Homes for All
Regarding Niall Ferguson's 2/6/09 Op-Ed in the Los Angeles Times, "Keynes can't help us now," I think his idea about lowering homeowners' interest rates to make it possible for families to stay in their houses is a good one. However, in addition to just lowering interest rates I think we should also try to re-introduce a proven American government program from the past, the Homestead Act. In my own family, my great grandmother, who had grown up as a poverty stricken orphan, homesteaded in Oklahoma with her husband, and proved up a small ranch that way. She often said it was the first time she ever had enough to eat and felt secure. That is a feeling every family should be able to enjoy.
A new homestead act, perhaps administered by a new agency, might be the way to make it happen. The agency could take title, perhaps through eminent domain, to houses after paying the current legal owner a negotiated price. Former "owners," actually mortgagees, would become homesteaders by entering into a contract with payments tied to their incomes.  No interest would be charged, the intent being to get people into home ownership, not to run a business. Eventually, say in twenty years, after living on the property, paying on it, maintaining it and improving it, homesteaders could take title to it. In this way they would have discharged responsibilities similar to the "proving up" required of the Homestead Act of 1862.
Obviously such an arrangement would bring up many questions. (1) Could homesteaders sell "their" houses and keep any money above the price the agency paid for it at any time during the proving up period? That would be a matter of importance if homesteaders made improvements or provided superior maintenance. (2) What happens in case of defaults or if properties were allowed to run down? (3) If householders wanted to or needed to remove to another location, would the agency be obligated to take back the property and make it available to another homesteader? (4) Under what circumstances could the agency reclaim the property and contract with a new homesteader?  All of these questions and many more would have to be resolved before a new homestead act can be seriously considered. Yet, I believe it will take the establishment of some such program to relieve home-mortgage holders of their staggering debts. I hope the congress will investigate homesteading as a possible way to do that as part of the stimulus package under discussion.  
no place like home.” from the song “Home, Sweet Home.”
Saturday, February 7, 2009
A New Homestead Act