A Modest Proposal for Solving the Housing and Financial Crises

Much has recently been made of governmental inefficiencies in spending and allocating resources, as exemplified by wasteful spending, but what of the private sector’s inefficiencies? At the root of the current problem are home prices: housing is certainly in crisis, and calls have been made to bail out American mortgagees who find themselves overextended and temporarily unable to pay. To solve this and other problems, I address this proposal for the “Home Ownership Preservation, Energy Conservation and Banking Stability Act of 2011.”

In simplest terms, a mortgage is a contract between a borrower and a lender, two private parties, exercising their freedom to contract, a basic tenant of law. Buyers are having trouble paying these mortgages, and instead of simply providing cash to the buyers to enable them to sustain their home loan, or providing cash to the lenders to support the value of their loan portfolio, there is an opportunity for the federal government to help out both simultaneously.

At the root of the problem there are individuals purchasing more house than they can currently afford. Many individuals or couples have houses of 3000 square feet, and some even exceeding that. Few individuals, couples or small families can afford that much space, and furthermore, heating, cooling and maintaining that amount of space strains both personal budgets, and the environment. The carbon and greenhouse gasses emitted to decorate and condition excess square footage is simply unconscionable.

By putting that excess space to use, generating better efficiencies of space allocation, important personal and government aims can be realized. Many academic studies have examined the ideal amount of space per individual, and base d on that, I would propose that we take 500 square feet as a baseline. Even this is above historical norms, and in vastly exceeds space allocations in many successful situations. At a rate of 500 square feet per person, a two person family unit living in a 3000 square foot residence could have space for 4 additional individuals. This would provide for optimal use of space and resources, wasting much less, and could provide for a common benefit.

Throughout the country, many enthusiastic volunteers are participating in valuable programs such as City Year, Teach for America, or AmeriCorps. These volunteers come from geographically diverse areas, and are improving the world around them in virtually every city, town and rural area in the United States. Each of them also requires a place to live. By creating a voluntary program for distressed homeowners, and partnering them with eager volunteers in their area, we could create housing for volunteers, while saving homeowners and banks simultaneously.

This program would also offer the additional benefit of increasing diversity, although this is not, of course, the main aim of this proposal. Over the last fifty years, schools and other public institutions have grown increasingly diverse, much to their benefit. This success stands in stark contrast to the lack of integration, both in many neighborhoods, and also within housing units. By creating a diversity standards office to ensure the placement of socially and ethnically diverse individuals in housing units, we can encourage diversity, exposing homeowners to cultures and values that they might otherwise not be in contact with. Once again, this would be to our benefit as a nation.

In addition to benefiting homeowners, banks and creating diversity, the act would also help to increase suburban housing densities. This would make public transportation more economical and efficient, aiding local governments with the tasks of planning and maintaining a good mass transit system and making it available to all geographical areas. The volunteers could be advised to commute via public transit to their places of volunteering, and could receive government transportation vouchers to assist in this process. Local transit systems could tender these vouchers to receive payment from the federal government for their services.

Now, there are possibly not enough individuals in federal volunteer organizations to fill existing housing stock, and to help save all homeowners, so we should open this program to young military service men and women, serving in the armed forces, if they are stationed nearby. Since the homeowners would be participating voluntarily in the program, there would be no 3rd amendment issue.

If the volunteers and servicemen and women are not available in sufficient numbers, there are many families living in public or government subsidized housing, such as section 8 housing. By opening up the program to this population, we can further solve another problem. These individuals and families would no longer be concentrated in aging tenements and projects, and could move into the suburbs, where they would have good access to public transportation, work, and educational opportunities.

Now the premises being vacated by the public housing recipients and many other program participants as well are old, dilapidated and inefficient. By redeveloping these Brownfield sites, and replacing blighted areas with new, efficient buildings, we can create jobs and lower energy consumption, as part of an overall aid package to cities and states. This will also help cities and towns become more viable for the future. For their part, cities and towns would be required to create less restrictive zoning which would allow the subletting of rooms, and repeal laws regarding housing occupancy by unrelated individuals.

Now, instead of agencies paying the homeowners in cash, which could be misappropriated or spent on non-mortgage items, the homeowners could instead be paid in the form of vouchers. The banks would then be able to submit the vouchers for payment to the agency administering the program. This would ensure that banks loans continue to perform, creating solvent conditions across our financial system. In order to avert future problems, all existing home loan programs backed implicitly or explicitly by the federal government would need to include the provision for voluntary volunteer housing if they are financing a dwelling exceeding the purchaser’s family needs of 500 feet per person. This would apply to all FHA, FNMA, HUD and similar type loans.

This completely voluntary program, properly implemented, could alleviate housing pressures, ensure the conservation of scare resources, overhaul public transportation, encourage volunteerism, engender diversity, allow people to stay in their houses, and protect the banking and international financial system from failure. The net cost would be zero, and the savings and benefits would be tremendous.