Do We Have a Right to
Decent, Affordable Housing?

Edward J. Dodson

[Comments posted to the Community Development Banking discussion group, 30 May, 2010, responding to an essay by Mr. Quigley ("Housing as a Human Right") in Counterpunch, 13 May, 2010]

The article by Bill Quigley [legal director of the Center for Constitutional Rights and a law professor at Loyola University New Orleans] earlier this month initiated quite a few responses reflecting both the political philosophy and direct experience of members of this discussion group.

We in the United States and other social democracies hold to the belief that ours are systems governed by law and not by the directives of the individuals who happen to hold elected or appointed office at any given time. Yet, there is no consensus over what constitutes the line separating the limits of individual freedom and just governance. To give something like a rational treatment of this issue would require a long paper that looks back at least as far as John Locke and his attempt to distinguish between liberty and licence. The philosopher Mortimer J. Adler argued that liberty is freedom constrained by justice; but even Adler had difficulty coming up with universal principles of justice where property was concerned.

Which brings me back to Bill Quigley's assertion that we have a right to housing. He writes:

"Most people recognize that international human rights guarantee all humans a right to housing."

Mortimer Adler wrote that the degree of justice in any society was recognizable by the extent to which individuals enjoyed the 'goods' of a decent human existence. Decent, affordable housing would be one such good. Although most people would certainly say that people need decent housing, taking the next step to declare this to be a human right is not a principle I have heard very often during my 30 plus years of work in housing and housing finance. If such a right exists, it is a conditional right and carries with it corresponding obligations on the individual to meet minimum qualifiers.

Bill Quigley rightly observes that the form of social-democracy that exists in the United States has failed and continues to fail a significant portion of its citizens, even millions of individuals who have acted as responsibly as circumstances will permit. And so, activist leaders in stressed communities are intervening - outside a system of law that has failed so many - by "engaging in 'housing liberation' and 'housing defense' to exercise their human rights to housing."

In Madison, Wisconsin, the challenge of providing permanent affordable housing is taken on by the Madison Area Community Land Trust, which "can find the resources to turn [foreclosed properties] into affordable housing." In my experience, the land trust movement is the one movement that recognized the inherently dysfunctional nature of how our system of property law and taxation operates with respect to land. The solution of the land trusts is to permanently remove land parcels from the market as commodities to be bought and sold. Creating land trusts is a rational response to irrational, credit-fueled and speculation-driven property markets. Until we come to our senses and change the way we raise public revenue so that the full annual rental value of land is collected, we will continue to experience property markets that boom and then go bust. It would help if more economics professors re-examined and revised neo-classical economic theory to accurately describe the operation of land markets as they operate in the real world - which is uniquely different from the markets for labor, for capital goods and even for credit.

Bill Quigley goes on to describe how local activists in Toledo, Portland, Sacramento, Philadelphia, Chicago and Atlanta have moved to prevent banks from enforcing evictions on people who fell behind on their mortgage loan payments. Hundreds of thousands of elderly and lower-income households have certainly been victimized by predatory lending practices, aggressive marketing by mortgage brokers, and frequent occurrences of outright fraud. State banking commissioners and local districts of attorneys have, it seems to many of us, moved at a snails pace to bring these individuals and firms to justice. And, of course, there are millions more among us who are unable to keep their mortgage loans current (or keep up with rising property tax obligations) because of the loss of employment and income, or because of a prolonged illness and mounting medical bills. One result, quoted by Bill Quigley from the National Coalition for the Homeless is that "the number of homeless people in the US range from 1.6 to 3.5 million." The number continues to climb, even as the full extent of the problem is unknown.

The analysis of the global economy published in 2005 by British economist Fred Harrison forecasted that 2010 would be the year the U.S. economy hit depression-level problems. We hear from economists interviewed by the media and administration officials that we are coming out of the recession, that the recovery is real even if even more jobs are being lost rather than regained. If, as Bill Quigley informs us, an additional 4 million households will go through foreclosure this year, the economic recovery is being thinly experienced and financed by a skyrocketing level of government debt. By the end of the Obama administration's first term in office, this debt will approach $15 trillion; just servicing this debt at an interest rate of 2% requires tax revenue of $300 billion.

In response to Bill Quigley's article, a number of community development banking members offered their own perspectives.

Glen Ohlund asked: "If banks are getting bailed out, why not people? What makes one "OK" and not the other?" To which John Neusaenger responded: "Because the banks have agreed and have the resources to pay the taxpayers back! That is not necessarily the case with consumers, especially where the consumer is upside down in their residence. Would the consumer 'bail-out' set a requirement that the consumer pay 'us' (the collective taxpayers) back with interest?"

As I wrote above, it should be clear that victims of predatory lending and fraud ought to be protected by law from harm. Individuals who knowingly and willingly colluded with mortgage brokers in order to acquire properties they could not afford - with an expectation of being able to flip the property for a nice profit within a short period of time - deserve nothing from the rest of us. As for the banking system itself, I have researched and documented the long process of financial deregulation (beginning with the creation of the first money market funds in the 1970s) that added new layers of risk and stress to an already speculation-prone economy increasingly dependent on property market transactions rather than goods production.

G. Alex Morfesis makes an interesting observation, that "default rates for first time home buyers stretching to get the tax breaks of owning a home, and the possibility of getting access to inflation based financial growth, was in the 25-35% range...leading to "yo-yo" loans, where the borrower acted as though the home was one of those "buy here pay here" car lots." My experience was that so long as the general economy remained buoyant and unemployment low, mortgage loans made to first-time homebuyers (in accord with Fannie Mae standards, at least) performed within forecasted delinquency rates. Yes, delinquencies were higher, but these borrowers were limited to 30-year fixed rate mortgage terms and pretty standard underwriting criteria. Moreover, all of these loans had to be approved for private mortgage insurance and complete a homebuyer education program.

Homebuyers with moderate credit blemishes might qualify for financing under Alt-A terms, priced (if memory serves me) at 50 basis points higher than A credit risk borrowers. Thus, when Mr. Morfesis writes "the original plan was to allow borrowers to use 'venture capital' type rates to get their foot in the door" I believe he is describing the decisions by the major financial institutions to circumvent GSE program requirements and work with Wall Street firms to package the much higher risk mortgage loans into the private placement securities that became prone to extensive fraud and massive defaults.

After describing the various circumstances under which homeowners found themselves in financial trouble, Mike Shonborn concludes that "bailing out all the borrowers would cost hundreds of billions of dollars and reward adverse behavior at the expense of others who acted responsibly. I know a similar argument can be made for the bank bailout, but our entire economy was on the verge of collapse, making it a different issue." And, of course, a real issue is whether those in the U.S. Congress or the Administration sufficiently understand the causes of the meltdown - and have the political will - to change the laws and create a sufficiently potent and independent regulatory structure to solve the problems.

William Wolf expressed his belief that we have "no such thing as a 'Human Right to Housing" in this country." Rather, that "we have a right to equal opportunity" which "includes the right to fail." What Mr. Wolf touches on is the issue of what is the appropriate limit to government power to intervene in the realm of property rights. This is a debate that has gone on since John Locke, in an age when the primary means of acquiring landed property were military conquest and civil wars. The moral principle that has long guided my thinking on the subject comes from Thomas Paine, who argued that each person has an equal birthright to occupy the earth. The challenge, then, if you accept this ideal, is how to achieve this in a world where the earth is divided up into nation-states (each claiming sovereignty), then smaller geo-political state or provinces, with land bought and sold as any other commodity. The answer finally came to me after studying the works of Henry George.

I fully agree with William Wolf's statement that we must "teach families to handle their finances effectively." Financial literary programs reach only a small fraction of adults. The real place to begin is in our schools, starting as early as possible and continuing all through the secondary school years. Gina McCullough, writing of her experience as a credit counselor, describes how difficult it is to change the habits of people who have become adults without any serious training in financial literacy.