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Shrimp 'n Grits

Freddie’s busted and Fannie’s whacked
But Riley’s plan is still on track
Lee Walton

Mayor Riley’s plan to provide affordable housing on the Peninsula remains as rigid and impractical as ever as our nation faces a financial crisis of epic proportions triggered by sub-prime lending to unqualified, mostly first-time, homebuyers who simply lacked the basic economic knowledge, personal budgeting skills, and resources to own a home in the first place. Faced with a string of recent City sponsored first-time homeowner failures and subsequent costly buy-backs, the Charleston Homeowner Initiative has become an embarrassing oxymoron to the City Administration and another in a long line of financial rat-holes into which Riley continues to toss millions of taxpayer dollars.

Notwithstanding Riley’s $6 million deal in 2001 with The Beach Company to construct 42 housing units in Longborough with general obligation bond proceeds, the Mayor now plans to toss in another $10,000 per unit as a forgivable down payment loan to attract anyone who can qualify for the 42 nearly completed, albeit still unsold, $112,500 to $150,000 condos. The only problem is that most potential buyers who can qualify to purchase the City’s Longborough units would also qualify for conventional home financing free from Riley’s social engineering deed restrictions that severely limit resale equity gains for 99 years. Riley pragmatically defends his restrictions on resale as the only way to keep a long-tern stock of affordable housing on the Peninsula. “It’s a really good idea, and will be successful…It’s defeatism to say it can’t work.” Riley said in an April 3, 2006 Palter and Chatter article, “Some homes prove hard to sell.”

Notwithstanding lessons learned in hundreds of other government-financed affordable housing programs nationwide, Riley still dogmatically insists that his 99-year equity resale restriction, combined with hefty taxpayer subsidized funding to sell at cost, is a concept that will work in Charleston. Most other cities with similar first-time homeowner initiatives can attract qualified buyers only if equity resale restrictions are limited to generally 10, but no more than 20 years. Washington D.C. has been particularly successful with similar plans for affordable townhouse and condominium projects when marketed with a 10-year deed restriction. So what makes Riley think that he can improve on this successful, market-tested concept?

Given the back-lash from the ongoing sub-prime lending debacle and the universal revolt of taxpayers nationwide to lending institutions that targeted NINJA (no income, no job, or assets) customers, it is likely that only the upper range of median income applicants would be able to qualify for one of the City’s 42 Longborough condominiums. That being the case, what family of four in their right mind earning up to $70,000 per year would willingly give up the American dream of homeownership market-equity accumulation and accept Riley’s 99-year resale equity restriction?

Our nation’s elected leaders may be free falling into European-style socialism, but most of us still haven’t given up on good old free-market capitalism. Riley’s cut from the same bolt as the liberal self-proclaimed financial wizards that got us into this mess. He and the other neo-socialist in Washington have got to be term-limited out of office. It’s the only way to save our country and our wallets.

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