More on S.F. Eminent Domain

One more possibility:

The cities want to remove owners who are upside down on their mortgages, because Prop 13 prevents them from capitalizing on property price appreciation while existing borrowers are in the home.

Underwater borrowers will hold onto their mortgages and their homes for longer, depriving the city of tax revenue. By "flipping" the properties to new buyer-borrowers, they can be re-assessed at purchase price, driving up long-term tax revenue.

By focusing on underwater borrowers, they can present their revenue grabs as "helping" the underwater borrower.

- Matt

Hi Matt,
This is great analysis. Thank you! Most folks will indeed go with the
attractiveness of such plans, since the plans, especially as framed by the
powers that be, clearly benefit the most visible players. As you show in your analysis, the
possibilities for making money are endless!
Add political benefits accruing from the expansion of power, and such
plans become unstoppable. However, here
is why I feel LPSF should stand in clear opposition:

1. We need to be
consistent in our macro aversion to expansion of government power and
interference with markets. Specifically,
the trend in novel reasons for seizing private property is troubling.

2. We have made our
opposition to Plan Bay Area public; and in my opinion, we should also oppose
the individual pieces of legislation that enable the Plan, related to financing
the Plan and easing the transfer of property from private into public
hands. The Housing Trust implemented
last November and Senate Bill SB1 are examples.
Expansion of eminent domain at the local level is a logical progression
in such legislation.

3. We should not
ignore the economic downside of the proposal – the more invisible players, as
well as the unintended consequences,

Investors in mortgage backed securities (public employees’
pension funds, Fannie Mae, Freddie Mac, bequests funding various institutions)
are likely to suffer losses as the securities get shuffled around.

States and municipalities, trying to find ways to overcome
the challenge of ever increasing pension costs will find themselves with one
more thing to worry about, the increased risk of MBS , rendered open to
modifications due to property seizure.

Ordinary wage earners will see a loss of job opportunities
as the more risk-averse lending institutions shy away from operating in localities
with heightened eminent domain powers.

Borrowers might see a loss of borrowing opportunities from
the more risk-averse institutions.

So, we have your analysis, Matt, which clearly shows the
money making opportunities of Supervisor Campos’ proposal. And we should definitely be deeply cognizant of
them. Do we now refrain from acting out
our usual role as the resident wet blanket, or we point out the downside of the proposal to the
general public?


Hi Marcy and Matt! Obviously we must oppose his proposal and I nominate Campos for the Nanny Award of the Month. As Libertarians we should warn against getting involved in personal issues like paying your mortgage--that is the only proper Libertarian stance on these housing/eminent domain shenanigans. It seems like, in the end after all is said and done, the taxpayers will get the short end of the stick when things backfire. After the week-end, I will write Campos a few thoughts of my own about this issue. For one thing, if a homeowner is stupid enough to take out outrageous loans, that's their problem, not everyone else's. Personal responsibility--that goes along with the freedoms we cherish so much. For another, are these folks nuts or haven't they noticed lately that housing prices (at least in the Bay Area) have stabilized and have been heading upward? I see no crisis here. Lastly MRP sounds like an evil company--just another scam
artist looking to make a lot of quick bucks. This nonsense never ends.