The biggest single impetus the residential real estate business ever got was from the housing provisions of the G.I. Bill of Rights after World War II.
Allowing veterans to purchase a home with no money down and a 30-year, 4% mortgage was not just a grateful nation's way of thanking people who served in the armed forces. Perhaps more significantly, it fueled the greatest expansion this country ever saw.
A Boon to Many Businesses
Thousands of communities were born as the veterans' dreams of home ownership became reality.
The nation's population was dispersed, spurring the biggest growth ever experienced by the multitude of businesses that feel the home construction industry.
The sale and manufacture of home appliances, floor coverings, lighting fixtures, wall coverings, and automobiles boomed. New roads were also needed to serve the communities.
An economy that had been poised for the traditional postwar decline instead boomed for more than two decades.
Now the United States needs the same economic stimuli. But instead of rewarding its veterans for past services, it can reward young people for future services.
I propose a 6% mortgage that can be offered to first-time homeowners who will commit themselves for a period of years to difficult jobs in the public sector, such as law enforcement, fire fighting, and sanitation.
The mortgage might also be given in return for a commitment to community service, such as working in drug or alcohol rehabilitation programs, in senior citizens homes, and in hospitals.
Why grant special status to first-time homeowners? One obvious reason is that young people today simply cannot affort the down payment or the monthly carrying cost of home ownership.
To give them a leg up and jump-start the stagnant housing industry, let's offer this low,government-supported mortgage for commitment to community service.
The difference between the artificially created rate and teh actual mortgage rate at time of purchase would be repaid to the lender when the house was sold.
In addition, the gap could be reduced during the life of the mortgage as the buyer's income increased.
I envisage a 30-year maximum on the reduced mortgage payments, and a $200,000 ceiling on financing.
If the home were sold at any time during the life of the mortgage, the gap would have to be made up immediately.
In addition, as the mortgage holder's income went up, preset levels would automatically trigger increased mortgage payments, creating a safety valve of sorts for the lender by steadily reducing the deferred portion of the mortgage.
Everyone involved in producing and marketing housing would have to go the extra mile to make the plan work.
* The buyer would have to accept a smaller profit after the resale of the home.
* The lender would need to wait until the loan matured or the house were sold before realizing most of the interest.
* The government agency backing the program would have to make up the difference if resale of a home left a gap.
The federal government's history of strong commitment to housing makes me think Washington would be willing to grant such assurances.
The Veterans Administration and the Federal Housing Administration, instituted to provide opportunities for home ownership, also contained some risk at the outset.
I believe we have sat by long enough while first-time home buyers have been squeezed out of the housing market.