Home Values Fight Back

This from the Wall Street Journal:

“Officials at a Citigroup Inc. office in St. Louis placed a call to this desert town recently. The bank had caught word that Indio was coming after the lending giant with fines and threats of criminal charges. The offense: an algae-infested swimming pool at 79760 Eagle Bend Court.

Citigroup wound up in charge of the foreclosed home, one of thousands of such properties it was managing across the country. But last year, Indio passed a law that allowed it to charge banks with a criminal misdemeanor if they allowed a home to fall into disrepair.

“If I need to do it, I’ll say, ‘Mr. Bank President, if you don’t come and take care of your property, we’re going to come arrest you and take you to court in California,'” says Brad Ramos, Indio’s long-serving police chief.

The hard-line approach is part of this town’s attempt to gain leverage over some of the nation’s largest lenders. A couple of years ago, Indio was a real-estate bonanza. Old date farms were closing down, sprouting subdivisions in their places. Today it’s a different scene with one in 10 houses either in default or foreclosure.”

At first glance, this seems like a good way for homeowners who have done everything right and made their payments on time to prevent their home values from going down. As the neighbors upkeep can have negative externalities. The next question is the property rights one. Should other homeowners be allowed to sue other homeowners for upkeep.

The solution may be that if they all entered a social contract like the ones James Buchanan lays out, then it is an unianimous decision that the homeowners would be held against. Obviously, if your neighbor who you never entered a contract with decides that you do not keep your home nice enough for him, then he cannot do anything to you. This is why there are homeowner’s associations.

The rest is here.


Published in: on May 28, 2009 at 1:17 pm  Leave a Comment  
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