Bulldozers: Cheaper than a bailout, faster, and more fair

No joke: Wall Street Journal columnist Holman Jenkins suggests that bulldozing vacant homes would be a better government policy than the currently brewing stew of bailouts and tax breaks.

"Knocking down surplus homes would be the most efficient and equitable way to spend taxpayer dollars," he writes. "It can proceed experimentally. It can be turned off quickly when the need evaporates. It would not be a lesson to Americans that housing debt is not real debt and need not be repaid. It wouldn't benefit the most irresponsible lenders and borrowers at the expense of responsible ones. The housing market would still have to hit bottom, but the bottom would be higher (and sooner)."

Even if you think the bulldozer option is too far out there, the column is worth reading for its well-reasoned takedown of the thinking behind a bailout. As Jenkins points out, the only way to structure an effective housing bailout -- if that's really what you want to do --  is to construct a bailout that saves speculators from bad bets: "Behind the fig leaves that will be frantically waving, a lending bailout would be effective in stemming foreclosures and propping up home prices only if taxpayer money were used to put speculators' housing bets back 'in the money.' "

Thoughts? Comments? E-mail story tips to peter.viles@latimes.com
Photo Credit: AP

Comments

[Tim Hebb]

I'm sure the legions of homeless in our city would find this a sensible option, or rather, "a modest proposal."

[Dave]

One thing you haven't mentioned in your coverage here is the proposal to give a $10K to $15K tax writeoff to anyone who buys a foreclosed house. In actuality, this is a big sloppy wet kiss to irresponsible lenders. It's also a gigantic kick in the pants to John and Mary Good Citizen, who will now find it even more difficult to sell their homes because their buyers will get no tax writeoff. This is nothing short of rewarding bad behavior and a gigantic shafting of ordinary taxpaying citizens.

[enlightenment]

Better yet, lets doze all of the speculators houses, including the one they live in.

[dilbert dogbert]

Sounds something like what was done in the 1930's when the government bought up farm products and then destroyed them. The government did stuff like that for years. They didn't just destroy the products, they stored them or sent them overseas to destroy other peoples markets for farm produce.
I read somewhere that cities and towns in the Rust Belt are taking abandoned houses for back taxes and bulldozing them and selling the vacant lots. Better bare lots than crack houses.

[E]

Sure...that may solve some supply/demand issues 40 miles outside of timbuktu but it still doesn't apply the fundamental concept of incomes relation to what people can borrow.

Any story that talks about a "higher bottom" is just bait for the desperately needed debt slaves that our system depends on.

Hail to the knife catchers for "taking one for the team"!

[LizWetzel]

What I am annoyed at is that the banks are still holding the properties for the biggest bidder. I offered to buy a house on what they listed at. The bank said that they want more deposit. If I have more deposit money, I wouldnt even look at that property. So they said, the property is already in escrow but 2 months after its still in the market. I called them as another person, and was told it is still available. I am so mad now that I pray everyday that that house do get bulldozed or burned.

[Laker]

The smart Soviet Bolshevik HOLMAN W. JENKINS says: "...Using tax dollars to buy and demolish foreclosed, unoccupied or half-built houses in selected markets...." and
"...Knocking down surplus homes would be the most efficient and equitable way to spend taxpayer dollars...."

WOW, Stalin would be steaming from happiness as hi agenda has finally won, albeit not in USSR but in USA...
What kind of B of S is that? Give me a break please!

Let me get this straight. This fool want me to pay taxes and these taxes would go to buy the foreclosed houses and buy bulldozers and demolish them...
so here in LA, where there is shortage of housing, we will bulldoze them down. So then the resposnsible people that want to buy a house, instead of getting it for normal price of say $300,000, would see their future house demolished and will be left to fight bidding wars on home for sale by delusional sellers and pay super duper inflated prices??
ARE YOU NUTS?$%$#%
You want to punish the responsible citizens, those that made wise decision to save, and pay their taxes 5 times!
1) you inflate the housing market by 0% interest loans, teaser, IO, Option ARMS, lair loans, state income 0 FICO...
2) You use tax money to buy the foreclosure from the banks (probably at full price - mortgage balance)
3) You destroy the houses that BELONG NOW to the tax payers.
4) Reduce inventory to prop up prices by reducing supply.
5) Let us fight for the remaining ones...

HEY stupid, what can't you understand, houses are not affordable, especially in CA and LA.
That is the reason prices are free falling!
Keep your dirty hands from the market and from our pockets, crook.

[Fred]

Why is the government so intent on upholding an unhealthily high "bottom"? It is not safe for Americans to be spending so much of their incomes on housing. Wouldn't consumer spending rise if we all had more dispoable income because we weren't spending all our money on our mortgages?

This all seems like a lot of dangerous, irrational fidgeting with a market just to save a certain group of people some short-term money.

[arroyogrande]

"The housing market would still have to hit bottom, but the bottom would be higher"

This is something I don't quite get...housing is something we all need in one shape or form, yet our own citizens and government wants to keep the price HIGHER?

Should we also have a government policy of keeping energy and food prices higher? If high housing prices are a good thing, why aren't high food and energy prices a good thing also?

Sure, lower housing prices hurt some families and industries, but so do lower energy and food prices. After all, many many families have their investments and retirement savings in food and energy companies ("big oil", for one). So should the federal government try to keep energy prices high as well?

No? That would be a silly idea? So why isn't keeping housing prices (artificially) high considered a silly idea? Using taxpayer dollars to bulldoze houses? Should we also use taxpayer dollars to re-bury oil production deep in the earth, so as to keep energy prices high? After all, we wouldn't want the oil companies or pensioners with money invested in energy stocks to get hurt, now would we?

- arroyogrande

[IToldu2CashOut]

Blah, how about we just let the market work itself out.

[Winfield J. Abbe]

This outrageous proposal is just as foolish and meaningless as the artificial bailout of Bear Stearns by the Federal Reserve with "money" the Federal Reserve did not have, but only had the ability to "print" out of thin air. Did this author propose burning and destroying the remaining assets of Bear Stearns? Did he propose demolishing the building in New York owned by Bear Sterns and lowering its "value" from a billion dollars to whatever the bare land is "worth", thereby reducing the property taxes to the city of New York by around 70% or more? I am sure the city of New York would love this wouldn't they? And the banks which held mortgages and made bad bets on Bear Stears would be rewarded wouldn't they since they would have to be paid before this demolition could happen? What if there were n mortgages on top of a 1st, they would also have to be paid in full before such a demolition could occur; therefore, those who made the "bad" bets on Bear Sterns would be rewarded wouldn't they, contrary to the false claims of this disgusting article which should not have been approved for publication? But instead of demolishing or "burning" the remaining virtually worthless assets of Bear Sterns, our Federal Reserve Bank, out of any direct citizen control, tacitly authorized the printing of United States Dollars, thereby reducing the value of all existing dollars, to prop this failed business organization which could not (or would not) meet demands for payment by creditors. The "free market" should have been allowed to operate and let this fraudulent piece of garbage evaporate to the nothingness it was for all the world to see. But instead it was bailed out to manipulate the New York gambling casino totally fraudulently and artifically. This article illustrates an "accounting" value of assets independent of the true, physical, inherent value, provided by the work of thousands of individuals to pruduce the asset, independent of any artificial market value which might be imputed. This author is nothing more than a bean counter who has no respect for the basic raw materials which created the inherent wealth of homes, commetcial buildings and other assets in the first place. He thinks these raw materials are unlimited in availability, unbridled in scope; just destroy them with an artificial housing holocaust and any number of new ones may be constructed without regard to any other considerations of labor, raw materials, means of production, etc., ..., let alone entropy considerations of the earth itself. The proposals of this elitist article should be flushed down the toilet to the sewer of the earth where they belong. This contemptable article shows, in graphic terms, how meaningless the concept of "value" is in econoimics in the first place. In a sense, every "appraisal" is fraud isn't it? For in the last analysis, what something is "worth" is not a single penny more or less than what an "arms length" buyer would pay for it in cash, not borrowed dollars, printed out of thin air by government criminal fraud!

[John]

Can we start eating the young inner-city youth that are plaguing our public school system also?

[Fred]

Forget the economic implications, isn't bulldozing houses an enormous moral problem? How could we willingly destroy houses when L.A. has such an enormous homeless population?

[Kevin Culbertson]

I have been proposing this since last year ... but let's take it a step further and demolish any home that goes to foreclosure ... make the land a public park ... garnish the wages of the borrower until the debt is paid and, for good measure, continue to have them pay for the upkeep of the park and the lost revenue to the city, state, etc. ... come on folks, the fault is with the borrowers ... let's make the greedy pay for a change instead of causing problems for folks that do the right thing regardless ...

[Kathryn]

I don't think bulldozing homes would fly in Los Angeles, but it might be the best thing to happen to the inner city areas of cities like Cleveland, Detroit or Dayton, where there are vast stretches of old, run down houses no one wants. Bulldoze them and start over. Let the cities redevelop the land. Some houses were just built so cheaply and haven't been kept up, starting over might be a better idea.

[Laker]

Kevin Culbertson, if we follow your idea of demolishing every foreclosure, we would have a huge national park in riverside. Lancaster and palmdale will become a state park.
And the san fernando valley will suddenly become green, an 1/4 of it will be a city park...
Who is going to pay for all these houses????
Sometime we underestimate but let's be real. Even the gang bag foreclosure has some value more than 0.
A $600,000 SFV 3/2 1500 sq ft house bought in 2006 still has some value of about $150,000-200,000.
So why would you destroy this $200,000???

[victor knopp]

this is one of the most ignorant postings i have ever read,it is just another example of people who dont know anything about real markets and how they function,iam wordless with disgust.prices have to fall untill they are affordable to the average qualified buyer.for a capitalistic country people seem to be completly retarted,,,,,buyers and sellers will not match untill the capitulation of delusional sellers is realized,please is this a late april fools joke,WOW

[victor knopp]

if we can say things so stupid,i got a wonderfull idea how about inheritable mortages,that will solve everything,rumplestilscin style talk about debt slaves,our children can assume our debts,dantes hell is waiting for the desprate white coller crooks that would do anything to avoid picking up trash on the side of the freeway where they belong

[Wayne]

"Why is the government so intent on upholding an unhealthily high "bottom"?"

Because it benefits those who caused this mess in the first place, and that's why the mess-makers' lobbyists are jamming through the "relief" bill right now.

[InspiredLA]

Wow. We are a nation utterly lacking a leader. The proof is the total absence of a unified vision and a defining strategy to see us through this mess. It's every man for himself, with disparate programs springing up everywhere - Congress, the Fed, the States - with no common dialogue and without a shared definition of the problems at hand. This body is all arms and legs and no head.

Every day in the news, George W. Nero is off fiddling a new tune - keeping kids in school, erecting missile shields, on a peace mission - while the U.S. burns. Has there ever been a less relevant President?

[m]

I don't know what else to say except this is disgusting and disturbing on so many levels -- morally in terms of homeless populations, artificial price raising for people that wanted to buy a house one day, environmentally in terms of destroyed and wasted resources, monetarily as a tax payer... the list can go on and on...

[ROB CASE]

HMMM REMMBER BACK IN LETHAL WEAPON 3, THEY DESTROYED A HOUSING TRACK (PARTIALLY BUILT) IN THE ANTELOPE VALLEY DUE TO THE LACK OF SALES

[xtine]

Where are we going to put all the houses we demolish? The stucco - pipes - plywood?

Landfills.

The environmental impact of the detrius that would create is unsustainable.

[Brad A. Greenberg]

Jenkins is a bit detached from human emotion in his approach. But I like his logic.

[victor knopp]

personaly i like bobs creative destruction idea,didt that just happen in the last fire season

[Uncle Billy]

Executive Summary: This Country/State/County/City needs a high colonic.

I like Michael's energy and enthusiasm with regards to effecting change by participating in the process (previous posts), but I'm inclined to think that letter writing and even voting has little effect on any issue but the one right down your own street. The system that has worked kind of ok for us for over 200 years just doesn't seem to be doing the trick anymore.

We do not need regular, cyclical bubbles that make a miniscule percentage of the population (and external entities) huge fortunes while ruining everyone else; we need slow steady growth and a much more even income distribution with a humane floor for poverty -- in my very humble, frustrated, opinion. That would be a good start.

[peter m]

Let me address this problem of demolishing abandoned foreclosed eyesore properties from the LA Angle. I have been into some of the most derelict districts in inner La and the IE where i saw abandoned REO properties so wreaked, trashed and gutted that they were unfit for human habitation. The deal is that there was also an enormous amt of teardowns, retros, quick fix and flips in the shabby inner LA slumzones, which always altered the old stable hoods into haphazardly upturned mixed-use zones with resultant decline in neighborhood stablity. Many older homes frequently would be demolished,a new home halfway built and then abandoned, leaving neighborhood eyesores while the city would repeatedly cite the skipped owners(?) for code violations . Eventually the city gets these half- finished quick fixes but no one wants then unless for a very cheap price say 20-30% of the original market value.
If these half finished or gutted eyesores start selling for a fraction of the average hood prices it would raise hell from the entire hood over declining prices.and values.
I would buy one of these half- finised gutted 2/1 's 700-800 sq ft even if completely trashed for $20,000-maybe even 30,000 even in a gang -infested ghetto. I could slowly restore it in a year or two and 100% sweat labor and have a decent small ghetto home valued at $100,000 and up.
No quality community would allow properties to sell so cheap , even if property completely gutted & abandoned, as it would lead to calamitous collapsing Re values all over LA.

So city /hood might as well demolish it and make the neighbors happy about keeping their hood values up.

[victor knopp]

from a thermodynamic,co2 emmision point of view bobs idea would result in= amount of emmisions as the tractor would ,however if conducted porperly and saftly would be economicly more effiicent

[JohnnyB]

This sounds more like the billionaire’s club of Wall Street floating a subtle threat into the populace through a... ehem (clear's throat)... “journalist”.

The populace is on the verge of forming an enormous mob of torch wielding Frankenstein hunters storming the castle seeking the blood of Ponzi’s brethren – the creators of this monstrosity.

Wall Street’s message; “you people want to walk away from your over-priced houses?... well, we’ll give you what for… like tearing them down in your wake. That’ll teach you plebs. We’re in charge here, so don’t piss us off too much or we’ll tear down your huts. How dare you not bow down and acquiesce to our private equity”

Jenkins; “It would not be a lesson to Americans that housing debt is not real debt and need not be repaid.”

What’s forming is a lesson to Wall Street from the mob that they’ve gone too far… way too far. They’re coming across as a bunch of lying, cheating, greedy crooks that are making up the rules as they go along so they cannot lose. How un-American can you get. But, that’s part of the problem isn’t it… they think they can float along, untouchable, on 5 star global clouds pissing on the very people whose real assets they’re leveraging.

The Roman patricians learned the hard way about pushing the “mob” past their tipping point. Blood letting in the network of coliseums and false warring with the neighbors only releases and redirects so much pent up resentment. When you f*ck with their homes and livelihood and smirk at them on top of it, eventually they’ll get lizard brain evil on you.

The mob tipping point is upon them and Jenkins & Co. should take heed.

Corrupted media filtering only goes so far when Joe six pack is taking repeated cheap shots to the back of his thick noggin'.