first—you might be safer than you think.
March 4, 2016 | Permalink | No Comments
Friday’s Government Reports Roundup
- The S. Department of Commerce found that in January 2016, the sale of single-family homes decreased by 9.2 percent from a 10-month high. However, most believe that the housing market remains stable.
March 4, 2016 | Permalink | No Comments
March 3, 2016
The State of Moderate-Income Housing
The Center for Housing Policy’s most recent issue of Housing Landscape gives its 2016 Annual Look at The Housing Affordability Challenges of America’s Working Households (my discussion of the Center’s 2015 report is here). it opens,
Millions of working households face big challenges in finding affordable housing, particularly in areas with strong economic growth. In 2014, more than 9.6 million low- and moderate-income working households were severely housing cost burdened. Severely cost burdened households are those that spend more than half of their income on housing costs. Overall, 15 percent of all U.S. households (17.6 million households) had a severe housing cost burden in 2014, with renters facing the biggest affordability challenges. In 2014, 24.2 percent of all renter households were severely burdened compared to 9.7 percent of all owner households. These percentages were even higher for working households, of whom 25.1 percent of renters and 16.2 percent of owners had a severe housing cost burden.
Housing costs continue to rise, particularly for working renters, who saw their median housing costs grow by more than six percent from 2011 to 2014. And for the first time since 2011, housing costs increased for working owner households as well, marking the end of a three-year downward trajectory. Additionally, more working households were renting their homes as opposed to buying—52.6 percent of working households were renters in 2014, up nearly two percentage points from 2011, when the share was 50.8 percent.
With more working households renting their homes, demand for rental housing continues to grow, pushing rents even higher in already high-cost rental markets. And although incomes are growing for many working households, this growth is not always sufficient to offset rising rents, meaning that working renter households are increasingly having to spend a higher proportion of their incomes on housing costs each month. (1)
The report outlines a series of good policy proposals (many of which are politically unfeasible in the current environment) to address this situation. But my main takeaway is that the wages of working-class households “are not sufficient for meeting the cost of adequate housing.” (5) Their housing problem is an income problem.
March 3, 2016 | Permalink | No Comments
Thursday’s Advocacy & Think Tank Roundup
- The Harvard Joint Center for Housing Studies released 2016 Update on Homeownership Wealth Trajectories through the Housing Boom and Bust, which it had originally released in 2013. “It examines the goals of homeownership and lessons from the housing crisis.”
- The Association for Neighborhood & Housing Development released “Who is Lending and Who is Getting Loans?” report, finding that lending data does not match NY’s demographic data. For example, 22 percent of New Yorkers are black and 29 percent are Hispanic, but 8.7 and 8.4 percent of mortgages went to those groups in 2014, respectively.
- Enterprise Community Partners and the Center for Outcomes Research and Education released “Health in Housing: Exploring the Intersection Between Housing and Health Care”, which shows that having affordable housing paired with health care services reduces emergency room visits, lowers Medicaid costs and increases access to primary care.
March 3, 2016 | Permalink | No Comments
March 2, 2016
Hillary’s Housing Agenda
Hillary Clinton’s housing policy platform is included in her Breaking Every Barrier Agenda. I quote the key passages below and provide my two cents on them. Overall, the proposals strike me as reasonable, progressive ones.
- Support families as they save for sustainable homeownership. Clinton will support initiatives to match up to $10,000 in savings for a down payment for those who earn less than area median income.
I like that this down payment assistance proposal because it requires that homebuyers have skin in the game (and $10,000 is a lot of skin for many first-time homebuyers). Down payment assistance programs that do not require skin in the game can turn out to be unmitigated fiascoes for homebuyers and government programs alike (for instance, see my discussion of the American Dream Down Payment Act of 2003 here).
- Easing local barriers. Clinton will encourage communities to implement land use strategies that make it easier to build affordable rental housing near good jobs by increasing funding available to those that do through both her infrastructure bank and competitive grant programs, like the Department of Transportation’s TIGER initiative.
- Build more affordable rental housing near good jobs and good schools. Clinton will increase support for affordable rental housing in the areas that need it most and encourage communities to implement land use strategies that make it easier to build affordable rental housing near good jobs.
I like these proposals because they acknowledges the outsized effect that local land use policies can have on housing construction. The federal government can use its considerable set of incentives to push local governments to allow for housing where it is needed.
- Overcome pockets of distress. Clinton will provide the resources necessary to overcome blight, giving communities a chance to rebuild and renew with new businesses, new homeowners, and new hope. And she will connect housing support in high-poverty neighborhoods to economic opportunity.
I am not sure if this proposal is specific enough to respond to, but I am concerned that it does not account for the fact that some communities are blighted because the local economy has failed. Decisions to address blight must be made without sentimentality or we will just be throwing good money after bad.
- Connecting housing assistance to community development. Clinton will build on the Choice Neighborhoods and Neighborhood Revitalization Initiative programs, both of which provide communities with support for housing as part of a multifaceted strategy to address the complex challenges of poverty. She will make resources available for economic development, health care, environmental improvement, and more.
Housing policy is clearly just one aspect of social policy, so it makes sense for Clinton to treat it as one thread in a broader fabric. This proposal is also a little short on details, so it is hard to see what she is intending to do, other than continuing current Obama policies.
- Giving recipients of assistance more choice. Clinton will work to expand the choices that recipients of housing vouchers have in deciding where to live. Today those with vouchers must often choose among the very pockets of poverty the vouchers are intended to allow them to leave. Clinton believe we should expand their range of options to include neighborhoods with more jobs and better schools.
I am a big fan of giving low- and moderate-income households more choice when it comes to their housing options, so I think it is great that Clinton wants to expand the voucher program.
- Support counseling programs for the significant financial commitment of homeownership. Clinton will increase funding and broaden credit terms for housing counseling programs shown to help borrowers become sustainable homeowners.
I am not sure that the evidence is there that homeownership counseling works, so I would caution the Clinton campaign to look at the research on this topic.
- Enforce fair housing and fair lending laws. Clinton will make sure that the Department of Justice enforces fair lending and fair housing laws and will work closely with regulators to make sure that Fannie Mae, Freddie Mac and the nation’s lenders meet their responsibility to provide lending in communities that have been historically underserved.
No question, fair housing and fair lending enforcement should be a priority for the DoJ. I would like more details about Clinton’s expectations for Fannie and Freddie though. It is important that any policies implemented through Fannie and Freddie are designed to encourage sustainable homeownership, not just homeownership that can end up being a part of a cycle of purchase and default.
- Reducing the cost. Clinton will defend the current supply of Low Income Housing Tax Credits and provide additional credits in communities where the demand for these credits far exceeds the supply. The additional credits will be allocated through a competitive process to those cities and states that are in the best position to use them effectively.
The Low Income Housing Tax Credit has bipartisan support as an engine of housing construction for low-income households, so it seems reasonable that Clinton would want to expand it in the current political environment.
* * *
I will review the other candidate’s housing platforms in the coming weeks.
March 2, 2016 | Permalink | No Comments
Wednesday’s Academic Roundup
- Buying Happiness: Property, Acquisition, & Subjective Well-Being, David Fagundes.
- Growth and Volatility of Micro Statistical Areas in the U.S., Bienvenido S. Cortes, Michael Davidsson & Michael McKinnis, The International Journal of Business and Finance Research, v. 9(4), pg. 89–102, 2015.
- What Drives Racial and Ethnic Differences in High Cost Mortgages? The Role of High Risk Lenders, Patrick J. Bayer, Fernando V. Ferreira & Stephen L. Ross, Economic Research Initiatives at Duke (ERID) Working Paper No. 206.
- A Study on the Consistency between Housing and Urban Planning Policies, N. Kosavera et al., High School of Economics Research Paper No. WP BRP 03/URB/2016.
March 2, 2016 | Permalink | No Comments
