While the results of last night’s presidential election remain too close to call, a leading political science academic is warning that the January 2021 occupant of the White House will be forced to deal with the greatest foreclosure and eviction crisis since the Great Recession.
After the COVID-19 pandemic disrupted the economy, moratoriums were declared on both foreclosures and evictions. But these measures were only temporary and will be gone by 2021 unless they are renewed.
In an opinion piece published on the Informed Comment website, John Buell, a former professor at the College of the Atlantic, observed that an after-effect of the COVID-19 pandemic’s economic trauma will weigh on the housing market as homeowners and renters struggle to keep up with housing costs.
“If foreclosures and evictions are standing in the way of recovery, it is also safe to say that the draconian cuts in budgets of state and local governments translate into wage reductions and/or unemployment for public sector workers and thus more pressures on the housing market,” Buell wrote. “If homeowners and government workers are not able to create sufficient demand to restore economic growth the federal government must step in. State governments are constitutionally prohibited from borrowing for daily expenses.”
Buell lamented that while this situation metastasizes, “there is very little talk about how debt might be restructured or how to house the many who will be left homeless. What talk there is once again seems to blame the debtors.” He recalled a similar situation that occurred following the 2008-2009 crisis.
“Borrowers lost their homes and savings even as bankers reaped multi-million dollar bonuses,” he continued. “Borrowers alone were punished despite the fact that for every improvident borrower there is a reckless or manipulative lender. The bailout legislation in effect recognized this truth and allotted a portion of the bailout relief for homeowners. Nonetheless, the Obama Administration chose not to implement that part of the legislation even though assistance to ordinary borrowers would have been at least as effective in saving the banking system.”
Buell cited a proposal from Debunking Economics Australian economist Steve Keen for a “simple one-time grant of say $50,000, which can be spent only after it has been used to pay down any personal debt,” adding that the concept deserved consideration.
“This proposal has several merits,” he said. “Because it is universal, it would help the thrifty homeowners sufficiently who have paid off most of their mortgage while also aiding those underwater from home or student loans. With another debt foreclosure crisis coming, it is imperative that such ideas receive a fair hearing.”