FHA is about to adopt new rules explicitly encouraging home buyers to purchase single-family, detached housing in the suburbs rather than attached (condos) in urban cores:
Until now, almost any condo development could apply to FHA for “approved” status, therefore making FHA financing available in that development. In addition, in developments that were not approved, “spot approvals” were sometimes available for individual units. (The lender applied for an approval for the unit you wanted to buy, in spite of the development not being approved).
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2. All development not considered primarily residential are out. For instance, a development with more than 25% of the total floor area dedicated to commercial business use is out.
3. Noise issues is a new concern, so any development within 1,000 feet of a highway, freeway, or heavily travelled road, 3,000 feet of a railroad, 1 mile of an airport, or 5 miles of a military airfield will become ineligible for approval.
4. If the property has an “unobstructed view , or is located within 2000 feet of any facility handling or storing explosive or fire prone materials, it is not insurable - we're not talking just fireworks factories here. A gas station 2 blocks away can disqualify this development.
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11. All current condominium project approvals will be invalid (with the exception of projects approved on or after October 1, 2008) and projects must be re-approved under the new options available.
But these new regulations seem purposely designed to push new homeowners out of dense, urban areas to the suburbs. They exclude many mixed-use developments (#2). In a central city, it is hard to find a condominium not within 1,000 feet of a highway, freeway, or heavily travelled road, 3,000 feet of a railroad, or one mile from an airport (#3). Allowing developers to tap into FHA guarantees for entire single-family subdivisions but only 30% of condominium units naturally will encourage developers to shift to single-family subdivisions. These new regulations are fundamentally anti-urban.
Even if it is somehow possible to defend our existing scheme of suburban subsidies, is it really possible to defend introducing new market distortions?
The last thing I expected from Obama is an anti-urban, and obviously explicitly anti-Chicago pro-Schaumbourgeoisie policy. What is going on here?
Somebody phone da mare!
At first I thought this was purely anti-urban, but the rules are specifically for condos, they don't apply to houses. It does make urban condos pretty hard to get passed; OTOH, condos seem to be at the center of the pyramid scheme of real estate. I wish we had a better approach to densification than condos... Chicago left me pretty cold on the condo scene.
ReplyDeleteWow. F'n Finance people setting GD rules. Grrrr. This will definitely set up a lawsuit from California, as their new AB32 is explicitly against this sort of exclusionary zoning. Gonna be interesting.
ReplyDeleteAnd it is an excellent indicator, Michael, that we do not know how to solve our deep, broad, and all-encompassing systemic problems that lead to man-made climate change, toxiification of surface waters, land-use changes, etc.
Economics is divorced from reality.
Best,
D
I just saw an analysis of how common it is to see the sequence:
ReplyDeleteoverlogging -- overbuilding -- overlending -- financial crash
This got built in with a plan to allow timberlands to be turned into housing developments with great tax breaks, part of the same legislation.
It's a huge scam, long in the making.
In Northern California, look at how Highway 101 north from SF into the redwoods has been steadily developed to freeway divided highway standards. This is a huge area long in forestland, at forest taxes; the old growth is about all gone, or protected. There's no real profit in second growth timber. The guy who looted the Savings and Loans, and used that money to buy out a logging company, then looted the redwoods. He's out of the picture now. But there's lots more timber up there big enough to cut into 2x4s for stick construction, and they sure don't want to wait around a century for it to grow into great big trees.
Look at what you find with this.
Seriously. The anti-condo provision forcing development out to the edges of the cities is part and parcel of the log-and-build program that gives a big tax break to the people (real estate investment trusts) set to rake it in.
http://www.google.com/search?q=Housing+and+Economic+Recovery+Act+REIT+timberland
MT --- Should not that read "on or before"?
ReplyDeleteDavid, maybe; it would make more sense that way. But I'm just pasting form another blog.
ReplyDeletetheir houses. FHA loans are the easiest type of real estate mortgage loan to qualify for nowadays. The FHA guidelines for loan qualification are the most flexible of all mortgage loans that require less than 5% down payment.
ReplyDelete