Saturday, November 18, 2006

Land Reform New Orleans Style

In much of the under developed world one of the major issues has been Land Reform or Land Redistribution.

After Communist governments were established in most countries, land was expropriated by the government and collectives formed, for the benefit of the "peasants" or "workers". In theory the workers were to benefit from the removal of the oppressive land owners. In reality the Soviet workers attitude became "They pretend to pay us and we pretend to work". Mexico and other Latin and African countries have at different times also initiated Land Reform with varying degrees of success. Recently Zimbabwe has been in the news with charges of expropriating land from mostly white owners, for the benefit of government supporters.

There are at least three separate causes which will effect significant redistribution of the Residential Property in New Orleans.

Foreclosure and Repossession. Many people are going to simply walk away from their mortgages and New Orleans rather than rebuild. Some of the mortgage companies may recover from the insurance, especially if there was flood insurance in place, but they will eventually repossess the property. A large number of small rental properties will fall into the group, since rental don't generally qualify for government help. A lot of these loans will be federally insured through VA and FHA, leading to HUD ownership.

Road Home Buyouts. No one knows how many people will take the buyout option. I know of a couple of people who are going to. I don't have a feel the economics of the situation and it probably varies by neighborhood. Private investors will likely make it more advantageous to sell to them in the more desirable neighborhoods. Out in the east, I expect a lot more LRA buyouts.

Blighted Property. The city has recently begun notifying the owners of nearly 9,000 properties that they need to clean up and secure their property. Most people will comply but a lot won't. The city will in time begin to take possession of these properties.

Since the Road Home and Blighted properties will eventually end up under the control of the city, there are really three categories of Owners which will be prominent in this process.

Private Lenders. Normally sell repossessed properties to private investors as soon as possible, owning property only costs them more money. In New Orleans I expect there will be a shortage of investors by the time the lenders actually have the property. Lenders might decide to demolish any heavily damaged property, rather than risk a mold or other suit down the road Lenders might be induced to donate property to a Redevelopment Authority, in exchange for immunity for future law suits or simply to unload it.

HUD has a well developed process of disposing of reposessed property and as a federal agency can afford to hold property as long as it takes, but their normal process probably won't apply in New Orleans. I expect HUD to demolish any building not meeting the minimum flood elevation. They might also be directed to donate property to a Redevelopment Authority by a higher authority.

The City of New Orleans will receive, through a Redevelpment Agency, all of the property purchased by the LRA. They will also likely receive the property seized through the Blighted Property programs.

I am fearful of the result of the current land redistribution efforts in New Orleans. How this property is transfered and redeveloped will be crucial to the long term health of New Orleans. If past experience is any guide we should be very vigilant in monitoring how this is accomplished.


bayoustjohndavid said...

Good points, I didn't see this when you posted it. On the positive side, the city gaining control of the property plus the Democrats being more likely to forgive the city's loans means that the city might not be broke for as long as I feared.

On the negative side, does anybody really want the city to have financial incentives to aggressively pursue blighted housing enforcement? Condemning a house is a lot different than writing a parket ticket. Throw in the fact that the mayor's now a real estate developer and it gets really scary.

mominem said...

I wonder how he property will be distributed.

I hope to see a "Homesteading Plan" and a "Bridge Plan" allowing individuals to obtain property under favorable terms, in an attempt o benefit individual home owners and small entrepreneurs.

I expect that the usual suspects will receive favorable terms which will allow them to "parter" with moneyed interests and obtain large profits at little risk, based on personal relationships.

Anonymous said...

HUD! ARGH!!! Here's where I used to live before HUD got their mitts on it ;,+Detroit,+MI&ie=UTF8&z=16&ll=42.364315,-82.974415&spn=0.006611,0.020192&t=k&om=1&iwloc=addr

It used to be stately 2 story brick homes with huge cement porches and enormous sycamore trees. How it's a HUD desert and has been for decades. Pray that HUD doesn't get involved.