Irvine Housing Blog

The crux of the Harlem deals was getting out the rent controlled units.  It takes a certain type of person to write up a business plan based on evicting people from rent-controlled apartments.  It didn’t turn out to be as easy as they thought.

Do you think the prior owners weren’t concerned about people gaming the rent-control system?  Why would these new owners be able to clean out the people defrauding the rent control system when the prior owners weren’t?  Would they have been willing to take illegal measures while the prior owner wasn’t?

You can look to Trump to see how NYC real estate works.  Shell companies declare bankruptcy and people walk.  The dealmakers have already gotten theirs.

You also don’t hear people talking about gov’t involvement or the community reinvestment act with respect to these massive deals.  This is worse than most subprime loans.  I want to rent a home for $500, but my mortgage payment will be $1500.  Really?

What if HELOC proceeds were taxed?  And then the entire P&I can be deducted from future income.  Your total tax bill would be the same.  You would pay the initial tax out of the HELOC proceeds.  This is a revenue neutral action (as long as someone had enough income to use the future deductions), so it is really just to deter behavior.

$23k after tax per year for 10 years would come in handy, even for folks in the highest tax brackets.  What bank underwrote the last loan?  Do you see some lenders being the worst of the worst?

Say a 25 year old married couple was looking to buy this.  Odds are they don’t have $45k in savings…however, their parents definitely would have during the bubble - do their parents have that now?  I wonder how many buyers during the bubble counted on their parents as their ‘lender of last resort’ practically supplying their ‘emergency fund’ and often their actual down payments.  How much of the money for that came from their parents’ HELOC’s?

Assuming today’s home loanowners only squatted for 2 years, they paid about 8 years of mortgage payments, taxes and HoA to live there.

So that’s $150k to $200k in total, depending on the changes in mortgage payments over the years.

So you can either look at it as a free place to live for 10 years, or the paid their mortgage and were paid $23k to live there in return.

Plus trashed credit and income tax on the HELOC money if they can’t prove it was used to improve the residence:

HELOC 1099s (Arizona)

“For example, if the property requires an unbudgeted $100,000 repair, and the owner makes that repair, he can do nothing to recapture his investment.”

not correct.  If you read your quote above that, the owner is allowed to recapture over a 7 year period by permanently raising rents, so not only do they recapture, they increase their revenue in the longer term.

this is actually one mechanism that owners use to ‘de-control’ their properties.  over improve them to bump the rents above the control limit (which was $2k/month last i heard).

rent control isn’t the boogie man here, it is like prop 13.  good idea, poorly implemented (actually rent control is better implemented than prop13).

Rent control back East is locked in once someone moves-in.  Lots of once young professionals get the apt and live there until they either die or sell the rights to take over the unit via roommate to changing over to the lease in the new (buyer’s) name.  The rest of the non-rent control units must pay.

The Harlem loan abuse raises a common miss conception that the Community Lending Laws (CLL) caused the liquidity crisis.  It feeds on the “blame it one the blacks” (BIOTB) mentality.  I’ve not seen very much supporting data to support BIOTB but lots of finger pointing to the CLL as the root cause in Congressional hearings.  I’ve not seen many blacks as a large percentage of the squatters.  In fact I don’t see black able to squat for over a year in this area nor have I seen very many black banksters. 

When the common man squats and need 6 months of loan forgiveness is a moral hazard.  When the banksters need millions for a personal bailout, it’s a necessity.  When the too big to fail need free money, the govt response is how much and when?