Housing

The current -- and predicted future -- turmoil in the mortgage market highlights an important challenge to the American dream of homeownership: how to make certain that those who enter into homeownership are able to sustain that status, protecting family stability and building equity in a critical asset. Thirty years ago, those who owned homes had fixed rate mortgages and substantial equity, and foreclosure was a rare event.

Three years ago, Alejandro Gutierrez got a strange and tantalizing message from Hong Kong. Some McKinsey consultants were putting together a business plan for a big client that wanted to build a small city on the outskirts of Shanghai. But the land, at the marshy eastern tip of a massive, mostly undeveloped island at the mouth of the Yangtze River, was a migratory stop for one of the rarest birds in the world -- the black-faced spoonbill, a gangly white creature with a long, flat beak.

Only a sap, it seems, would believe that you can pull money out of thin air.

But an interesting proposal is floating around L.A. that would, in effect, do just that -- and it might well work, raising meaningful sums for worthwhile aims such as affordable housing.

You may remember the ruckus that arose a couple of years ago when a local Spanish-language television station, Channel 62, put up a billboard publicizing its newscasts. Next to the words "Los Angeles," the abbreviation "CA" was crossed out and "Mexico" written in its stead.

Many reacted angrily, saying the sign was glorifying illegal immigration. Others accused the complainers of being racist xenophobes and maintained that the ad was simply celebrating the region’s Latino flavor.

I realize now how fitting it is that the billionaire godfather of mainstream Las Vegas was an agoraphobe. Not unlike Howard Hughes barricading himself in his penthouse suite, on a midweek road trip to Vegas last week I only left my gigantic hotel complex once -- and that was to take a limousine ride to see a new monster project being built.

Imagine you’re a mortgage lender, and somebody comes to you with a marginal credit record, work experience that includes as many employers as Liz Taylor has had husbands and no Social Security number. Would you hand him a bunch of money to buy a house?

I’m guessing that you wouldn’t, especially not this week, what with the ongoing meltdown among sub-prime lenders -- those that specialize in making loans to people with shaky credit or erratic incomes.

But Leo Simpser well might. He’s managing director of the Hispanic National Mortgage Assn. in San Diego.

Eli Broad has suggested that once its big makeover is complete, Grand Avenue will be comparable to the Champs-Elysees. That’s bunk. But it may look a little like Sesame Street, and that’s terrific.

The children’s public television program -- which, in the words of a recent study by a University of New Hampshire scholar, has "strived to exemplify and create an egalitarian and more tolerant community" -- has had a tough time being replicated in the real world. This is especially true in L.A., which is highly balkanized along racial and class lines.

For the last five years, speculators, big developers and homeowners have gorged on Los Angeles real estate. The huge run-up in prices -- more than 135% from 2001 to 2006 -- has greatly increased the spending power of property owners. Yet there has been a worrisome consequence: Working and middle-class families are moving out -- and failing to move in -- because they cannot afford a house here. Long term, that’s not good for the local economy. As perverse as it sounds, what L.A. needs now is a real estate bust.

Federal housing programs are sustained more by inertia and the difficulty of unwinding financial obligations than by a consensus that these policies are effective in helping people. Established rationales have been weakened both by changes in the nature of the housing problems faced by low-income households and by the inability of research to demonstrate that these programs are as cost-effective as alternative means of helping improve the lives of the poor. Setting a new course requires us to rethink housing policy—from its premises on up.

Like binge drinkers or fast-food fanatics, American urban leaders have had a tendency to run wild when things appear to be going well. But soon they will find that the good times are coming to end.

The prime culprit this time will be deflation of the residential real estate bubble, which has brought about a surge of tax collections and development.