True North

Last week, I wrote about the mood change I see in Saint Paul since the Coleman (Chris) Administration took over, and since the ultraliberal Gang of Four consolidated their power and expanded to Five. 

To sum it up - things seem gloomy in Saint Paul lately.

Now, I’ve lived in some gloomy places.  I grew up in North Dakota, during the farm depression of the seventies and eighties.  The family farm, in those pre-ethanol days, was in deep trouble.  A decade of profligate farm lending (and borrowing) ran smack-dab into huge surpluses and lower prices.  This, combined with government interference in the market both chronic (the various farm subsidy programs) and acute (the 1980 grain embargo of the USSR), made independent farms dry up and blow away faster than Al Franken’s political future.  Some farmers (and the rural businesses that supported and depended on them) adjusted; they sold the land and left the business; others diversified crops and, in many cases, careers.  Others reacted less rationally.  And quite a few just hunkered down and rode it out.

Which, if you’re not on the federal reserve board or Warren Buffet, is about all you can do.

Unless, of course, government seems hell-bent on making things much, much worse.

———-

I got an email last week from a Saint Paul resident, from the Como Park neighborhood.  He’ll remain nameless for now, since his wife is closely-enough connected to this issue that it’d be poor form for her name to be floating around.

And she brought the bill above to the writer’s attention:

She got a copy of this new St. Paul city ordinance from her trade association.  If they’re correct that this ordinance was adopted, it could be historic.  We could see huge swaths of Frogtown and the East Side disappear in the next three years.

That got my attention.

Saint Paul has a foreclosure problem - and that leads to a vacant building problem.  As of yesterday, the city listed 1993 vacant properties in Saint Paul.  The number is big enough when you put it up against the total number of houses (115,713 as of the 2000 census); it’s worse when you see how those vacant properties are concentrated.   While real estate values throughout the city have suffered, a big part of the problem is concentrated in some of the city’s most “challenged” neighborhoods.  You can walk some blocks in the North End, the East Side and Frogtown and see more houses with blue “Vacant Building” signs on them than without; I walked a block near one of my kids’ schools, in the North End, last spring and counted five vacant, foreclosed homes out of six on a block just west of Rice Street.

Now, you can attribute this to any cause you want.  Some will point to greedy, unethical lenders - and they are certainly an part of the problem. 

Of course, free markets are usually pretty good at preventing bad behavior on their own - and when you see unethical behavior on a wholesale basis, it’s often useful to look for openings for that behavior, created by government interference in the market. 

The Community Reinvestment Act, and its various amendments, is a good place to start looking; the CRA impelled lenders to get into the subprime business on a wholesale level in the first place.  This wasn’t a bad thing in and of itself; home ownership can, in and of itself, be a very good thing for communities.  Twenty years ago, “absentee landlords” were the crisis du jour in exactly the same neighborhoods that are awash in foreclosures and vacancies today. 

Of course, combining a regulatory compulsion to do assume riskier loans and the “get rich quick” impulse on the part of many lenders to fill that compulsion during the housing bubble meant that, in a lot of cases, money was moving faster than information; a lot of new home-buyers didn’t know the questions to ask.  The lenders (or, to be fair, the brokers that originated the loans that the big lenders then bought to collect on the debt) didn’t, by law, need to care; they were doing their job, as mandated under the CRA.

But this posting isn’t about why we have a foreclosure crisis in Saint Paul.  It’s about how we - as a city - react to it.

And that’s where the really bad news kicks in.  Not only are many of the city’s oldest - and, as it happens, most historic - neighborhoods in immediate jeopardy, but so is the notion of actually being able to buy a home, if the plan goes through.

More on Thursday.

Cross-posted and comments welcome at Shot In The Dark