Sens. Chuck Schumer (D-NY) and Mike Lee (R-UT) have a wacky new bipartisan idea for the housing crisis:
immigration.
Two Senators have come up with a plan to boost the moribund U.S. housing market: Give residence visas to foreigners who spend at least $500,000 to buy a home in the U.S.
A report in The Wall Street Journal says Sens. Charles Schumer (D., N.Y.) and Mike Lee (R., Utah) are preparing to introduce the idea as part of a larger package of immigration measures. The idea is to help make up for the lack of American buyers in the housing market, according to the report.[...]
The plan aims to fuel this demand by offering visas to any foreigners making “a cash investment of at least $500,000 on residential real-estate — a single-family house, condo or townhouse,” the Journal reported.
There's an important caveat highlighted by Matt Yglesias: the housing visa doesn't include a work visa. These new immigrants wouldn't have the right to work here. Without jobs, what's holding them here? What's to say wealthier foreigners wouldn't end up just becoming overseas landlords, living where they can work, holding property in the U.S.? Yglesias's point is different, he says:
As with other restrictions on high-skill immigration, this is essentially a form of class warfare against less educated Americans. We should be clamoring to increase the supply of foreign-born doctors, lawyers, engineers, and other highly educated occupations as a way of increasing the real wages of America’s factory workers, janitors, waitresses, carpenters, and retail clerks.
But it could be seen as a different kind of class warfare: warfare against the middle class desperately trying to hang onto their homes. Rather than creating another backdoor bailout for banks by selling these properties off to the highest foreign bidder, our policy-makers should be trying to figure out how to stabilize the housing market to keep middle-class homeowners in their homes. The smartest way to do that, particularly among Democrats who might want to show that they are at least sympathetic to the 99 percent, is to force banks to accept principal reductions. Former Vice Chairman of the Federal Reserve Alan Blinder writes at the Wall Street Journal, that "we can do better than Social Darwinism" in solving this crisis.
Most economists see principal reductions as central to preventing foreclosures. That takes money, of course—plus ignoring the Rick Santelli rant. Perhaps the cost to taxpayers could be reduced by giving the government—or even private investors—some of the upside when house prices finally start climbing. One encouraging sign is that settlement talks between the government and the five biggest mortgage servicers (Ally Financial Inc., Bank of America Corp., Citigroup Inc., J.P. Morgan Chase & Co., and Wells Fargo & Co.) are reportedly coming around, at last, to principal reductions.
The Rick Santelli rant? That's the political problem Blinder (and Kevin Drum) are afraid of, the idea that "many Americans view it as unfair to bail people out of unaffordable mortgages." Well, here's some news about those Americans who hate their neighbors. They're already tea party types, and aren't winnable by Democrats anyway.
What people who still own their homes are really worried and angry about is being underwater on their own homes, and that foreclosed properties in their neighborhoods are further driving down the value of their homes. Having their home values stabilized would likely sit much better with them to than to see those homes sitting empty, or even ending up in the hands of possibly absentee foreign landlords.