Solving the Foreclosure Crisis
The “Great Recession” of 2008-2009 has exacerbated a problem with foreclosures that originally stemmed from the loose lending standards of the previous decade. The combination of foreclosures and the recession has devastated state and local revenue coffers: foreclosures in particular drag down neighborhood property values, which lead to lower property tax revenue. Since this revenue funds local essentials – predominantly local public school systems – the foreclosure crisis has moved beyond its original tragedy of displacing individual families, and now, in a further blow, threatens entire localities and the funding for their public school systems. In Loudoun County, Virginia, where I live, the school system receives more than 47% of its revenue from local property taxes, according to a December 20, 2009 article by Leesburg Today. Due to the decrease in property taxes stemming from the foreclosure crisis, the Loudoun Independent newspaper in a November 16 article quotes government officials saying that school revenue will be slashed for the coming academic year. This budget cut is projected to occur despite thousands of new students entering the Loudoun County school system, the highest student growth in the entire state. One of the major victims of the school budget cuts typically is low-paid teachers. Teachers have not received even cost-of-living wage increases in my county according to the Leesburg Today article: the ultimate cost of the foreclosure crisis is therefore falling heavily on the shoulders of our teachers and children. Without cost-of-living wage increases, let alone oft-recommended salary increases, it will be increasingly difficult to attract and retain the best teachers to the public school system. A proper solution to the foreclosure crisis will therefore not only address the problem of empty homes and loss of local tax revenue, but also the ultimate cost on the local school systems.
To this end, offering Federal mortgage subsidies for teachers to buy homes (specifically foreclosed homes) would help solve both the foreclosure crisis and its effect on the local school systems. These subsidies would help solve the foreclosure crisis by encouraging purchases by teachers, who have stable government jobs and are therefore unlikely to default on their mortgage. With foreclosed properties being purchased in this manner, home prices across neighborhoods would stop their precipitous decline, which would stabilize local tax revenue and therefore the school systems which depend on it. Teacher subsidies would also help the local school systems by attracting teachers: although cost-of-living wage increases are not possible, there would be considerable value added to the job by the ability to qualify for a subsidized home.
The benefit to such a plan is that similar programs have already been designed and are popular in individual pockets across the country. The city of Chicago, IL began offering $3,000...