Last week we at Reform America published an article about how giving a $15,000 tax credit to every home buyer was a bad idea. It is easy to criticize but a lot harder to come up with solutions, so this week we offer an alternative solution.
Banks currently complain that they cannot lend money to people right now because they are settled with too much toxic debt, also known as foreclosed properties that are in poor condition. Down on Main St. millions of people can’t find themselves a decent paying job. So we propose that the government buy up all foreclosed properties that are uninhabitable, update them with green technology built in the United States, and resell them.
Here is why, the government will buy up uninhabitable properties at the lowest price possible because they are the hardest one’s to sell for banks. This is because people don’t have the funds to put 10% down on a loan and then spend another $10,000 in making the property livable. So by taking these properties off the balance sheets banks will find it easier to lend money so that people can again begin purchasing properties (according to the banks anyway). While this aspect may be good it is not the primary reason for creating this program.
The biggest part of this program is the jobs it will create through the updating of these properties. First are the manufactured products such as furnaces, refrigerators, windows, siding, solar panels, and thousands of other products. With a large increase in sales of these products for the remodeling of the properties theory would say these companies would need to hire more workers to keep up with demand. Then people are going to need to be hired to install all these things into the properties, once again creating more jobs this time for tradesmen such as carpenters, plumbers, electricians, and painters.
Once a property has been completely rehabbed the government can rent it out at a low monthly cost until it is able to sell the property. Renting the property ensures it is utilized and creates a revenue stream for the government from that property. The property will also need to be maintained during the time it is rented out or remains vacant. This maintenance will again create jobs.
The ultimate goal however will be to sell the property (but not necessarily for a profit) as the government does not want to be in the business of real estate management. The money from the sale (and rental) of these properties will go towards paying down the debt incurred by the project itself.
These projects do not necessarily have to be completed by government workers. There are plenty of businesses that could perform these tasks. However, when contracting for these projects the government must ensure three things. First that the products used will be primarily from American companies. Second, the labors utilized to install things in the property or repair it are all American citizens or legal immigrants. Lastly, that the work done on these properties and products installed within it are of high quality and not just the cheapest around.
There will have to be some government oversight on this as we don’t like just throwing money around without anyone ensuring it is being used properly. We suggest that the Department of Housing and Urban Development handle these projects. It will of course need to increase its size to deal with this program which will create even more jobs.
Many free market advocates may argue against this “buy American” aspect. We ask why is it a problem? Doesn’t the free market mean we as consumers can purchase whatever products we want regardless of our reasons for that purpose? So why can’t the federal government do the same thing when it is being a consumer?
So we at Reform America believe this is a much better way to stimulate the economy. By creating jobs rehabbing properties Americans will be back on the track of being able to afford a dwelling place without government assistance. In the process of creating these jobs we will be doing our environment a favor by utilizing green products in these properties. Lastly the project will likely be a lot less costly than other programs proposed because the government will be reselling the properties it acquires.