A local newspaper editorial claims “Allegheny County’s first-time homebuyer program will boost [the] middle class.”
To which Jake Haulk, president-emeritus of the Allegheny Institute for Public Policy, offered a no-punches-pulled refutation: “What utter gibberish.”
The program, known as “1st Home Allegheny,” would, as the editorial notes, offer “forgivable loans — which might also be called conditional grants — of either $10,000 or $45,000 for prospective first-time homebuyers to use for closing costs and down payment assistance.”
“The smaller amount is available to ‘middle-income’ buyers, which cashes out to $86,480 for an individual and about $124,000 for a family of four. The larger amount is available to ‘moderate-income’ buyers, which means about $60,000 for an individual and $86,000 for a family of four.
“The interest-free loans are forgiven after six years, as long the buyer remains an owner-occupant of the home for that long. This incentivizes neighborhood stability.”
We guess there’s free money, then there’s really free money, eh? “Utter gibberish,” indeed.
And, since “when did an income of over $120,000 qualify as inadequate income to purchase a home?” Haulk ask. “Good grief.”
The editorial laments that more and more first-time homebuyers simply can’t afford traditional downpayments (Who remembers the 20 percent rule?) and, with rising housing prices, are shut out of homeownership.
As they should be, perhaps.
Having the necessary downpayment for a home long has been the beginning benchmark that helps prove creditworthiness. It’s far more likely that a would-be home buyer who has sacrificed and scrimped and saved to come up with that once-necessary down payment also will have the discipline to maintain their investment.
But while the editorial bemoans high housing prices, the editorialist ignores the fact that such subsidies most assuredly will give sellers the incentive to raise housing prices accordingly (much like subsidized tuition has given colleges and universities the cover to raise those tuition levels).
Haulk reminds that it is demand and supply that set housing prices where they are. And he offers this succinct point of order for a program born of classic “Democrat know-nothingism”:
“There are already programs in existence to help buyers,” he reminds. “FHA and VA come to mind.”
But, the “problem is that for FHA you must have creditworthiness. Allegheny County Chief Executive Sara Inamorato apparently is not aware of that. She wants to be seen as the champion of the poor.
“When you incentivize poverty, you get more of it,” Haulk concludes.
“1st Home Allegheny” is available for only non-City of Pittsburgh homes. The city has two of its own similarly styled — and dubious — programs operated through the city Urban Redevelopment Authority.
The editorial closes by applauding Innamorato “for extending homeownership support across Allegheny County. More emphasis on for-sale housing affordability, including incentivizing new construction, will widen the currently far-too-narrow path to middle-class stability for Pittsburgh families.”
Sorry, but no. It’s more likely to put more people in homes they neither can afford nor maintain while raising the prices of existing and new housing. Talk about a dog that should not be allowed to hunt.
And as Haulk notes, “1st Home Allegheny” is just the latest example of “progressives … always trying to solve problems that their earlier, failed policies created.”
Colin McNickle is communications and marketing director at the Allegheny Institute for Public Policy (cmcnickle@alleghenyinstitute.org).
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