News and Reviews
Fox Business News
Yeah, you read it right. All in all, not a bad experience, and I was glad to script the Chyron as Fox’s guest expert with bullet points like “Support rental housing” and “Keep a strong govt mortgage market backstop.”
All Things Considered
NPR’s All Things Considered just interviewed me on what it means to be a renter in the United States – namely, freewheeling and flexible but also often unstable and deprived of financial benefits that government policies grant to homeowners.
Making Sense of “Sustainable Communities”
I admit it: I’ve fallen down the Twitter-hole. Why communicate in full sentences out into the ether when I can telepathically connect to devoted courtiers? (Oh yes, we have a lot of fun over there.) We writers like to get paid by the word, y’know.
OK, I’ll begrudge you a few free words today, on the occasion of two articles you ought to read – one mine, one quoting me, and both grappling with the question I raise in the epilogue of Our Lot: how to move real estate markets so they build environmentally sustainable and human-scale places to live, instead of the destructive sprawl that is synonymous with the real estate bubble and the direct product of the government policies that for more than 70 years have favored outward suburban growth.
I tackle this in The American Prospect, in a look at the Obama administration’s new Sustainable Communities Initiative, which brings together the U.S. Department of Housing and Urban Development, Department of Transportation and Environmental Protection Agency to coordinate…well, their terminology is necessarily much more careful than mine. But ultimately they are looking to create a regulatory and planning environment that cultivates walkable, transit-oriented communities. (You can see their principles here.) As I suggest in the article, these efforts are puny compared with the hundreds of billions shoveled into interstate highways in the Eisenhower era. But they are also meaningful and real, all the more so now that the Senate Banking Committee has passed the Livable Communities Act, which would authorize spending for regional planning projects around the country and especially efforts to coordinate transit, housing and workplace development.
If you’re not reading him already, you should also make sure to tune in to Jonathan Hiskes at Grist, who is doing sharp, important work on this subject (as well as on the fight over PACE financing for home energy-efficiency retrofits). He has just posted a story on location-efficient mortgages, quoting me and grappling with the question of whether giving homebuyers who live near mass transit more purchasing power (that is, debt) is a constructive response to sprawl, given all we know about the consequences of high housing leverage. I’m not so worried that borrowers won’t be able to pay back their mortgages – the assumption here is that their diminished dependency on cars will make their household budgets less burdened. It’s that leverage on a wide scale leads directly to real estate price inflation, and that defeats any benefit of location-efficient mortgages while also making housing less affordable.
By the way, I’m @alykatzz. You know where to find me.
It’s Here: Paperback!
For those of you who have been holding out (don’t feel bad – I do it all the time): Our Lot is now available in paperback. And hardcover still, and Kindle. And even available at these funny places they call bookstores.
Harry Chapin Media Award
Great news: I’m now the proud winner of a Harry Chapin Media Award from WhyHunger, in the best periodical journalism category, for my American Prospect story “There Goes the Neighborhood”.
Chicago Hearts Texas
Mary Umberger at the Chicago Tribune has written a kind and thoughtful article about my Texas prescription for avoiding future foreclosures: limit cash-out refinancing to 80 percent of a home’s value.
Expert/friends I’ve been talking to since my article ran in The Big Money/Slate/Washington Post note that constitutionally any legislation directly restricting cash-outs, Texas-style, would have to take place at the state level. So how about it, Illinois? Sure, it’ll be a tough sell politically, especially once the lobbyists and donors descend. I can already hear the cry: The politicians are stealing Americans’ freedom [to destroy their family finances]!
But as Umberger notes the real estate biz is more split on cash-outs than you might imagine. The Texas Realtors, for one, have vigorously defended the state’s cash-out limits. After all, they want selling a home to be the readiest way to tap home equity.
Harry Chapin Media Awards
In the toot-my-own-horn department: The World Hunger Year Harry Chapin Media Awards has nominated my American Prospect article “There Goes the Neighborhood,” about the devastating toll of foreclosures on Atlanta neighborhoods, for best story in a periodical. It’s up against worthy competition: Jon Lee Anderson on hunger in Zimbabwe for Dispatches, and fellow Nation Institute Investigative Fund grantee Paul Reyes on Miami’s Take Back the Land movement for Virginia Quarterly Review.
Georgia and the Flatland Myth
The New York Times’ Paul Krugman is the latest opinionator to pick up on my story for The Big Money about how Texas avoided the worst of the foreclosure crisis. He comes at the question from another and equally interesting angle: Why does Georgia have so many bank failures?
After all, Georgia, like Texas, is part of “Flatland,” Krugman’s coinage for the soft inner tissue of the U.S. — as opposed to the hard crusty coasts with all their development restrictions — where governments more readily permitted real estate development to sprawl where it pleased. Basic economic theory would suggest that in less regulated environments, supply is less constrained than it is in highly regulated building environments, and therefore housing prices would be less prone to inflate under speculative pressure. Hence California, Florida; Nevada and Arizona are a little harder to explain but spillover of investors from the California boom are supposed to explain it.
But I think Krugman’s Flatland theorette neglects how aggressively demand, put on steroids by the tsunami of debt that the securitization and derivatives markets unleashed, defeated the power of supply constraints in many markets, and Georgia is a perfect example of that. Those small, now failed banks that Krugman writes about today financed an unbelievable volume of real estate construction all over the Atlanta region, some 75,000 permits a year at its peak – condos, McMansions, loft conversions, anything, anywhere. And as I explain in Our Lot, those developers from very early on – we’re talking 2001 – engaged in elaborate mortgage fraud schemes to “sell” these units. Entire subdivisions and condo developments were sold this way so that developers could pay back their construction loans to local banks. But many of them couldn’t — hence Georgia’s distinction as the nation’s bank failure capital.
Red Herring in the Rio Grande
My article for The Big Money on why Texas didn’t have a real estate bubble or bust has sparked some worthy responses, some proposing alternate explanations for the Texas miracle.
I owe a big debt to Mike Konczal, who pointed me to his initial posts and comments on his blog Rortybomb, where he first blogged about the Texas miracle a year ago. Here’s Mike’s take on my take over at Ezra Klein’s Washington Post blog.
As Mike did in his earlier post, at Mother Jones Kevin Drum notes that Texas has a bunch of other borrower protections on its books, including bans on prepayment penalties, negative amortization mortgages, and balloon payments.
Yes, these laws do exist in Texas. And they have had little impact, because of the way the statutes were written. Just as with the failed effort by Congress to rein in subprime lending in the 1990s via the Home Owner’s Equity Protection Act (HOEPA), these restrictions only apply to “high cost” mortgages, defined as having an APR at least 8 points above the Treasury rate. And that’s the initial rate, so a teaser rate that later sets upward doesn’t count.
Attorney S. David Smith of the law firm McGlinchey Stafford, who represents Texas mortgage lenders and has a handy guide to the high cost loan guidelines on the firm’s website, told me lenders simply set their interest rates beneath the threshold to avoid being covered. “I have not seen a single reported high cost mortgage under the Texas Finance Code,” he reported.
It’s possible the Texas restrictions on prepayment penalties scared off bottom-feeding mortgage-backed securities issuers from buying Texas loans, since losing the penalties increases investors’ uncertainty. But many states banned or restricted prepayment penalties for some or all borrowers, at least until the Office of the Comptroller of the Currency preempted state banking regulations. Illinois, which bans the penalties entirely, has a foreclosure rate nearly twice that of Texas, and saw plenty of subprime loans.
The failure of regulations pegged to “high cost home loans” has already been well documented at the national level: HOEPA, with its 8-points-above-Treasury threshold, ended up applying to just 1 percent of all subprime mortgages (sorry, no link, but it’s cited here by an all-star cast of housing and subprime experts – see page 140).
A couple of other good points:
At the Economist, R.A. (aka Ryan Avent) cautions against giving regulations too much credit, and suggests that Texas saw causality in the opposite direction: no Texas bubble meant less home equity to drain.
A commentator at The Big Money, Joseph Zona, points out that because Texas does not have a state income tax, property taxes are high. They’re indeed significantly higher than in, say, Florida, a bubble state that also has no income tax, and it’s an important factor to consider.
Writer/activist/hacker Aaron Swartz calls me out for saying that Texas, like most sun belt states, is “flat and generous in letting real estate developers sprawl where they will.” Swartz notes: “The cause of sprawl is not a lack of regulation against it, but instead zoning regulations that make dense development illegal.”
Don’t Mess With Texas
New from me in The Big Money: How Texas escaped the mortgage bust. A big part of the answer is that Texas tightly restricts refinancing, so homeowners can’t use their real estate as ATMs. They take this seriously in Texas – it’s in the state constitution. If the rest of the country had rules like Texas’, we’d be a whole lot safer from the threat of predatory lending, debt slavery and real estate bubbles.
How the homes we live in turned into the monsters that ate our economy and the United States became a nation obsessed with real estate.
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