The subprime mortgage debacle has caused the American Dream of homeownership to become a national nightmare, not only for the families impacted but the business community as it struggles to attract a reliable work force into the metropolitan region. The subprime market, designed to boost families into that “dream” in spite of shaky credit, has now revealed its highly shaky foundation. The “buy now, pay later” culture, the underpinning of our consumer economy, has finally tripped up the public and a major shakeout is in progress. As Rabbi Abraham Joshua Heschel has stated, “Few are guilty ”“ all are responsible.”
It is difficult to comprehend what the credit markets had in mind when they knowingly sucked in people without the sophistication to read the fine print. Further, where was the oversight for these mortgage lenders? Haven”™t we gone through this before with the savings and loan mess that exploded during the Reagan administration? As in the subprime mess, congressional, administration and regulatory folks failed in their oversight role.
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A work force on the move
The dilemma has come on top of the continuing exodus of people, some propelled by a subprime loan, moving farther and farther away from their jobs in search of so-called “affordable housing,” which has become less and less affordable as the cost of the commute steadily rises. The frantic search for “cheap” housing is a major cause of congestion on the roads and CO2 in the air.
As many have now discovered, the expenses associated with homeownership are not fixed. They only go in one direction ”“ up: utilities, rising steadily because of our dependency on fossil fuels; homeowners insurance, sure to go up as storm damage cost kicks in; property taxes, some of the highest in the nation and still rising; and now the big one, interest on all but the fixed-rate home mortgage. In spite of the fact that interest rates have been exceptionally low in recent years, many future homeowners opted for the even lower adjustable rate-, interest-only or balloon-type mortgages, and then got trapped by the volatility of these financial instruments.
The subprime fiasco has only exacerbated the region”™s ability to attract and retain young people who may not view the New York City area as the only place in which they will be happy. There is the sense that policymakers feel the region is so desirable that everyone wants to locate here. Therefore there is no incentive to do much to attract new residents, except those prepared to shell out a million bucks-plus for an apartment. Other metropolitan regions can boast a more affordably priced, frequently better maintained and newer housing stock. A recent survey revealed that 86 percent of the companies questioned said housing costs were a serious deterrent to attracting business and middle-income employees to the region.
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Strategies, possibilities
In order to build and maintain a healthy work force the business community must take a more active role in influencing the development of solutions for the housing crunch. The first step, however, is to help individuals realistically assess their economic limitations in order to develop a strategy. This will not be easy given that there is such a strong sense of entitlement among young people today. But the business community simply must pick up the ball if it is to build a strong economy that has the resilience for future shock waves.
Here are some possibilities for getting the housing your work force needs and can afford. How about supporting subsidies for young people willing to renovate housing in an underdeveloped neighborhood? Another strategy: Encourage new home seekers to consider buying the worst house on the block, and old adage that is still a good principle. A house doesn”™t have to be new. It doesn”™t have to be perfect. It doesn”™t have to have a lawn. It needs potential. It may seem a bit old-fashioned but some in this generation may have to rediscover “sweat equity” if one seeks to buy a home.
If you don”™t want to spend your life in your car instead of with your family there are solutions that don”™t require hands-on. Buy a home with an auxiliary apartment, the mother-in-law space. This helps pay the mortgage, does wonders for your income-tax return and may actually provide space for an aging relative down the line. A two-family house provides the same economic advantage, only more so.
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Rethinking our options
The frenzy of construction in all of Westchester”™s cities, all of which are located on a Metro-North rail line, is a most positive direction for the future of the region. The rediscovery of the advantages of building in existing downtowns has opened up an old tradition ”“ living above the store. It has definitely lost its negative connotation in today”™s housing market. Related to the joys of living downtown is the location efficient mortgage (LEM). This type of mortgage is not well-known in this area but needs to be explored. If the future homeowner is choosing a condo or house near to a rail station, and in or near the business district, he or she may qualify for a larger mortgage, a LEM. Because of the fact that a car, a real money pit, may not be necessary because of the proximity of all the services one needs to survive, more money is available for the purchase of a home or condo, a fact recognized by the banking system. Car-sharing services, proliferating nationwide, can provide the extra transportation when needed. (More about car sharing in later column.)
There needs to be a fundamental rethinking among housing developers as to what the region really needs, rather than just basing their plans on what will sell. Do we really need more “luxury” housing or McMansions? All trends point in the opposite direction. The carbon footprint is the growing concern, not only because of climate change but the uncertainty of the energy supply, entangled in global political machinations. Work-force housing is what is needed. It is essential for the region to be able to compete with the rest of the nation if not the world in order to maintain our much-vaunted “quality of life.”
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Maureen Morgan, a transit advocate, is on the board of Federated Conservationists
of Westchester. Reach her at mmmorgan10@optonline.net.
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