Diminishing
Property Rights Will Lead
Slowly, but surely, private property rights have been eroded. In cities and counties all over the U.S., Americans are being subjected to real estate fascism. County commissioners, city councilmen, and other public officials have literally gained dictatorial powers over real property. Homeowners are being told that trees cannot be cut down from one’s yard, that soil may not be imported to establish a new garden, that a small structure may not be built in a back yard, that a home remodel must meet certain arbitrary standards, and the list goes on and on. Even worse is the use of the powers of eminent domain where local government seizes property and, often times, hands it over to politically-connected companies. Thus, the Fifth Amendment has become a mockery. When summing all of this up, one must ask if individuals and businesses really own their property? What is so alarming about this is that Americans, in general, see no problem with this creeping real estate fascism. I have some friends (a married couple) who live in a Seattle suburb and have blindly accepted the dictates of the local city planners. Four years ago, I helped my friends build a storage shed in their back yard. As it turns out, the cinder-block foundation upon which we built the shed was deemed inadequate by the building inspector—he stated that city code required a concrete-slab foundation for such a sizable shed. Consequently, we literally sawed off four feet of the structure in order for the shed to meet the city code pertaining to using a cinder-block foundation (as a side note, a neighbor tipped off the city inspector, prompting this unpleasant alteration to the structure). My friends just shrugged their shoulders and have unwittingly accepted the fact that they share their property’s ownership with the local government. Since the New Deal, the federal government has intervened in the private housing market—which, in many ways, has lead to the aforementioned real estate fascism. The Federal Housing Authority (FHA) was established in 1934 with the objective of rescuing a housing industry that "...was flat on its back." The following reasons were given for the creation of this federal monstrosity during the Great Depression (as found on the Department of Housing and Urban Development’s website):
In 1965, the FHA became a part of HUD. On a combined basis, the "FHA and HUD have insured almost 30 million home mortgages and 38,000 multifamily project mortgages representing 4.1 million apartments, since 1934." Undeniably, the federal government’s intervention into the housing market has been enormous. Since 1934, an alphabet soup of government agencies and government sponsored enterprises (GSEs) have intervened in America’s housing market with the objective – as stated on Ginnie Mae’s website, using this agency’s statement as a proxy – to "...help make affordable housing a reality for millions of low-and-moderate-income households across America by channeling global capital into the nation’s housing markets." In addition to Ginnie Mae, other federal agencies involved in the housing market include the Department of Veteran Affairs, the Department of Agriculture’s Rural Housing Service, and HUD’s own Office of Public and Indian Housing. Not to forget the GSEs, Fannie Mae and Freddie Mac have become behemoths in providing liquidity to the housing market. When combining the Federal Reserve’s current (and reckless) low interest rate policy with the above-mentioned governmental and quasi-governmental housing entities, millions of otherwise unqualified Americans now “own” homes. Members of Congress and even President Bush are taking credit for helping Americans realize the American dream of home ownership. What these politicians fail to recognize is that they have circumvented the traditional route of Americans saving the 20% downpayment previously necessary to qualify for a traditional 30-year mortgage. Now Americans have very little “skin” in the game as the mortgage lending system has been so distorted, by the government, that literally anyone with a pulse can qualify for a mortgage loan—including loans that require minimal downpayments (even as low as 0%). Millions of households have adjustable rate mortgages and often depend upon having two wage earners in order to afford the house payment. Indeed, with federal involvement, mortgage credit is easy to come by. Never have so many people, with so little at stake, been able to borrow so much money. Now the big question becomes what will happen to the real estate market when interest rates (and, most likely, unemployment) inevitably begin to rise? One must look at how Americans have become conditioned, by the federal government, to uncritically view the issue of private property rights. We have a draconian tax system that makes it clear that Americans do not fully own the fruits of their own labor (i.e. money earned via hard work). We have local governments (supported by federal appellate court decisions) that decide for themselves what real estate property rights may or may not exist. We have federal bureaucracies that provide shortcuts allowing Americans to purchase homes without having to work and save for a meaningful downpayment—in essence home mortgage credit has been socialized. We have a fiat-money system that steals our wealth via the pernicious tax of inflation. Thus, we have a society in which the meaning of private property ownership has been debased by the federal government itself. So when interest rates begin to rise, I see massive mortgage defaults ahead. Heck, I can hear the mantra now: “I can’t afford the house payment anymore, so it’s the government’s problem now, not mine.” Consequently, hugely expensive bailouts of the GSEs, and other federally backed institutions, lay on the horizon. Of course, this will mean higher taxes (both directly and via inflation) and, therefore, further violations of property rights. Does anyone care anymore? ©
2004 Double Eagle, About
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