After many real estate industry complaints that the new Obama administration recovery plans did nothing for housing (aside from refinancing assistance plans, which as we all know still require lender cooperation), out comes a plan with that goal in mind. But will this new plan really help distressed inventory and jobs, or is it merely another attempt that will eventually fall apart and leave the housing market no better off?
The new plan, called Project Rebuild, is actually not a completely new concept. Based on the already somewhat successful Neighborhood Stabilization Program (NSP), which in two parts provided grants to states and local governments (and later to non-profit agencies) to rebuild blighted neighborhoods, Project Rebuild focuses on jobs. The $15 billion program will connect out of work Americans with jobs to rebuild distressed neighborhoods, including both residential and commercial properties.
There are several problems with this approach.
1.Â How will neighborhoods be identified to participate? The program states that it will focus on the most distressed neighborhoods, yet there are so many areas that have these types of neighborhoods. While $15 billion seems like a lot of money, when you are talking about rebuilding homes and buildings it can go pretty quickly. Many states, like California, don’t have the money to fix all the broken neighborhoods, so while some may be helped this obviously will not make the problem substantially better.
2.Â How will states decide who gets these jobs? Many states have big unemployment numbers, and while the program states it will give jobs to people in the distressed areas again – this means the rest of those in other distressed areas will receive no jobs. It cannot cover everyone, and may not even be able to make a dent in jobless numbers. Also, there will likely be many people who cannot work in construction, for various physicalÂ reasons. What, specifically, are these jobs going to be, and how will they choose who gets them? What if people need training – is that part of the budget?
3.Â Will fixing some distressed areas really make that much of a difference in the distressed housing market? Should the feds even be involved in this? Some say that the feds need to leave the distressed markets alone, with perhaps the only exception being the need to get lenders to be more cooperative in working with distressed homeowners in avoiding foreclosure.Â (It is important to note there are federal programs with this goal in mind, but the fact is that the lenders still can do whatever they like, for the most part, and cooperation is not where it should be). Distressed markets can actually be good for housing, as they bring prices down so that more people can afford to buy. This can really be a blessing or it can be a problem, depending on your thinking.
I think it is fantastic to try and clean up some of those areas that have suffered the worst, and make these neighborhoods liveable once again…while at the same time providing jobs that meet that goal. We all know that there are so many people out there who are ready and able to work, and providing more jobs is a great goal. I am just not sure that this is the best way to do it, and even with private sector involvement I question whether there will be enough money to go around.
We could look at some other options. One that comes to mind is to pour some of that money into our public schools so that we can hire more teachers and reduce class sizes, bring back art and music and P.E. to many schools. Bolstering up schools is a win-win for everyone, including neighborhoods. This is just one idea, and I do think we need to do something about the lenders and the difficulties with them refusing to help people avoid foreclosure. In time, this will help heal neighborhoods as well. The fact is that we still do not have a strong program to help the housing market and homeowners.
What do you think? This is a tough call, and I would love to hear your thoughts – I invite you to comment below (if you do not see the comment box, simply click on the title of this post and then scroll down to the end).