Richmond CA Votes to Risk the Ire of Wall Street with Eminent Domain
|December 9, 2013||Posted by Staff under Activism, Financial|
The city council in the California city of Richmond, pop. 105,000 with a Green Party mayor, narrowly voted to become the only municipality in the US to seriously consider using eminent domain to seize underwater mortgages from the investors who currently hold them. The city would not seize the properties themselves – as more typically happens in eminent domain cases – but would use the power to essentially purchase the mortgages at their current market value (against the wishes of the banks that hold them).
The median price of homes in town has dropped to less than half of what it was at the height of the housing boom. And the city has estimated that about 51 percent of its homeowners are underwater. Richmond’s unemployment and poverty rates are high.
Richmond CA would ultimately sell the restructured mortgages to new investors at rates that would keep the current residents in their homes.
Every other local government that’s been tempted by this idea has ultimately abandoned it in the face of growing pressure from the banking industry, realtor groups, and even the federal government.
Banks and the securities industry have threatened that no one will give credit to cities that show they’re willing to seize property like this. And the Federal Housing Finance Agency has said it may take legal action against cities that try the tactic and stop lending to would-be homeowners who live there.
Ed. Notes: If the city does stand up to the realtors, bankers, and politicians, it can still win, if it turns Richmond into a highly desirable place. That the city can do by making itself into an enterprise zone. And that any city can do by de-taxing buildings, sales, and earnings. Instead, the city would recover the value of locations. It would charge rent to landowners (a tax or fee or dues, etc). To pay the charge, owners would develop their land and the city would prosper. Everybody wants to do business in a prosperous city, even realtors and bankers who had been angry opponents.