Affordable Housing

One of the big issues for the NDP in British Columbia, and the left wing of the political spectrum everywhere is the availability of "affordable housing" for low income people. It was the whole purpose behind the creation of Fannie Mae and Freddie Mac, to use government subsidies to put people in houses that they could not otherwise afford, and the sub prime housing bubble was born. As the banks, pressured by government to grant these mortgages in the United States, greatly increased the amount of debt it was issuing relative to the capital it held in reserves then the value of real estate sky rocketed as more people were in the market to buy houses. To make matters worse, investment bankers began to buy up these mortgages at companies like Bear Sterns and Lehman Brothers; then bundle them into extremely complicated equities for sale on the open market. The promise was that at some point in the future, they would begin to pay higher returns. I suppose nobody thought to mention that these high returns were supposed to come from low income people who would see a sudden spike in their mortgage payments.

I do not believe that the theory of a sub prime mortgage was based in evil. I hear it all the time with the "affordable housing lobby" in Vancouver that all you need for a successful career is to live in a house; that once they own a home, they will transition from a low income job to a high income job. They say the road to hell is paved with good intentions, and that the egg came before chicken. As it turns out, living in a house versus living in an apartment has no appreciable affect on income, and that it only serves to increase debt burden leading to a bursting bubble. The idea of a sub prime mortgage was to be the vehicle to deliver houses to low income people. Give them a low interest rate, no money down loan to start, and once they had turned that home ownership into a successful new career they would then be able to make up the difference. Had Fannie Mae, Freddie Mac, and other mortgage providers been legislated to offer a fixed rate at market value to people of low income, the loan would have been unaffordable from the beginning.

Which political persuasion in the United States forced this absurd policy on the free market? Liberals. Conservatives should have done more to prevent the bubble from getting so big while they had control of the legislature and the Oval Office from 2000 – 2006, but they still were not the ones who created the problem. So now, the Democrats have a monopoly on the legislative and executive branches of government, and they are saying that they need more intervention and oversight. Meanwhile they were the very people calling the shots at Fannie Mae and Freddie Mac, but that oversight did not stop those two mortgage providers from collapsing. Infact, the policy of the Democratic Party was what was responsible for the collapse! But ask Jon Stewart who is to blame for this crisis, and he blames CNBC for not reporting on the problem, not the Democratic Party who CREATED the problem.

As the band Nine Inch Nails once sung in a song, “He sewed his eyes shut, because he is afraid to see”