Monday, October 25, 2010

The next crisis

The housing crisis and potential solutions all seem to focus on foreclosures and how to fix them.

Foreclosures are a real problem, but the true mark of leadership is looking forward and seeing the next crisis. Foreclosures are not an isolated event.

An economy cannot have 20 percent of the homeowner population in financial trouble and expect that it will not lead to the next big problem. When foreclosures are solved -- and I mean brought back to a reasonable level -- the root problem will move on to the next stage.

I am betting that it will be a rental housing shortage.

I base that on several factors:
The housing bubble, which was created by a big government push to make everyone a homeowner, has burst. You can blame banks, but they went with the flow.

A capitalist economy did not create Fannie Mae and Freddie Mac.
There are now millions of Americans who are being foreclosed out of houses that they cannot afford -- and for a variety of reasons, with plenty of blame to be assigned all around.

Those people, once they are leave those foreclosed homes, will have to live somewhere.
Once you get beyond moving in with relatives or friends, that leaves renting.
And there is no surplus of rental property available.

This, once again, is due to government intervention that has made it increasingly difficult to own, manage and profit from owning rental property.

The solution? Start by cutting over-regulation of housing rentals. Offer tax breaks now available only to homeowners. Eliminate the rental tax penalties for renters. Change the law and the judicial attitude so that landlords have a fighting chance in court disputes with tenants.

Some of those homeowners facing foreclosure may eventually find their way back into home ownership, some will never go back to owning. Housing values may again rise and make the cost of ownership the investment that it once was.

But what is being done now for the next big crisis?


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