New Englanders tackle the housing crisis
As our nation’s housing sector enters what looks to be the 10th straight quarter of decline in residential housing investment, coupled with a continued fall in housing prices and the disruption in credit availability, the impact on New England ripples from Connecticut to Maine.
It has been a particular source of pride, however, to see the New England leadership in both chambers of the U.S. Congress in creative, proactive efforts to create remedies for both homeowners in default and the lenders who lose out financially through foreclosure.
The Senate and House committees with primary jurisdiction over housing issues are both chaired by New Englanders, Sen. Chris Dodd, D-Conn., and Congressman Barney Frank, D-Mass. And they have had strong support among other New England congressional players serving on the House Financial Services Committee: U.S. Reps. Capuano, D-Mass., Hodes, D-N.H., Lynch, D-Mass., Murphy, D-Conn., and Shays, R-Conn. Rhode Island Sen. Jack Reed also serves on the Senate Banking Committee.
These New Englanders have served as trailblazers in dealing with an unprecedented disruption in the nation’s housing markets. The work has been marked by an exceptional spirit of compromise as both committees work to develop coalitions of support in dealing with this housing crisis, which is having an enormous impact on our region.
In New England, loan default and foreclosure rates have surged dramatically. In New Hampshire alone, 2008 filings are projected to increase by 200 percent over the previous year.
By defaulting on mortgage payments and losing their home to foreclosure, borrowers and their families suffer tremendous hardships. Their credit is often irreparably damaged, making it more difficult to relocate and often resulting in personal bankruptcy. Lenders suffer, since the resale value of the home is less than the original loan amount. Foreclosure itself takes a year and a half to complete and costs the lender an average of $59,000.
Cities and towns suffer from the loss of property-tax revenue caused by a reduction in assessed value — studies indicate that homes within an eighth of a mile of a foreclosure see a one percent decline in value. Recent Federal Reserve Bank of Boston research indicates that the current wave of foreclosures in the region has a disproportionate effect on multi-family housing units, which are often concentrated in low-income neighborhoods, spawning blocks of foreclosed properties in the most vulnerable communities.
The far-reaching negative impact on our economy affects everyone. That said, New England has strengths as well. Recent reports suggest that our region is home to a number of the nation’s most stable real estate markets. And with a congressional delegation in strategic leadership positions and working hard through the legislative process to help cure the nation’s housing woes, we look forward to better days ahead.
James T. Brett is president of the regional business organization the New England Council.