When Government Makes Housing Less Affordable
Something is drastically wrong when a city government refuses to let someone purchase and restore a run-down house, and continues the court fight even after the home has been remodeled.
by Jerome F. Winzig
Being in favor of "affordable housing" is like being in favor of motherhood and apple pie. Who could possibly be opposed to it? "Affordable housing" is often a rallying cry for those who want the government to spend more money subsidizing housing. Sometimes, however, government itself is the cause of the problem, not by failing to spend money but by pursuing policies that -- in spite of their stated intent -- take less expensive housing off the market.
A recent Minnesota court case illustrates the problem. After a mortgage foreclosure, a dilapidated house in the Midway area of St. Paul reverted to the federal Housing and Urban Development (HUD) department three years ago. The city of St. Paul condemned the house and sought to have it torn down. HUD, however, wanted to sell it to someone who would live in it and bring it up to code.
When the city went ahead with demolition plans, HUD obtained a permanent injunction in federal court in January 2000 that blocked enforcement of St. Paul's nuisance order. In May 2000, HUD sold the house for $25,000. The new owner, who repaired and remodeled the 900-square-foot, two-bedroom house, estimates it would now sell for $130,000. Instead of celebrating this victory for "sweat equity," however, the city appealed the court decision in an attempt to assert its right to have the house demolished. Earlier this month the 8th U.S. Circuit Court of Appeals ruled against the city. Incredibly, Mayor Norm Coleman is contemplating an appeal to the U.S. Supreme Court.
Things are sadly askew when city officials are so convinced that only government can do anything about affordable housing that they are willing to tear down a repairable house. The court decision makes it clear that the crux of this dispute between HUD and the city of St. Paul was the city's desire to have the government rather than a homeowner repair the house. The city sought to force HUD to "replace all floor coverings, including carpet, completely rebuild the garage, install new storms and screens for all windows and doors, repaint the exterior and interior of the house, and rewire the basement with switches and outlets" before it could sell the house.
HUD argued that since 1991 their policy has been to offer homes for sale in "as-is" condition so as "sell acquired houses as quickly as possible at affordable prices to owner occupants." This represents a change with past HUD practice, which was to make extensive repairs to homes it acquired prior to marketing them. HUD discovered, however, that this practice was a "failure." Not only were its costs prohibitively high, but homes frequently stood vacant for years and were often subject to substantial vandalism. In other words, HUD discovered that government was poorly suited to providing affordable housing.
So HUD found a buyer for the house who intended to make repairs and then occupy the property as his principal residence. Under HUD's policies the buyer would be required to make all repairs previously required by the city. This was not good enough for the city, which set a deadline for demolition, indicated HUD (i.e., the taxpayers) would have to pay the costs of the demolition, and rejected a plea from the prospective new homeowner.
It seems that the city has confused the means (government building codes) with the end (decent, affordable housing). In addition, it seems the city has become so distrustful of private ownership and private rehab efforts that it is willing to spend its scarce resources on a fruitless and idiotic lawsuit designed to assert its right to remove from the housing market a renovated home that is owner-occupied.
The chief lesson in this case is that good intentions and laudable goals are not enough. We need a little less trust in government and a little more faith in individuals. We need fewer government policies that make housing less affordable by eliminating housing that the well-situated regard as undesirable. We need to quit destroying houses and neighborhoods in order to save them.