Another Government Real Estate Failure

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Basic principle: whenever the government tries to fight the market the market wins. Always. Never fails. When will they learn?

Just take a look at what must be the 375th government housing program: The Neighborhood Stabilization Program. The basic concept here was to sprinkle $3.9 B around the country for states and localities to buy and fix abandoned properties or to loan money to people who would buy and fix these properties. Sound like a good idea? Let’s look at it.

Neighborhood Stabilization Program HandoutsFirst, whenever the federal government starts handing money out they end up shifting money from one part of the country to another. In this case Chicago ends up with a disproportionate amount of money. As the chart shows, Chicago ends up with more than 1/3 of what California gets even though California has more than 12 times the population of Chicago. That’s great for us in Chicago – but only until some other ill advised government giveaway gives a disproportionate amount to New York.

Second, according to a recent CNN Money article, there is a “problem” in that the government officials are unable to buy houses because ” they are being scooped up instead by private investors and homebuyers at rock-bottom prices.” In other words, these “rock-bottom prices” are more than the government officials bid. Huh?!?!? Let me understand this. Homes are going to private buyers at higher prices than the government would pay and this is a problem? The article goes on to say that “some locales now fear that they won’t be able to commit their allotment to specific projects by next fall’s use-it-or-lose-it deadline.” So it’s a problem that they’re not spending all of the taxpayers’ money?!?!?!?!

By what stretch of the imagination is any of this a problem? The bottom line is that this is just another misguided government program that is ineffective and unnecessary and the market is proving it every day.

Gary Lucido

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