Tag Archive for housing market

Could ‘Squatters’ Really Hold the Economy Down?

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I love squatters. Thought to be fading into history as a self-conscious class, these intrepid refuseniks have not made much news for the past decade or thereabout. So when a friend sent me a link to a Time/Moneyland story about a new breed of squatters, I couldn’t wait to see what they were up to.

Despite being ridiculously titled “Is America Becoming a Nation of Squatters?” (hyperbole much?), the piece by Tara-Nicholle Nelson starts off good, introducing the phenomenon of squatting and the seemingly anomalous legal concept known as “adverse possession”, a doctrine under which in some states squatters can acquire legal title to real property simply by residing on it without permission for a certain period of years (usually ten). This is interesting stuff, and over the generations, lots of housing activists have made the case that squatting is a valuable social phenomenon. (Not a hard case to make, given that people need housing and so much of it is vacant.)

Nelson then introduces a “new class of squatters” — homeowners who default on their mortgages but stay in their houses. This is not exactly a social movement, and it’s kind of a no-brainer (if you’re broke but not yet being physically forced out of the structure you call “home”, where all your stuff is… why would you leave?), but it’s an interesting socioeconomic phenomenon, if you will.

What really threw me for a loop was the writer’s conclusion. I honestly did not see it coming. Nelson — notably a lawyer and a real-estate broker — suggests that this “squatting” phenomenon may be adversely affecting the housing market because it could taint Americans’ attitudes toward what she calls “the inherent rightness of paying for the right to live in a place”.

WOW! What a phrase, and what an overarching idea.

My objections are manifold. First, people cheerleading for housing values to rise again need to sit in the corner wearing a “real-estate agent” dunce cap. Second, people who suggest rights can be bought should sit in the corner with a “lawyer” dunce cap on. Third, get real — there is (unfortunately) no real “threat” of an attitude shift toward access to real property. Fourth, even if there were such a prospect, its impact would probably be immeasurably small, given that it would come up against the reality of how property is treated in our society. And it would only serve to anchor housing prices in ways that aren’t all bad.

Let’s take the philosophical point first and dispense with this notion that one can purchase rights. There is sadly no right to housing in this country. One can purchase the legal prerogative to occupy a dwelling either by obtaining deed or lease. Otherwise, with few exceptions, one has no expectation of any legal or even philosophical right to shelter. Overturning this would be a good thing; maybe not for the real estate market, depending on how it was implemented, but definitely a win for the human condition.

On to the threat of an attitudinal shift anchoring the housing market, which Nelson considers unhealthy. She writes:

I suspect this harm will manifest most evidently in consumers’ mindsets, as widespread squatting threatens to upend basic, important social beliefs about the inherent rightness of paying for the right to live in a place. If consumers perceive that a primary advantage of being a homeowner is that you can stick around for years without making a payment, strategic default and foreclosure rates might never decline back to their pre-recession rarity.

[…] The real danger is to our social norms and financial belief systems which, in turn, threaten a lasting recovery and future prosperity.

Economic recovery and (material) prosperity are indeed tied to the housing market. When the housing bubble predictably burst in 2008, the consumer credit system took a massive hit. Our economy is 70% consumer-driven. It depends on growth, and growth depends on credit. So while the stagnant housing market is probably (for now) holding back severe inflation as the Fed pushes a credit- and government-spending-based recovery dependent on an increased currency/reserves supply, that same moribund market is holding back the real flow of consumer credit. This everybody acknowledges.

Where onlookers differ is in the real social quality of this anchoring effect. First, the more affordable housing is, the better off society is, generally speaking. That’s not an economistic view — it’s just another of my pesky humanistic views. If our economic system gave a damn about sheltering Americans, we would be happy to see a gentler rate of increase in housing costs.

But besides this, holding back growth in a society that has too much housing (however misallocated) and too much consumption in terms of resource use and pollution/greenhouse-gas output, is not in and of itself a bad thing. An economic system that causes suffering when aggregate production contracts or even slows will tempt all of us to cheer for growth. But growth has severe consequences; it is not inherently good. The cost of ameliorating present economic misery for working and unemployed Americans may build in too many problems associated with overconsumption. These will hurt down the road. Severely.

The housing market needs never to return to unsustainable growth. It is amazing that this has to be said in a post-burst world, but apparently some people haven’t figured it out, including self-interested homeowners and real-estate brokers. As long as credit is made readily available and energy costs are artificially low (as they do not include the real environmental and social costs of hydrocarbon-based production and consumption), there will be a tendency for real estate prices to bubble, not just threatening sudden harm to the economy again, but also excluding poor people from decent housing.

This is why the notion that attitudes of entitlement to housing will hurt the market is absurd. First, this attitude isn’t going to come about by some spontaneous collective realization. It would take an organized social movement to reevaluate the concept of housing as a right (that can’t be purchased).

Besides, the market has too many systemic upward pressures; nuances that tamp it down have an upside, even if it really sucks for people who made poor real-estate investment choices in the last decade. We really don’t want to reinflate the bubble just to give those bad investments new life and prop up the credit-based overconsumption frenzy that put us in this sad state to begin with.

Now back to philosophy for a moment. This is just my own belief, to counter Nelson’s appreciation for the idea that people should pay market prices for the “right” to occupy a home. Shelter is a human right, and anyone who contributes to society should have comparable access to stable, secure, desirable housing. Shattering arcane notions that a suitable home is a privilege one must purchase would be good not just in terms of anchoring the housing market, but to transform this society into a halfway decent alternative.

Carol Simpson cartoon -- real estate agent shows family a homeless shelter.

Cartoon by Carol Simpson.

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Linkage: Sachs on Happinomics, Baker Kicks Double-dippers, Yves Kicks Ezra, More

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I read so damn many interesting commentaries and articles every day, I couldn’t hope to blog even a fraction of the most provocative here. So I’m going to start posting links to good stuff with (very uncharacteristically) brief comments here, if I remark at all. Right? Sure. I’ll try it.

Happinomics

First up, a great piece I by one of the few progressive economists who really convincingly cares about people: Jeffrey Sachs. We disagree on solutions and some other big areas, but I can’t help liking this guy, and not just because he’s buds with my little brother. His latest commentary is on “The Economics of Happiness“, and it made me smile. A quick excerpt:

[T]o promote happiness, we must identify the many factors other than GNP that can raise or lower society’s well-being. Most countries invest to measure GNP, but spend little to identify the sources of poor health (like fast foods and excessive TV watching), declining social trust, and environmental degradation. Once we understand these factors, we can act.

Baker Kicks Double-Dippers; Rasmus Kicks Back

Notoriously prescient economist Dean Baker, whose prediction of a housing bubble and its effects I started paying close attention to way back in 2003, gained lots of attention yesterday with remarks in his own blog about the prospect of a double-dip recession, or lack thereof:

Of course consumption is not really growing that fast, more likely it is increasing at near a 2.0 percent annual rate, but maybe this number will shut up the arithmetic challenged economists who keep talking about a double-dip recession.

The implication is that tens of millions of people will remain unemployed or underemployed because of the Wall Street sleazes and the incompetent economists who could not see an $8 trillion housing bubble and still don’t know a damn thing about the economy. It’s a crime that they still have their jobs.

These fighting words — which really just pile on to a more detailed argument from last week — got noticed by some economists who foresee a second dip, including one of my other favorites, Jack Rasmus, who took exception:

Baker conveniently forgets that some of the most prescient economists who predicted the recession and financial collapse back in 2007 are also now predicting that a double dip in the coming months is increasingly likely. In other words, not everyone forecasting double dip today were the polyannas predicting no recession back in 2007.

Dean isn’t without friends, though. Karl Smith over at Modeled Behavior backs him up, tentatively.

Yves Smith vs. Ezra Klein on Refi Ridiculousness

One of the Obama administration’s hairbrained ideas for boosting the slouched housing market and economy is to offer a new federal refinancing program that would of course work with private lenders to help homeowners get a new life on their equity or maybe get out from underwater.

This is dumb. Thanks to Naked Capitalism’s Yves Smith (heavily citing Adam Levitin) for speaking direct, simple truth to this silliness. Levitin shuts the idea down effectively, but Smith locks the door by pointing out that there are real opportunity costs to pursuing mediocre-at-best policies, a lesson the administration seems determined not to learn. Whereas administration pumper Ezra Klein had said “it’s worth a try”. No, Ezra, it’s really just not.

‘Who Will Help the Poor?’

This is the title question of a commentary by Dominique Moisi, who worries (as do I) that in a belt-tightening frenzy ravaging the West, the world’s most vulnerable populations are without a helping hand. I wish I had time to critique this one, as I don’t totally agree with the premises, but I am so hungry for anyone actually caring about this matter, I wanted to draw readers’ attention to it even without remark.

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