A Suggestion On How The Government Could Help The Housing Industry

The housing glut has the entire economy in handcuffs!

Here’s a great approach to get the folks who “deserve” the American Dream a chance!  This proposal from Blair Rugh at Trinovus is a government stimulus plan that will work! 

A Suggestion On How The Government Could Help The Housing Industry

by Blair Rugh

I have a suggestion on how government could help the housing industry. I am reasonably confident that neither President Obama, his economic advisors nor members of Congress read this weekly newsletter. But when you write something that has a reasonable circulation you never know where it will wind up, so here goes.

Three facts we know for sure. (1) The U.S. housing market is in the dumper. Some areas are worse than others, but no area has been unaffected. (2) The volume of foreclosures has harmed low- and middle-income borrowers, particularly African- Americans and Hispanics disproportionately. Many of the people foreclosed upon had no significant asset other than their home. (3) The provisions of the Dodd Frank Act relative to underwriting requirements and loans that can be sold in the secondary market, market conditions and enhanced regulator scrutiny and criticism of all lending will make it much more difficult for future borrowers to get a loan. For good, bad or indifferent the actions of the government and the regulators make it significantly more difficult for the housing industry to recover. Until it does, it will be difficult for the economy to recover.

There are a lot of qualified people who still have a job and can afford a reasonable payment on a home but cannot or will not be able to purchase one because they do not have the down payment. In today’s world, for a working class family, it is virtually impossible to save enough for a reasonable down payment. The husband and/or the wife may both have stable jobs and a stable income but saving the $20,000 or $30,000 required to make a down payment that will qualify them for a loan that they can afford is almost out of sight. Today’s housing prices are as low as they have been in the last 10 or 15 years. If we can just get qualified people into the system, it would be a great advantage for them and if we can deplete the nation’s housing inventory at the same time it would be a great boon to an economic recovery.

Let’s lend qualified borrowers a reasonable down payment on a home purchase, say a maximum of $20,000. Were it mine to do, I would make it available only to persons who do not presently own a home. The goal is to deplete the existing housing inventory, which is not accomplished if someone who owns a home is just moving up. Second, I would limit it to homes that were built before a specified date, say June of this year. The purpose of my plan is not to spur new construction directly. That will happen if the existing inventory of vacant housing is depleted. I would not have the federal government do it directly as I am not sure at this point if the federal government can do anything efficiently. I would have the federal government provide block grants to the various states depending on each state’s inventory of vacant homes.

I would grant the homebuyer a loan that would be secured by a junior mortgage on the home. The mortgage would not bear interest in the initial years and then after a reasonable period of time would require interest at some reduced rate. The loan would be payable upon the sale or transfer of the property or at some reasonable time in the future, say 10 years after it was granted. That should provide the homebuyer sufficient time for the housing market to recover its value and to reduce the first mortgage so that refinancing is achievable.

If 100,000 people qualified for the program, the government outlay at the maximum amount of $20,000 per loan would be $2 billion. While that is a lot of money to anyone I know, the federal government seems to treat it as you and I treat pocket change. And more to the point, it is not an expense of that amount as if properly handled the bulk of the money will be eventually repaid. What I suggest has to be refined and better thought out, but I think it is a viable solution to the housing mess. Moreover, it will put qualified people into housing that they can afford. I am generally pretty conservative and against any government assistance programs. I don’t like social security, Medicare, food stamps or anything similar to those programs. I think government should provide everyone an equal opportunity and then let the chips fall where they may. In this instance, however, the government created the problem so I think it takes a government program to hasten the recovery. The purpose of the program is not to provide relief to anyone but to rescue the housing industry. If it has a collateral result of helping people that is even better. I know you can improve on what I suggest. Add your improvements, and if you think it is a good idea make your representative or senator aware of it.

“The best way to predict the future is to invent it.” – Alan Kay

Business is improving, despite all the obstacles in this unpredictable economy that remain and those ahead of us.  This is largely self-fulfilling prophecy as our engine runs on premium personnel and our management team isn’t half-bad either.

We have invested a great deal in new products and new markets.  I’m a big fan of Alan Kay’s expression, “The best way to predict the future is to invent it.”

Klondike Bluffs mountain bike trail outside of Moab. In the background, Arches National Park and the La Sal snow-capped mountains (click on the photo for a better view)

This message comes somewhat diluted by events such as 9/11, and the BP oil spill.   Natural disasters are somewhat unpredictable but they are going to happen.  I have seen the raw and gut-wrenching affects as they unfold.  We are certainly not exempt from the fallout.

There’s little one can do in the moment but there is much that can be done to either prevent an occurrence or deal as effectively as possible with the results.  Unless of course, your government gets in the way.  That’s a whole other topic.

We believe we are as well prepared as we can be to limit the impact of most natural disasters.  Arguably we are and will be impacted on a financial and personal level as well.  To what extent will be born out by the actions, performance and lessons learned by others.  Certainly, we are far more fortunate.

There is still no consensus on when and where the economy will improve.  I spend a great deal of time measuring and evaluating circumstances as they may affect our business.

We can watch Fox News or CNN but our success or failure has little or nothing to do with the economy, politicians or other outside factors.  It has to do with you and me.  It has to do with the quality and functionality of our products and services.  It has to do with how we deliver our products and services!  It has to do with how we choose and treat our customers and our partners.

We are nothing to big business or big government in terms of our success or failure.  We are everything onto ourselves.  We will not succeed or fail due to outside influences.  We will only fail if we are cannot deliver excellence on all levels, products, customer service, implementation and ongoing support. 

Conversely, big business and big government need us to succeed, Their’s has become a global problem.  Because they have simply ignored the entrepreneur; unless, of course, the entrepreneur is holding the glass slipper.

Small businesses are mostly carriages of pumpkins and mice out there delivering the goods.

There are very few Cinderella stories.  Once delivered, the glass slipper still fits but we are working well past the ballroom festivities which has become just as intended, a fantasy.  We are soon  forgotten.  When the carriage and horses are stabled and the cats are away, the mice, small business people, you and I, will come out to play.  Small business can be very resourceful, if left alone.

Made in the USA

Made in the USA

Monday, October 19, 2009 at 9:16pm

“Made in the USA” isn’t about the Big 3 automakers…
It’s time to put the brakes on government spending. The road to recovery lies with the success of small businesses, not with behemoth car companies and big labor. If we were going to bailout anyone, we should have bailed out the car dealerships and auto supply companies to allow them to remarket, retool and invest in new technologies. We should be growing our tax base, which is only going to happen if we fuel the small business private sector. Speaking of which, why are we not doing more to grow and keep promising small business technology companies and their technology jobs in the USA, where our best talent and our best jobs can remain right here at home?

“You will find men who want to be carried on the shoulders of others, who think that the world owes them a living. They don’t seem to see that we must all lift together and pull together.”    Henry Ford

We have Bill Gates and Microsoft, Larry Ellison and Oracle; and Eric Schmidt and Google, not to mention a plethora of phenomenal technology and software companies that started from nothing and today generate thousands upon thousands of high paying private sector jobs and tax revenues, all “Made in the USA.”

What’s more, most technology companies, in particular software companies, do little to harm our ecology (true green); they do not tax our ports, our roads, our bridges or our rail. This reduces our carbon footprint, while not adding to the tremendous and costly burden on the seemingly never ending and costly construction of our roads and our beleaguered transportation infrastructure.

Competition is increasing dramatically from foreign countries who wish to attract our talent, both foreign and domestic grads educated here in the USA, many getting their higher education with the help of US taxpayer dollars. The number of “propeller heads”, a.k.a., the savvy entrepreneurs and highly skilled workers “Made in the USA”, are leaving for a more favorable business climate or jobs overseas.

Our foreign competitors are offering much lower tax rates and hundreds of thousands of dollars in incentives to technology business startups and to their highly paid – highly skilled employees. They are advertising a better quality of life, improved infrastructure and a lower cost of living. Our foreign competitors recognize what we increasingly take for granted, which is the huge tax and revenue potential from small business startups, in particular in the technology field; with their disproportionally high numbers and high salaries as it pertains to job creation. This is coupled with the minimal impact on their country’s costly transportation  infrastructure.

The now and next generation of Bill Gates’, Larry Emerson’s and Eric Schmidt’s may find our politics too ambiguous, too costly and too unimaginative to breed success here in the USA. There are hundreds of thousands of small businesses and entrepreneurs right now who are losing the battle against a poor economy accentuated by high taxes and ever increasing regulation. There are hundreds of thousands of entrepreneurial ventures not even born yet that will never pass the incubation period.

Where should we, the United States of America, concentrate our efforts to keep our existing technology gurus and attract the next generation of “byte heads?” We need to provide education and programs that offer immediate and future tax relief to small businesses and their employees, like a payroll tax holiday. To do this we need to elect government representatives who want less government, who do less for Wall Street, who care less about big government and big union.

We need tech savvy, forward thinking, feet on the ground, “been there, done that” politicians who have missed a few paychecks like the rest of us and who want to do more for small businesses and the working class. Get started by offering existing small businesses and their employees, tax relief with a payroll tax holiday of 6 months or more. Offer new business start-ups, especially technology and software businesses who are Made in the USA and who are 1) less impactful on our transportation infrastructure; 2) provide green technologies; and 3) provide the high end wage earners, which is our future tax base, lower taxes and less government to stay and grow their businesses here in the USA.

“What’s right about America is that although we have a mess of problems, we have great capacity – intellect and resources – to do some thing about them.”
Henry Ford

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