Feature

Issue of the week: Eminent domain to help homeowners

Officials in San Bernardino County are thinking of using the power of eminent domain to relieve underwater homeowners.

This could be a “game-changer for the housing market,” said Jordan Weissmann in TheAtlantic.com. Officials in California’s San Bernardino County, where half the homes are worth less than their mortgages, are considering a radical proposal: using their power of eminent domain, typically invoked to clear property for highways or schools, to relieve underwater homeowners. Under the plan, local governments would buy mortgages from lenders and investors at a discounted, but fair, market rate. They’d then give homeowners smaller mortgages that reflect a home’s current value. The whole scheme, run by a private company for a fee, would be funded with money from new investors, so taxpayers wouldn’t be at risk. 

The approach would solve housing’s paralyzing “collective action problem,” said Robert Hockett in Reuters.com. Everyone knows we need to write down mortgages to heal the housing market, but no one will make the first move. Mortgage-backed bonds have been so sliced, diced, and bundled that investors “cannot even find one another,” much less agree on how to cut homeowners a break. That’s why local governments have to jump-start the process. 

What a bad idea, said The Wall Street Journal in an editorial. This constitutionally dubious scheme would make a mockery of established contracts, let alone that little “detail known as property rights.” The government would essentially seize mortgage bonds from investors and set new prices as it saw fit. Such a “drastic step” would send “shock waves through the market,” said the Los Angeles Times. Current bondholders would be spooked, “drying up the supply of money for new mortgages,” and lawsuits would abound. It also bears asking, since city governments and new investors stand to profit, how it’s appropriate to use a drastic measure like eminent domain to create profits for one group “at the apparent expense” of others. 

I’ll admit the idea “sounds a little crazy,” said Joe Nocera in The New York Times. “But the more closely you look at it, the more sense it starts to make.” There’s no question that fixing housing is in the public’s interest, and with 12 million homes underwater, it’s time to relieve homeowners of “unrealistically high” mortgages and help them start spending again for the sake of the economy. This country has suffered through four years of a devastating housing crisis, and nothing has yet worked to halt the foreclosure tide. With so few workable options, “it’s time to give eminent domain a try.”

Recommended

Orthodox priest heckles Pope Francis in Greece
orthodox priest being arrested
Heretic!

Orthodox priest heckles Pope Francis in Greece

Polls close in first Gambian presidential election since dictator's exile
Gambian election
Plonk! goes your vote

Polls close in first Gambian presidential election since dictator's exile

1 dead, dozens injured after volcano erupts in Indonesia
ash blanketing motorcycles
fire in the sky

1 dead, dozens injured after volcano erupts in Indonesia

Le Pen, Orban, and other European populist leaders meet in Warsaw
Orban and Le Pen
to the right now, y'all

Le Pen, Orban, and other European populist leaders meet in Warsaw

Most Popular

Late night hosts joke about Trump's secret COVID test
Donald Trump shares COVID with Joe Biden
Last Night on Late Night

Late night hosts joke about Trump's secret COVID test

Meghan Markle handed win in court battle with U.K. tabloid
Meghan Markle
meghan vs. tabloids

Meghan Markle handed win in court battle with U.K. tabloid

Fox News personality Lara Logan condemned for likening Fauci to Nazi doctor
Lara Logan.
wow

Fox News personality Lara Logan condemned for likening Fauci to Nazi doctor