Risk Rap

Rapping About a World at Risk


Yesterday’s post on the theme on the New American Diaspora neglected to mention the impact of mortgage foreclosures.

Diaspora is a Greek word that means “to scatter.” Yesterday we speculated on how high energy prices and climate change may impact the changing demographics and population shifts in the urban centers and rural areas of America. Today we offer a brief comment on mortgage foreclosure and its potential impact on the New American Diaspora.

Due to the excesses of the credit marketing orgy and the implosion of sub-prime lending market, it is estimated that during 2007 1.5 million mortgages were in foreclosure. The Department of Treasury estimates that during 2008 approximately 2.5 million mortgages will enter foreclosure and subsequent quarters will experience 800,000 home foreclosure run rate. That’s a staggering amount of potentially displaced people.

It is heartening to see that our governmental institutions are moving to address this growing problem. The financial and political impact on state and local governments and the economies of local communities can be severe.  Over 4 million mortgage foreclosures have been or are forecast to occur. If we surmise that each mortgage is tied to a house that shelters 3 people we are speaking about 12 million people who are being put out of their homes. This does not translate into 12 million newly homeless people. Many former homeowners will return to renting their dwellings. But the pressure that this will put on affordable housing markets ability to absorb this dramatic spike in demand will drive affordable  housing prices up and will contribute to a rise in homelessness.

State and local governments rely heavily on property tax receipts. As defaults grow the level of tax receipts will recede forcing state governments to raise taxes and cut back on critical services. State governments are moving to address this problem. The Federal government is also trying to develop market solutions to keep people in their homes. If market solutions fail the government may have to dust off some New Deal Programs to address this mass dislocation.

The California town of Weedpatch was created by the Farm Security Administration in 1935 as a settlement community for the displaced Dust Bowl dirt farmers. Lets work to create a solution to this problem so we don’t have to build these camps.

Lets listen to this Woody Guthrie Dust Bowl classic, I’m Going Down the Road Feeling Bad.

Risk: homelessness, local government, tax ratables, social programs, market solutions

July 10, 2008 Posted by | Bush, credit crisis, homelessness, recession, social unrest | , , , , , , , | Leave a comment