First what I wrote. OMG more than 8 years ago:
Tuesday, July 06, 2004
Location Discriminatory Mortgages
I once thought "Location Efficient Mortgages" (LEMs could address the problem of exurban development patterns (e.g. living in Riverside and working in LA) but then my brain started working again. I call location efficient mortgages transit apartheid. "Location efficient mortgage" is like "smart growth." Who would want a location -inefficient- mortgage or who would support dumb growth. Meaningless catch phrases, nothing more. Location Discriminatory Mortgages are the exactly descriptive phrase. Funny how the old VA loan policies that inadvertently used to favor new suburban housing, and jumpstarted the exurban nation trend, were struck down as unfair by the very same people advocating this new version of redlining. (Red Line as in Los Angeles and Boston, etc.) I'm surprised at the willingness of people who claim to want fairness to resort to unequal treatment (LEMs, density bonuses, transit subsidies, tax breaks) as a first step when they agree with the agenda. I'm also concerned about the unintended consequences that always appear. We both know that govt with good intentions ALWAYS results in unanticipated problems. In the case of LEMs; people will buy near transit, use more transit, pay less taxes to local govt and eventually get cars. Result, normal traffic overloading local roads while burdened by higher transit subsidies. In case you haven't noticed I'm describing LEMs in terms of transit but we were talking about POV commute patterns and Prop 13. That's because of two things. First LEMs have been hijacked by transit advocates despite there being no connection. Second, lenders already do a little of this when you apply for a mortgage. They take into account your living costs including travel budgets when determining lending limits.
Now what the New york Times (of course) is pushing:
Factoring in Commuting Costs
MORTGAGE lenders do not figure in a household’s likely commuting costs when weighing loan applications, but a recent study suggests that borrowers of moderate means would be smart to calculate these costs themselves before buying.
The study, published in October by the Center for Housing Policy and the Center for Neighborhood Technology, looked at transportation and housing costs in the 25 largest metropolitan areas. It found that transportation costs rose faster than incomes in every area over the last decade.
That has added to the financial burden shouldered by moderate-income homeowners, defined as households earning 50 to 100 percent of a metropolitan area’s median income. Transportation consumes 30 percent of their income, on average. Add housing costs to that and the combined cost burden rises to 72 percent.
...
The study also found that some metropolitan areas generally considered more affordable than New York become less so after transportation is figured in. For example in Houston, where housing development is more sprawling, transportation consumes 32 percent of income, compared with 22 percent in New York, which has a more robust transit system.
...
Scott Bernstein, the president of the Center for Neighborhood Technology in Chicago, argues that transportation costs are quantifiable enough that they ought to be factored into underwriting. And they were, during the first half of the last decade, in an experiment the center conducted jointly with Fannie Mae. Called a “Location-Efficient Mortgage,” the product was a contrasting proposition to the “drive till you qualify” strategy of finding an affordable home. The mortgage compensated borrowers applying to buy in areas with lots of transportation choices, and close to jobs and amenities.
...
Tested in a handful of markets before 2007, the mortgages were issued to about 2,000 borrowers and, based on the center’s evaluation of a representative sample, showed a very low default rate. But the experiment ended with the mortgage market collapse.
...
The national calculator could be ready by year’s end. Another calculator developed by the center, called Abogo (abogo.cnt.org), lets people plug in an address and find out what a typical household in that area spends on transportation.
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Unfuggingbelievable. Let's start at the top and tackle other bits in later posts. "For example in Houston, where housing development is more sprawling, transportation consumes 32 percent of income, compared with 22 percent in New York, which has a more robust transit system." Texas income tax 0%. New York State 6.85%, New York City ~3%. Idiots with calculators and agendas are dangerous.
