NOTE: nothing on this page is to be considered official information;  opinions expressed are those of the webmaster.
T H E    H O U S I N G    P A G E    I N D E X


SO HOW DID WE GET TO THIS POINT?  (Everyone who wanted a home loan or refinance got one, the entire chain of feeders on the real estate tree made theirs...)

HOUSING NEEDS IN CONNECTICUT:  affordability, ownership type and size of homes, teardown (destruction of neighborhood feeling?)

IN THE NEWS...old news and from "outside the beltway."
Read interview with one of the "winners" the "long" Session 2007.
Read about the "incentives" housing legislation passed as part of Omnibus Bill 1500 here!
BLUE RIBBON COMMISSION to assess the housing/economy linkage -  Click here.
THE MARKET, HERE AND ELSEWHERE AND IN NYC
Subprime issue leads to...
Delinquency filings statewide, which leads to...
CT foreclosure picture...which reflects
Present status of the housing situation (Oct. 1, 2008)    
AND THEN AGAIN THERE IS AFFORDABILITY...

Where it, it being the housing meltdown, began, 10 years ago, pre-President Bush...long, long NYTIMES article Oct. 20, 2008 saved here.


"About Town" asks - for what price did these lesser numbers of homes sell?
Home Sales Drop to 7 - Year Low
NYTIMES
By REUTERS
Filed at 10:50 a.m. ET
January 6, 2009

WASHINGTON (Reuters) - Pending sales of existing homes plunged to a seven-year low in November, data showed on Tuesday, as mounting job losses and a deepening economic recession kept potential house buyers on the sidelines.

The National Association of Realtors Pending Home Sales Index, based on contracts signed in November, dropped 4 percent to 82.3, the lowest level since the series started in 2001. The reading was 5.3 percent lower than November 2007's print of 86.9.

Economists polled by Reuters ahead of the report had forecast pending home sales dropping by 1 percent. October's pending home sales were revised down to 85.7.
And an idea how to fix the housing mess!
The Reckoning: Tax Break May Have Helped Cause Housing Bubble
NYTIMES
By VIKAS BAJAJ and DAVID LEONHARDT
December 19, 2008

“Tonight, I propose a new tax cut for homeownership that says to every middle-income working family in this country, if you sell your home, you will not have to pay a capital gains tax on it ever — not ever.”

— President Bill Clinton, at the 1996 Democratic National Convention

Ryan J. Wampler had never made much money selling his own homes.

Starting in 1999, however, he began to do very well. Three times in eight years, Mr. Wampler — himself a home builder and developer — sold his home in the Phoenix area, always for a nice profit. With prices in Phoenix soaring, he made almost $700,000 on the three sales.  And thanks to a tax break proposed by President Bill Clinton and approved by Congress in 1997, he did not have to pay tax on most of that profit. It was a break that had not been available to generations of Americans before him. The benefits also did not apply to other investments, be they stocks, bonds or stakes in a small business. Those gains were all taxed at rates of up to 20 percent.

The different tax treatments gave people a new incentive to plow ever more money into real estate, and they did so. “When you give that big an incentive for people to buy and sell homes,” said Mr. Wampler, 44, a mild-mannered native of Phoenix who has two children, “they are going to buy and sell homes.”

By itself, the change in the tax law did not cause the housing bubble, economists say. Several other factors — a relaxation of lending standards, a failure by regulators to intervene, a sharp decline in interest rates and a collective belief that house prices could never fall — probably played larger roles.  But many economists say that the law had a noticeable impact, allowing home sales to become tax-free windfalls. A recent study of the provision by an economist at the Federal Reserve suggests that the number of homes sold was almost 17 percent higher over the last decade than it would have been without the law.

Vernon L. Smith, a Nobel laureate and economics professor at George Mason University, has said the tax law change was responsible for “fueling the mother of all housing bubbles.”

By favoring real estate, the tax code pushed many Americans to begin thinking of their houses more as an investment than as a place to live. It helped change the national conversation about housing. Not only did real estate look like a can’t-miss investment for much of the last decade, it was also a tax-free one.  Together with the other housing subsidies that had already been in the tax code — the mortgage-interest deduction chief among them — the law gave people a motive to buy more and more real estate. Lax lending standards and low interest rates then gave people the means to do so.

Referring to the special treatment for capital gains on homes, Charles O. Rossotti, the Internal Revenue Service commissioner from 1997 to 2002, said: “Why insist in effect that they put it in housing to get that benefit? Why not let them invest in other things that might be more productive, like stocks and bonds?”

The provision — part of a sprawling bill called the Taxpayer Relief Act of 1997 — exempted most home sales from capital-gains taxes. The first $500,000 in gains from any home sale was exempt from taxes for a married couple, as long as they had lived in the home for at least two of the previous five years. (For singles, the first $250,000 was exempt.)

Mr. Wampler said he never sold a home simply because of the law’s existence, but it played a role in his decisions and also became part of his stock pitch to potential customers who were considering buying the homes he was building in the desert. He would point out that the tax benefits would increase their returns on a house, relative to stocks.

“Why not put your money on the highest-yielding investment with the highest tax benefit?” he said recently.

During the boom years, he prospered. But today he owns 80 acres of land on the outskirts of Phoenix that he cannot sell. He owes $8 million to his banks, which may soon foreclose on his land.

“I am literally dying on the vine,” he said.

The change in the tax law had its roots in a Chicago speech that Senator Bob Dole, Mr. Clinton’s Republican opponent in the 1996 presidential election, gave on Aug. 5 of that year. Trailing Mr. Clinton in the polls, Mr. Dole came out for an enormous tax cut, including an across-the-board reduction in the capital-gains tax.  The proposal made Mr. Clinton’s political advisers more nervous than almost anything else during the campaign. The campaign’s chief spokesman, Joe Lockhart, traveled to Chicago to stand outside the ballroom where Mr. Dole was speaking and make the case that the Dole tax cut would cause the deficit to soar.

At the same time, Mr. Clinton’s aides began scrambling to come up with their own tax proposal. Dick Morris, the president’s chief outside political adviser, argued that Mr. Clinton could assure his re-election by matching Mr. Dole’s call for a big cut in the capital-gains tax.

But members of Mr. Clinton’s economic team, led by Treasury Secretary Robert E. Rubin, disliked that idea. They thought it would undo the tough work the administration had done to reduce the budget deficit. So they instead went looking for smaller tax cuts that would allow their boss to campaign as both a fiscal conservative and a tax cutter.  Getting rid of capital gains on most home sales seemed like the perfect idea.

Treasury officials had become interested in that provision earlier in Mr. Clinton’s term after Jane G. Gravelle, an economist at the Congressional Research Service, had called it to their attention, according to Eric J. Toder, an official in the tax policy office at the time. He and his colleagues were looking for ways to simplify the tax code, and Ms. Gravelle told them that eliminating capital-gains taxes on houses was an excellent candidate.

The tax forced homeowners to keep track of all their renovations over many years, because the cost of those renovations could be subtracted from their taxable gain. Even renovations on previous homes often qualified, as long as people had deferred the tax in the past by buying a new house at least as valuable as their old one.

“It was very hard for people to keep track of that information,” said Leslie B. Samuels, the assistant Treasury secretary for tax policy from 1993 to 1996.

People could also avoid the tax under a one-time exemption, for profits of up to $125,000, if they were older than 55. Thus, the tax raised relatively little revenue — perhaps just a few hundred million dollars in today’s terms. “It was the worst kind of tax system,” Ms. Gravelle said recently. “It raised very little revenue, but it caused all these distortions and compliance problems.”

Three weeks after Mr. Dole’s speech, with support from top Treasury officials, the proposal made it into Mr. Clinton’s speech at the Democratic convention. During the presidential debates that followed, he used it to parry Mr. Dole’s calls for a big tax cut. The following summer, Mr. Clinton signed the provision into law.

At the time, Realtors and home builders lobbied for the provision and there was only scant opposition. Grover Norquist — a conservative activist and adviser to Newt Gingrich — said home sales did not deserve special treatment. But Republicans ended up voting for the bill by even wider margins than Democrats.

Today, it is the subject for considerably more debate. Ms. Gravelle and Mr. Samuels said they thought the law had done more good than ill. And William G. Gale, director of economic studies at the Brookings Institution, said he did not think that the change in the law was central to the bubble. Low interest rates, he said, were far more important.

The law’s defenders say that it also removed at least one tax incentive that had pushed homeowners to trade up. Before 1997, people had to buy a house that was at least as valuable as their previous one to avoid the tax, or else take the one-time exemption. Now they could buy a smaller property or move into a rental.

But many economists say the net effect of the law was clearly to inflate the real estate market. Dean Baker, co-director of the Center for Economic and Policy Research, a liberal policy group in Washington, criticized the exemption as “a backward policy” that “helped push more money into housing.”

A spokesman for Mr. Clinton declined to comment for this article.

Perhaps the most detailed analysis of the provision has been the study by a Federal Reserve economist, Hui Shan, who did the analysis while at M.I.T. Ms. Shan looked at homeowners with significant equity gains, before and after 1997, and compared the likelihood of their selling their house. Her study covered 16 towns around Boston and took into account a host of other factors, like the general rise in home prices at the time.

Among homes that had appreciated less than $500,000, she concluded that the change caused a 17 percent increase in sales in the decade after 1997. Before the law changed, many people apparently avoided paying the tax by simply staying in their homes.

Ms. Shan also found that sales actually declined among homes with more than $500,000 of gains after the law passed. (Under the new law, couples have to pay taxes on gains above $500,000, even if they roll all those gains into a new house.) Nationwide, however, less than 5 percent of home sales over the last decade had gains of more than $500,000, according to Moody’s Economy.com.

Despite the criticism, there has been little political support for trimming the tax breaks for housing. In 2005, a bipartisan panel of tax experts, which was appointed by President Bush and included Mr. Rossotti, concluded, “The tax preferences that favor housing exceed what is necessary to encourage homeownership.” Among other things, it recommended increasing to three years the amount of time people had to stay in homes to claim the tax break on a sale. But Mr. Bush and other policy makers largely ignored the panel’s report.

Geo Hartley, a lawyer who has lived in Los Angeles and Washington over the last two decades, captures the divergent effects that the law appears to have. Mr. Hartley, who is 59 and single, said he found the old law “weird,” because it led him to buy bigger houses than he wanted.

Since the law changed, Mr. Hartley has bought smaller homes. But he has also moved more frequently, knowing that most of the gains on his houses would not be taxed. He lived in one house in Los Angeles for a full decade before 2000. Since then, he has moved three times, making a handsome — and mostly tax-free — profit each time.

“It’s part of the thinking that gets you more motivated to buy and sell property,” said Mr. Hartley, who now lives in a town house in Washington that he is trying to sell, “and have the American dream of owning a home.”

In the Region: Housing Inventories on the Rise
NYTIMES
By ANTOINETTE MARTIN
December 28, 2008

ON the eve of a new year, it is becoming clear that the real estate market in Hudson County, the “Gold Coast” zone just across the river from Manhattan, will have to wait at least two years to celebrate a more prosperous era.

Once New Jersey’s hottest market for high-end condominiums — drawing streams of Manhattanites — Hudson now finds itself with 24.1 months’ worth of unsold inventory.

This is a much bigger backlog than exists in Brooklyn, which has a 13.8-month supply, and it exceeds unsold inventory levels in Queens; in Orange, Rockland and Westchester counties in New York; and in Fairfield County in Connecticut.

On Long Island, the unsold inventory is also swollen. It would take 20.9 months for all the houses and condos currently on the market there to find buyers, given the current pace of sales.

A new assessment of the region prepared by the Otteau Valuation Group presents a generally unlovely picture of residential sales markets:

Manhattan now has an 11.8-month supply of unsold inventory, said Jeffrey G. Otteau, whose Old Bridge, N.J., company analyzes contract sales figures and advises real estate brokers. “This is not terribly big,” he said, “but it is significantly bigger than a year ago — and much bigger than the days when multiple bidders were circling around every available unit on the market.”

There are a few other areas encircling Manhattan that also maintain what might be described as less-than-albatross-sized inventories, including:
• Passaic County in New Jersey, home to the large suburban communities of Clifton and Wayne, which has a 12.9-month supply of housing on the market;

• Union County, N.J., home to Elizabeth, Summit and Westfield, which has a 13.8-month supply;

• Morris County, N.J., an area with 150 towns, including Mendham, Morristown and Mountain Lakes, which has a 14.1-month supply.

Across New Jersey last month, the pace of sales fell 30 percent below the same month in 2007. In October, the drop was 28 percent.

Before that, according to various market reports, there had been a brief, sharp uptick around the region, ascribed to lower mortgage rates and asking prices. But Mr. Otteau’s numbers clearly indicate that once the banking crisis, job losses and bailouts began in October, sales fell and inventories rose.

In Hudson County, home to Hoboken and Jersey City — an area known as “Wall Street West” — sales were 26 percent fewer in November than the month before, and 47 percent fewer than in November 2007.

Looking further ahead, Mr. Otteau has recently raised the issue of potential overbuilding in Hudson County — in addition to his contention that outer-ring suburbs already have a surfeit of single-family housing on large lots that will not appeal to buyers of the next decade.

One large developer in Hoboken, the Applied Development Company, stopped building anything other than rentals as of nearly two years ago, said its president, David Barry. “We saw the condo market getting ahead of itself, and becoming temporarily overbuilt, for sure,” he said.

But of the rentals that Applied is moving ahead with, several developments are in Hudson County. “We just started on 225 Grand, a 348-unit rental in Jersey City,” Mr. Barry said, “and we’re preparing to start with the Berkshire, 93 rental units, at the Shipyard.” The Shipyard is an Applied rental/condo complex on the Hudson in Hoboken.

“It will be about two years before these come online,” he said, “and when the economy does turn around, my experience is that the first market to benefit from that is the apartment market. As jobs are added, the first thing that happens is many people go out and rent an apartment.”

Land costs have become “more reasonable lately,” Mr. Barry added; as a developer, he is seeking to capitalize on “an opportune time to get in the ground with apartments.”

Condominium developments that have already posted strong numbers of sales contracts — like the Trump Plaza Jersey City — will most likely continue to sell units during this “off time,” he said, but starting new condo construction at this point is “plain crazy.”

As for the “suburban sprawl” single-family-home developments that New Jersey policymakers have long been trying to rein in, Mr. Otteau predicts the market will only worsen.

Sales pace is slack in the northwestern part of the state, where large-lot single-family development prevails. The inventory backlog is 23.6 months in Sussex County, 21.6 months in Warren County and 16 percent in Hunterdon County, according to the Otteau numbers.

In the more urbanized northeastern New Jersey counties of Bergen and Essex, the residential backlog approaches 16 months.

Likewise, in New York State, the inventory in outlying boroughs and counties is very large compared with that of Manhattan and Brooklyn. Westchester County has the next-largest inventory to Long Island, at 18 months. Orange County’s inventory is nearly 18 months, and Rockland’s is 14.5. Mr. Otteau foresees a “structural shift” in housing demand that will come into sharper focus in the region when the overall market improves.

“Right now we are all focusing on how bad it is,” he said, “but what we are also seeing is a historic reversal of home-buying demand away from suburban and rural areas to cities and inner-ring suburbs that are more walkable than driveable.”

Mr. Otteau says the shift was partly because of higher energy prices. But the dominant reason is that the number of households with children living at home is on a persistent decline.

“In 1985,” he said, “50 percent of households had children at home. In 2000, that was down to 33 percent. Today it is 29 percent, headed to 25 percent.

“That means that 75 percent of home buyers over the next 15 years will have childless households — and within that group are empty-nester baby-boomers, or couples or singles buying a first house. And that means that three out of four home buyers will have no interest in a house in the suburbs with a good school system, which is pretty much what we’ve created over the last 50 years.”

Mr. Otteau cited a new study from Virginia Tech projecting that a nationwide surplus of 22 million suburban homes on lots larger than a sixth of an acre will be languishing on the market by 2025.
Homeowners Who Modified Loans Are in Trouble Again
NYTIMES
By THE ASSOCIATED PRESS
Filed at 12:40 p.m. ET
December 8, 2008

WASHINGTON (AP) -- More than half of all homeowners who had their loans modified to make the payments more affordable in the first half of the year are already in default again, banking regulators said Monday.  The new data raise questions about whether government money may be better spent on creating jobs, rather than averting foreclosures, said John Reich, director of the federal Office of Thrift Supervision office at a housing industry forum sponsored by his agency.

''I do have concerns about allocating federal resources'' Reich said.

However, many experts claim the bulk of loan modifications don't actually provide much financial relief for borrowers.  The government's data don't include enough detail about the types of the loan modifications that were made, said Sheila Bair, chairman of the Federal Deposit Insurance Corp. ''The quality of the (modifications) are not what they should be,'' she said.

The U.S. economic picture has darkened over the past month. One in 10 Americans with a mortgage is either behind or in foreclosure, and more than 500,000 jobs were lost in November.  Unemployment stands at 6.7 percent, and the worldwide credit markets have only improved modestly from the freeze that led Congress to approve a $700 billion bailout before the election.

Discussion on Monday's focused on how broad the government's intervention should be, rather than whether the government should play any role at all. The U.S. is on track for 2.25 million foreclosures this year.

''We need a bottom-up approach, in my view, by modifying people's mortgages and helping them stay in their homes,'' said New Jersey Gov. Jon Corzine.

Corzine called for a three to six month halt to foreclosures while the government works out a more aggressive plan.

Mark Zandi, chief economist at Moody's Economy.com, said the public is likely to be more sympathetic to efforts to assist troubled borrowers, because the link between the foreclosure crisis and the sinking economy is increasingly clear in the midst of most Americans.

''It's now in every corner of the country,'' Zandi said. ''I think that people understand that this is a broader issue.''

During an interview that aired Sunday on NBC's ''Meet the Press,'' President-elect Barack Obama declined to say how large an economic stimulus plan he envisions. He said his blueprint for recovery will include help for homeowners facing foreclosure on their mortgages if President George W. Bush has not already acted when Obama takes office next month.

For nearly a year, some consumer advocates, lawmakers and think tanks have advocated a dramatic government response. The effort, they say, should be similar to created the Home Owners' Loan Corp. in 1933 to help borrowers refinance troubled home loans during the Great Depression.  The Bush administration has focused mainly on voluntary industry efforts to modify loans, and those have not stopped the surge in foreclosures.

Shouldn’t We Rescue Housing?
NYTIMES
By JOE NOCERA
Published: October 17, 2008
 
Now that the government has “saved” Wall Street — at least for the moment — hasn’t the time finally come to save Main Street too?

The Treasury Department just pumped $125 billion into the country’s largest financial institutions, and it promises to use another $125 billion — more, if necessary — to recapitalize regional and community banks. They are vital steps. This week, at long last, the credit markets thawed, at least a little, and the global recapitalization of the banking system is the reason.

But the job isn’t done yet. The government now needs to tackle what R. Glenn Hubbard, the former chairman of the Council of Economic Advisers under President Bush, calls “the elephant in the room”: the continuing decline of housing prices. That decline means more and more homeowners are saddled with “impaired mortgages” (to use the current lingo), meaning their homes are worth less than what they owe on them. They didn’t necessarily do anything wrong; they just bought a house near the peak of an unsustainable bubble. Now they have little economic incentive to keep making mortgage payments.

Of course, millions of additional homeowners did make a big mistake: they took advantage of “liar loans” and other too-good-to-be-true deals to buy homes they couldn’t afford. Many are still in those homes, hanging on for dear life. Many others have already faced foreclosure proceedings.

I’ve seen estimates suggesting as many as one out of every six homeowners has a troubled mortgage. This is an enormous social problem. It is also a continuing economic problem. In the year since the crisis began, the world’s financial institutions have written down around $500 billion worth of mortgage-backed securities. Unless something is done to stem the rapid decline of housing values, these institutions are likely to write down an additional $1 trillion to $1.5 trillion. In other words, we ain’t seen nothin’ yet.

And please don’t raise the specter of moral hazard, the notion that people who did dumb things need to take their lumps so they won’t do it again. First of all, you would have to be an absolute idiot to repeat the folly of the housing bubble, even if you don’t lose your house in the crisis. I contend that this financial crisis is going to cause an entire generation to become debt-averse, as our parents were after the Depression.

Second, there is the question of justice. For Wall Street, which made plenty of its own dumb mistakes, moral hazard went out the window the minute the government realized what a catastrophic error it made when it allowed Lehman Brothers to go bankrupt. The government is not going to let another big institution fail. Why should homeowners have to pay more for their sins than Wall Street is paying for its sins? As anger across the country rises, this is becoming a political issue as well.

Yes, there were lots of Americans who were not greedy or foolish during the housing bubble, and many resent the idea that their neighbors might get a bailout they don’t deserve. They need to get over themselves. If housing prices keep falling, many millions of additional homeowners will find themselves, through no fault of their own, with underwater mortgages. Besides, foreclosures damage property values for everyone, not just those losing their homes.

Finally, and perhaps most important, the housing bubble and its aftermath form the core problem from which all other problems flow. If the government doesn’t do anything about it, the economy will remain in chaos. Banks will still be afraid to write mortgages because they won’t trust the value of the collateral. Giant financial institutions will continue to post multibillion-dollar write-downs. And homeowners will continue to face the stark reality that their primary asset is in jeopardy.

And yet, so far the government’s response to this part of the crisis — the part that most directly affects voters, for crying out loud — has been anemic. The Hope for Homeowners program, signed into law in July, is both too complicated and too narrow. The new $700 billion bailout bill contains some toothless pleas to help homeowners. Efforts to jawbone the mortgage industry have largely failed.

Just a few days ago, the chairman of the Federal Deposit Insurance Commission, Sheila Bair, publicly broke with her counterparts at the Treasury and the Federal Reserve and criticized the Bush administration for not doing enough for homeowners. “We’re attacking it at the institution level as opposed to the borrower level, and it’s the borrowers defaulting,” she told The Wall Street Journal. “That is what’s causing the distress at the institution level. So why not tackle the borrower problem?”

Why not, indeed. It turns out there are plenty of plans out there to do just that. But not one has broken through to gain wide backing.

For instance, both presidential candidates have homeowner assistance plans, but they are poorly conceived and would cost the government billions of additional dollars. Mr. Hubbard, now the dean of the Columbia Business School, and a Columbia colleague, Chris Mayer, say they believe the answer lies in having “the Bush administration and Congress allow all residential mortgages on primary residences to be refinanced into 30-year fixed-rate mortgages at 5.25 percent (matching the lowest mortgage rate in the last 30 years), and place those mortgages with Fannie Mae and Freddie Mac,” as they wrote recently.

A Yale economist named John D. Geanakoplos suggests a new system to “modify mortgage loans to keep homeowners in their homes,” as he put it in a recent paper. He also says the government should give financial incentives to renters to buy homes — and thus create a floor for housing prices. Both of these ideas are far better than the proposals of the two candidates.

But recently a proposal came across my desk that I believe is so smart, and so sensible, that I hope our nation’s policy makers will give it a serious look. It comes from Daniel Alpert, a founding partner of Westwood Capital, a small investment bank. I have quoted Mr. Alpert frequently in recent columns, because he has been both thoughtful and prescient on the subject of the financial crisis.

Here’s his idea: Pass a law that encourages homeowners with impaired mortgages to forfeit the deed to their lenders but allows them to stay in the homes for five years, paying prevailing market rent. Under the law Mr. Alpert envisions, the lender would be forced to accept the deed, and the rent. After five years, the homeowner-turned-renter would have the right to buy the home back, at fair market value, from the lender.

There are so many things I like about this idea that I hardly know where to begin. Let’s start with the fact that it doesn’t require a large infusion of taxpayers’ money. Indeed, it doesn’t require any government money at all. It also doesn’t let either homeowners or lenders off the hook, as many other plans would. The homeowner loses the deed to his home, which will be painful. The lending institution, in accepting prevailing market rent, will get maybe 60 or 70 percent of what it would have gotten from a healthy mortgage-payer. (Rents are considerably lower than mortgage payments right now.) That will be painful too. Moral hazard will not be an issue.

As Mr. Alpert told me the other day, his proposal “admits the truth: the homeowner doesn’t have equity, and the lender has taken a loss. They should exchange interest, but not in a way that throws the homeowner out in the street.”

Which is the other key part of his plan. It has the best chance of preventing, as he puts it, “the massive disruption of the economy and the social dislocation” that will come from large numbers of foreclosures. And it is the continuing foreclosures that are likely to cause housing prices to fall so hard that they will drop below the real value of the shelter.

That, of course, is exactly what happened during the bubble, albeit in reverse — prices wildly overshot the true value of the home — and it has to be prevented on the way down. Otherwise we face further economic calamity.

Why did Mr. Alpert choose five years? Two reasons. First, he feels confident that housing prices will have stabilized by then. “We continue to have a growing population,” he said. “And there is zero chance there will be a material increase in housing stock over the next five years that will exceed demand. Those two factors alone will cause housing to stabilize.”

Second, he says five years will give the renters enough time to get their financial affairs in order — to pay down their various debts and save enough to make the 10 percent down payment an F.H.A. loan requires. (Many of the homeowners affected by this plan would be eligible for F.H.A. loans, Mr. Alpert believes.)

If they don’t have enough for a down payment, they would have to leave, of course, but it would be far less disruptive to the economy than it would be right now, in the middle of the crisis.

Does the plan have stumbling blocks? Sure it does. One obvious one is that ideologues will view its being mandatory as an improper “taking” of homeowners’ property rights and a violation of the mortgage contract. But, as Mr. Alpert puts it, “the homes involved are economically without value to the existing homeowners.” He adds, “What the plan buys is time to heal for both sides in a fairly equitable and controlled manner.”

Mr. Alpert calls his plan “The Freedom Recovery Plan.” On my blog (www.nytimes.com/executivesuite), I have linked to Mr. Alpert’s detailed description of how it would work, which runs eight pages. I have also posted a series of short “comments” that he sent me recently, which outline the severity of the problem. I encourage you to read both documents, and weigh in on the plan’s merits.

That goes for you, too, government policy makers. I acknowledge that this may not be the perfect solution. It may have some fatal flaw that neither Mr. Alpert nor I can see. But if you don’t like this idea, it is incumbent upon you to come up with something better.

Actually, it’s long overdue.



U.S. Announces Takeover of Fannie Mae and Freddie Mac
NYTIMES
Article Tools Sponsored By
By THE ASSOCIATED PRESS
Published: September 7, 2008

Filed at 11:34 a.m. ET

WASHINGTON (AP) -- The Bush administration, acting to avert the potential for major financial turmoil, announced Sunday that the federal government was taking control of mortgage giants Fannie Mae (NYSE:FNM) and Freddie Mac. (NYSE:FRE)

Officials announced that the executives of both institutions had been replaced. Herb Allison, a former vice chairman of Merrill Lynch (NYSE:MER) (OOTC:MERIZ) , was selected to head Fannie Mae, and David Moffett, a former vice chairman of US Bancorp (NYSE:USB) , was picked to head Freddie Mac.

Treasury Secretary Henry Paulson says the actions were being taken because "Fannie Mae and Freddie Mac are so large and so interwoven in our financial system that a failure of either of them would cause great turmoil in our financial markets here at home and around the globe."

The huge potential liabilities facing each company, as a result of soaring mortgage defaults, could cost taxpayers tens of billions of dollars, but Paulson stressed that the financial impacts if the two companies had been allowed to fail would be far more serious.

"A failure would affect the ability of Americans to get home loans, auto loans and other consumer credit and business finance," Paulson said.

Both companies were placed into a government conservatorship that will be run by the Federal Housing Finance Agency, the new agency created by Congress this summer to regulate Fannie and Freddie.

The Federal Reserve and other federal banking regulators said in a joint statement Sunday that "a limited number of smaller institutions" have significant holdings of common or preferred stock shares in Fannie and Freddie, and that regulators were "prepared to work with these institutions to develop capital-restoration plans."

The two companies had nearly $36 billion in preferred shares outstanding as of June 30, according to filings with the Securities and Exchange Commission.

Homeless count grows, says report
NORWALK HOUR
By JILL BODACH, Hour Staff Writer
August 8, 2008

The results of a recent statewide survey show there are more homeless individuals and families in Connecticut this year than there were last year.

The 2008 Point-in-Time count of homeless residents in Connecticut showed a 13-percent increase in homeless families statewide; a
4-percent increase in the number of households experiencing homelessness; and a 5-percent increase in the number of individuals experiencing homelessness from 2007 to 2008.

In Connecticut, there are 4,366 homeless individuals; 3,448 households experiencing homelessness and 482 families experiencing homelessness compared to 430 in 2007.

The Point-in-Time counts seeks to provide a snapshot of what homelessness looks like in Connecticut on "any given day." The 2008 count was conducted simultaneously in communities across the state.

According to the report, the total number of families living in sheltered situations on Jan. 30 -- the day the count was conducted -- rose from 392 last year to 474 this year. The number of homeless adults in families rose from 446 to 519, while children in those families rose from 728 to 861. Single adults in shelters rose from 2,138 to 2,257.

In Norwalk, statistics improved slightly. This year, there were 13 adults in families and 146 single adults living in sheltered conditions. There were also 15 unsheltered adults. During last year's count there were 153 single adults and 23 adults in families residing in emergency shelter or transitional housing. Forty-nine single adults were unsheltered that night.

While the causes of homelessness are varied and complicated, the lack
of affordable housing in Connecticut continues to be one of the largest contributing factors to homelessness.

"The most commonly identified reason given for homelessness was the high cost of housing, high rents and the shortage of affordable housing," said Kate Kelly, manager for the Reaching Home Campaign and the Partnership For Strong Communities. "Twenty-seven percent of the sheltered adults and families reported leaving their last place of residence because of difficulty paying the rent."

Other factors are the struggling economy and mental health issues.

"One-third of adults in families reported that they were currently working and that work was an income source at the time of the count," Kelly said. "This supports what we're hearing anecdotally from shelter directors. There are people in shelters currently who are working and earning an income and still cannot afford housing."

Additionally, one-third of both sheltered and unsheltered single adults claimed to have had a history of mental health hospitalizations.

Despite the increase in the overall number of homeless individuals, the report also showed a decrease in the number of chronic homeless individuals, many of whom often suffer from mental health issues or drug and alcohol addictions.

The number of single adults found living in locations not meant for human habitation -- including living on the streets, in parks, cars, transportation terminals -- fell to 590 from 707. Additionally, there was a drop in the number of chronically homeless residents.

"The reduced number of chronically homeless people across the state indicates that efforts by the governor and legislature to fund supportive housing and related efforts may be having an extremely effective impact," said Carol Walter, executive director of the Connecticut Coalition to End Homelessness. "We know supportive housing works, and I would be willing to bet that it's the cause of at least some of the progress apparent here, but we can't be sure."

Kelly also attributed the decrease in the number of chronic homeless, in part, to the creation of supportive housing throughout the state. Supportive housing provides affordable homes plus individually-tailored support services to residents to help them get back to work and school and reconnect with family and friends.

"We saw a 3-percent decrease in chronic homeless population across state, which is who supportive housing is aimed at," Kelly said. "I can't say for certain that this is why the number went down, but I would bet a week or two's salary that the strategies we are employing brought that number down. In a difficult economy, a decreased number of chronic homeless is telling."

This was the second annual Point-in-Time count in which volunteers across the state conducted simultaneous counts of homeless individuals. Walter cautioned that because the count was only the second statewide coordinated effort, that it cannot provide definitive evidence or conclusions about the homeless population.

"We should be cautious concluding anything from this data, but the findings do indicate that more families are facing the horrors of homelessness," Walter said.

For the complete report, visit www.ctreachinghome.org.


Another architect who calls himself a planner?

Obama picks New York housing commissioner to head Department of Housing and Urban Development
Hartford Courant
Associated Press Writer
By PHILIP ELLIOTT
9:47 AM EST, December 13, 2008

CHICAGO (AP) — President-elect Barack Obama on Saturday named New York City's housing commissioner to his Cabinet, turning to a former Clinton administration aide with a national reputation for developing affordable housing.

Obama praised Shaun Donovan's record in New York, where he managed a $7.5 billion plan with a goal of putting a half-million New Yorkers in affordable housing. The Harvard-educated architect also kept foreclosures to a minimum in the city's low- and moderate-income home ownership plan, with just five out of 17,000 participating homes.

"We can't keep throwing money at the problem, hoping for a different result," Obama said during his radio address released early Saturday. "We need to approach the old challenge of affordable housing with new energy, new ideas, and a new, efficient style of leadership. We need to understand that the old ways of looking at our cities just won't do."

While the mortgage crisis has threatened cities, Obama said it also provides a chance to rethink how the Housing and Urban Development Department can help city residents. He said Donovan, who also has a degree in public service from Harvard, will bring "fresh thinking unencumbered by old ideology and outdated ideas."

Obama's selection of Donovan marks the 11th post he has filled in his cabinet, in just over a month since his election as the first African-American president. Still to come are announcements of his selections to head the Central Intelligence Agency, the Environmental Protection Agency, and the departments of energy, education, interior, labor, transportation and agriculture.

Donovan's appointment was something of a surprise. Most speculation has centered around Miami Mayor Manny Diaz, Atlanta Mayor Shirley Franklin or Bronx borough President Adolfo Carrion Jr.

HUD often has been led by someone who is a minority; Donovan is white. Latino groups were pushing heavily for Diaz, following in the footsteps of Clinton appointee Henry Cisneros of San Antonio, Texas. Bush picked Mel Martinez of Florida, a Hispanic, and Alphonso Jackson of Texas, an African American.

Even the rollout of the selection — announced at 6 a.m. Saturday via e-mail and later in Obama's Saturday radio address — broke with how Obama has announced previous Cabinet positions. For his other appointees, Obama invited reporters to a news conference, along with the nominee, and took questions.

Obama's last news conference on Thursday, to introduce former Senate Majority Leader Tom Daschle as his pick for Health and Human Services, was dominated by questions about the corruption scandal swirling around Illinois Gov. Rod Blagojevich, who is accused of putting Obama's Senate seat up for sale. Obama has said he's confident none of his aides were involved in any of the alleged deals.

New York Mayor Michael Bloomberg named Donovan, a New York native, to head the city's Housing Preservation and Development Department in 2004. He has been the point person for implementing Bloomberg's plan to build and preserve 165,000 affordable housing units for 500,000 people by 2013. It is the largest housing plan in the nation.

Donovan took a leave-of-absence as New York's housing commissioner to campaign for Obama.

Before working for Bloomberg, he worked at Prudential Mortgage Capital Company. And before that, he was deputy assistant secretary for multifamily housing at HUD during the Clinton administration. In that role he was the government's chief administrator for managing privately owned, government-subsidized housing. The housing subsidy programs provided over $9 billion annually to 1.7 million families. He also oversaw some 30,000 multifamily properties with more than 2 million housing units.

Donovan, 42, has a reputation for finding new ways to create and preserve affordable housing. As New York's housing commissioner, he spearheaded the creation of the $200 million New York Acquisition Fund, a collaboration between the city, foundations and financial institutions. It is intended to help small developers and nonprofit groups compete for land in the private market.

He was acting commissioner of the Federal Housing Administration during the transition from Clinton to President George W. Bush.
Sales of homes take big drop in Connecticut 
DAY
By Lee Howard 
Published on 12/5/2008

Connecticut, which took longer than other New England states to fall into a real estate recession, now appears to be lagging the rest of the region in coming out of the downturn.

A report Thursday by The Warren Group, publisher of The Commercial Record, showed that single-family sales statewide plummeted 17 percent in October from a year earlier, while prices were off more than 10 percent.

The steep drops followed a relatively optimistic September report, in which sales statewide were down a little more than 5 percent. It also followed reports from Massachusetts and Rhode Island, states that showed “considerable gains” in single-family home sales in October, said Timothy Warren Jr., chief executive of The Warren Group.

”October was the ninth month in 2008 that home sales in Connecticut were off by more than 15 percent, and this is the third month that prices dropped by about 11 percent,” he added. “Without a significant uptick in home sales for several months, price declines aren't likely to level off.”

In New London County, single-family home sales dipped in October by 9.4 percent and prices fell 10 percent from a year earlier, according to The Warren Group. The median price of a local house in October was $225,000, a drop of $25,000 from the year before.

Sales of condominiums in the region dropped more than 50 percent, but median prices held steady at about $174,000.

The statewide median price for a single-family home was $250,000 in October, down more than $30,000 from a year ago. Statewide condominium prices were at $190,000, off $22,000 from last year, the highest monthly slippage so far this year.

So far this year, condo sales statewide have slipped by about a third from the previous year, while single-family home sales are off by nearly a quarter.

Windham and Fairfield counties have recorded the steepest drops in median home prices throughout 2008. Fairfield has seen the biggest drop in median prices, with the $535,000 typical sales price off $65,000 from the previous year. Windham has had the biggest percentage decrease, with the median price sinking from $219,000 to $191,000, a decline of 12.8 percent for the year.
Senate plans vote today on anti-foreclosure plan 
DAY
By JULIE HIRSCHFELD DAVIS, Associated Press Writer 
Posted on Jun 24, 7:40 AM EDT

WASHINGTON (AP) -- A plan to help hundreds of thousands of homeowners avoid foreclosure is drawing bipartisan support in the Senate, setting the stage for high-stakes negotiations among congressional Democrats.

The far-reaching housing plan faces a Senate test-vote Tuesday, when it could also come to a final vote. The disputes among Democrats over key details, however, as well as a veto threat from the White House will almost certainly push any final agreement into July.

Conservative "Blue Dog" Democrats are concerned about how to pay for the measure, while members of the Congressional Black Caucus - most of them liberal - call it "unacceptable," arguing it doesn't do enough to address the needs of African Americans.

The centerpiece of the package is a foreclosure rescue program in which the Federal Housing Administration would provide $300 billion in new, cheaper mortgages for distressed homeowners who otherwise would be considered too financially risky to qualify for government-insured, fixed-rate loans.

Borrowers would be eligible if their mortgage holders were willing to take a substantial loss and allow them to refinance, and would ultimately have to share with the government a portion of any profits they made from selling or refinancing their properties.

The bill would tighten controls and create a new regulator for Fannie Mae and Freddie Mac, which provide huge amounts of cash flow to the mortgage market by buying home loans from banks.

It also would provide a $14.5 billion array of tax breaks, including a credit of up to $8,000 for first-time homebuyers who buy a home in the next year and boosts in low-income tax credits and mortgage revenue bonds.

In a letter to Democratic leaders last week, the 42 House members of the Black Caucus said the bill is plagued with "glaring omissions," including affordable housing funds for states affected by Hurricane Katrina and grants for states and localities to buy and fix up foreclosed properties.

To draw GOP support, Senate Democrats diverted the affordable housing money to pay for the foreclosure aid program.

The Senate bill provides $3.9 billion in grants to deal with foreclosed properties - compared with a House plan providing $15 billion - but the White House singled out the funds in its veto threat, and Blue Dogs are demanding that the money be offset with cuts elsewhere.

Rep. Barney Frank, D-Mass., the Financial Services Committee chairman, said he'd be willing to yank the money and add it to a separate measure in the interests of a deal.
 
As Foreclosures Grow, Cities, Eastern Towns Hardest Hit - Foreclosures Hit Connecticut Cities, Eastern Towns Hard
By KENNETH R. GOSSELIN | Courant Staff Writer
June 15, 2008

Shirley Reimann powers up her computer most mornings at the social services agency she supervises in Killingly and immediately runs a Google search:  Windham County foreclosures.

What she sees has her worried.

The number of houses and condominiums for sale in Windham County as a result of foreclosure has climbed from five last winter, when Reimann first started tracking them, to more than 40, as of last week. Telephone calls to her office tell the same story: There were 14 from homeowners falling behind in their payments last month, up from "next to none" a year ago.

"We have a shortage of apartments, and rents are high," Reimann said. "Where are these people going to go?"

A town-by-town analysis by The Courant of 16 months of Connecticut home mortgage data through the end of April shows that Windham County is hardest hit, with 23 foreclosure-related filings for every 1,000 households, compared with 17 in the state as a whole.

Throughout the state, the numbers are rising — reaching 6,500 in the first four months of this year, or 40 percent ahead of last year's pace, according to The Warren Group, which tracks the housing market in New England.

But so far the state's foreclosures and home mortgage delinquencies have not led to the sort of crisis that has gripped California, Michigan, Florida and Nevada, the nexus of the country's mortgage troubles. In most Connecticut towns and cities, the incidence of homeowners losing their houses is scattered thinly across neighborhoods.

Still, the state's foreclosures and distress sales are tamping down the value of houses not just in eastern Connecticut but throughout the state, especially in the bigger cities and lower-income towns. A Warren Group report showed the statewide decline in median sale prices reaching 9.8 percent for the year ending in April.

And economists warn that if recession hits Connecticut harder than expected, the foreclosure problem could deepen fast. Job losses, so far relatively mild, could pick up momentum and strain household budgets already under pressure from rising gas, home heating oil and food prices.

"We're holding up OK so far," said Donald L. Klepper-Smith, an economist at DataCore Partners Inc. in New Haven. "But I think there is a risk of increased foreclosure because of energy prices."

Reimann, whose nonprofit Access Community Action Agency provides social services throughout eastern Connecticut, shares those concerns. Today, 150 gallons of home heating oil costs $682, but Access can only provide $675 for an entire season of energy assistance to the neediest families, she said.

"These are the choices they have to make: heating their home or paying the mortgage," Reimann said.

A Grand Thoroughfare

Northeastern Connecticut has long struggled with the loss of manufacturing and defense jobs. It has also been hurt by its dependence on employment in nearby Rhode Island, where the housing and economic downturn is the deepest of the six-state New England region.

Although service sector jobs at the casinos and in new, mega-shopping centers are replacing some employment from traditional industries, they cannot match the hourly wages.

Just a short walk down Broad Street from Reimann's office in Killingly, there have been four homes with foreclosure-related filings since the year began. It's easy to pick out two of the properties; both are Victorians with wide front porches. Front lawns are overgrown. At one there is mail spilling out of the mailbox, a sign the house was recently abandoned.

Neighbors on the street worry about the blight on their neighborhood, once a grand thoroughfare, now characterized as a neighborhood in decline. They worry the decay will pull down their property values.

"I've been here 28 years," said Don Costello, who owns a funeral home in town. "Of course I'm concerned. This used to be one of the nicest streets in town."

Studies have shown that once a property goes into foreclosure it immediately lowers the value of surrounding properties by $5,000.

Lucien Laliberty, a longtime residential real estate broker in northeastern Connecticut, disputes that measure, but says properties in foreclosure clearly are dragging down the price of other similarly styled homes in surrounding neighborhoods.

"Some foreclosures are selling at bargain basement prices," Laliberty said. "Investors are back in the market, buying them cheap."

Foreclosures have cut across all price ranges but are most prevalent in houses and condominiums that were priced at $200,000 or less, Laliberty said.

Laliberty estimates that prices have declined as much as 18 percent in some parts of the market as a result of an increase in foreclosures.

Most callers to Reimann's agency are people with adjustable-rate mortgages who had low introductory rates that are now resetting higher, she said. That echoes what's happening across the country.

"People were making a choice when they went into an adjustable-rate loan," Reimann said. "Homeownership. This is the American Dream. They were never looking at what would happen if the rate went up..."
Speech given at club that burned down in 1929...only to be rebuilt on a grander scale.
Economist: Housing slump may exceed Depression 
By JOHN CHRISTOFFERSEN, AP Business Writer 
Posted on Apr 22, 2:27 PM EDT

NEW HAVEN, Conn. (AP) -- An influential economist who long predicted the housing market bubble cautioned Tuesday that the slump in the U.S. housing market could cause prices to fall more than they did in the Great Depression and bailouts will be needed so millions don't lose their homes.

Yale University economist Robert Shiller, pioneer of the widely watched Standard & Poor's/Case-Shiller home price index, said there's a good chance housing prices will fall further than the 30 percent drop in the historic depression of the 1930s. Home prices nationwide already have dropped 15 percent since their peak in 2006, he said.

"I think there is a scenario that they could be down substantially more," Shiller said during a speech at the New Haven Lawn Club.

Shiller's Standard & Poor's/Case-Shiller home price index is considered a strong measure of home prices because it examines price changes of the same property over time, instead of calculating a median price of homes sold during the month.

Shiller, who admitted he has a reputation for being bearish, said real estate cycles typically take years to correct.

Home prices rose about 85 percent from 1997 to 2006 adjusted for inflation, the biggest national housing boom in U.S. history, Shiller said.

"Basically we're in uncharted territory," Shiller said. "It seems we have developed a speculative culture about housing that never existed on a national basis before."

Many people became convinced that housing prices would increase 10 percent annually, a notion Shiller called crazy.

Shiller, who said it's difficult to forecast prices, endorsed legislation proposed by Sen. Chris Dodd, D-Conn., and Rep. Barney Frank, D-Mass., that would allow the Federal Housing Administration to back as much as $300 billion in mortgages for struggling homeowners. Servicers would have to agree to take a loss on the existing loans, while borrowers would have to show they could afford to make new payments on their refinanced mortgages.

On Tuesday, the National Association of Realtors said that sales of existing homes fell in March while the median home price declined to $200,700, a decline of 7.7 percent from the median price a year ago.

Sales of existing single-family homes and condominiums dropped by 2 percent in March to a seasonally adjusted annual rate of 4.93 million units.

Many analysts said they do not expect a rebound for a number of months, given the problems weighing on housing from a severe glut of unsold homes to tighter credit standards for prospective buyers and a rising tide of mortgage foreclosures.

Federal Rescue Considered As Homeowners Drown In Debt; With No Other Solution in Sight, Government Is Forced To Weigh Options 
DAY
By Edmund L. Andrews, Louis Uchitelle, New York Times News Service    
Published on 2/22/2008 

Washington — Prodded in part by some of the nation's biggest banks, the Bush administration and Congress are considering costly new proposals for the government to rescue hundreds of thousands of homeowners whose mortgages are higher than the value of their houses.

Not since the Depression has a larger share of Americans owed more on their homes than they are worth. With the collapse of the housing boom, nearly 8.8 million homeowners, or 10.3 percent of the total, are underwater. That is more than double the percentage just a year ago, according to a new estimate of the damage by Moody's Economy.com.

Administration officials say they still oppose any taxpayer bailout for either people who borrowed more than they could afford or banks that made foolish loans during the height of the speculative bubble in housing.

But with the current efforts to arrest the housing collapse so far bearing little fruit, Washington is being forced to explore new ideas, among them the idea of a federal mortgage guarantee for troubled borrowers.

And policymakers are listening to proposals from industry and community groups to use government funds to purchase and refinance billions of dollars in mortgages now in danger of default.

Many owners are only gradually becoming aware that their home would sell for less than the debt against it — a phenomenon, said Richard T. Curtin, director of the Reuters/University of Michigan Surveys of Consumers, that is “beginning to weigh on people, making them uncertain and nervous about the future.”

That nervousness is evident across the country, particularly in places like Memphis, Tenn., a city of nearly 1.3 million people where falling home prices and negative equity are new experiences.

The housing slumps of the mid-1970s and late 1980s were confined to the coasts. The current bust — while leaving some regions, including southeastern Connecticut, relatively unscathed — has cut a far wider path and it comes just when home debt is at its highest level since World War II.

For Stuart B. Breakstone, the problem hit home when he was forced to come to the closing on the sale of his 8-year-old, custom-built house with a check for $65,000. The money, out of his own pocket, was to pay the difference between what he still owed on the mortgage for his home and the lower selling price.

Breakstone, a 42-year-old lawyer, and his wife, Lori, chief of Customs agents at Memphis International Airport — who together earn more than $250,000 a year — managed to extricate themselves by paying off the mortgage. But millions of others are trapped in their homes. They have jobs, make their mortgage payments on time, but cannot raise enough cash to cover the shortfall.

Some eventually default, surrendering to foreclosure. But the vast majority — embedded in their communities, their children in public schools, their reputations at stake — wait nervously in hope that prices will bottom and rise once again, eliminating their negative equity and restoring their freedom to sell or refinance.

“People can't believe this is happening to them,” said Robert Moulton, president of Americana Mortgage Group in Manhasset, N.Y.

In Washington, it will be difficult to engineer a bailout similar to the one for savings-and-loan companies in the early 1990s, because Democrats and Republicans alike cringe at the word bailout and fear a backlash by people who never became overextended.

But with millions of homeowners already underwater and the prospect that millions more may face the same situation, Democrats and Republicans alike are scrambling for ideas to keep people from simply walking away from their homes and to help those struggling to pay their bills.

Bank of America, which is in the process of acquiring Countrywide Financial and has potentially huge exposure, has circulated a proposal to create a new federal agency that would buy vast quantities of delinquent mortgages at a deep discount and replace them with fixed-rate, federally guaranteed loans.

The bank warned that tightening credit conditions were leading to “escalating levels of delinquency and default among borrowers” and “an unprecedented number” of homes that would enter foreclosure.

Administration officials have given the Bank of America plan a cold reception. But the idea is similar to one proposed by Sen. Chris Dodd, D-Conn., the chairman of the Senate Banking Committee.

Meanwhile, the Federal Housing Administration is examining ways to expand its new insurance program, known as FHA Secure, to help people replace their costly subprime mortgages with federally guaranteed, fixed-rate mortgages.

Mortgage industry executives have complained that the FHA's eligibility requirements are so restrictive that the new program has helped only a trickle.

Credit Suisse executives said they have held lengthy meetings with FHA officials, and have urged the agency to relax rules that currently disqualify many borrowers.

One idea, company officials said, was to allow borrowers who had simply made six payments during the course of their mortgage to qualify.

Rep. Barney Frank, D-Mass., the chairman of the House Financial Services Committee, has ordered his staff to come up with options for a broader rescue bill. An aide to Frank said his bill would, among other things, allow the government to buy up at least some troubled mortgages.

A more modest plan is being developed by John M. Reich, director of the Office of Thrift Supervision, the agency that regulates savings-and-loan companies. His plan, still in rough form, would create a voluntary system under which mortgage lenders would reduce debt and monthly payments to reflect the diminished sales value of a home.

It would take the remainder of the mortgage as a “negative amortization certificate,” a lien that the investor could recoup if the house were later sold for its original mortgage value or higher.

In an interview, Reich said he hoped that most of the old mortgages would be replaced by cheaper mortgages insured through the FHA.

“It isn't a bailout,” Reich said. “It is a market-driven solution.”  
Pushing Supportive Housing; Nonprofits To Rally At Capitol March 4
By REGINE LABOSSIERE | Courant Staff Writer
February 19, 2008

Groups across the state are promoting what they believe is the best way to end homelessness — permanent supportive housing.

On March 4, nonprofit groups such as the Connecticut Coalition to End Homelessness and Reaching Home, a Hartford-based organization whose goal is to create 10,000 new supportive housing units in the state, are holding a rally at the state Capitol called "Supportive Housing Lobby Day."

Permanent supportive housing is independent and affordable housing that offers residents some social and employment services.  The groups are asking state legislators and the governor to fund 650 new units in the 2008 budget to add to the 3,000 existing units across the state.  Kate Kelly, Reaching Home's campaign manager, said the 650 units could cost about $13 million from a few funding sources. She said long-term costs to the state for supportive housing would be less expensive than paying for homeless people who go in and out of emergency shelters.

"It only costs $54 a day to house somebody in supportive housing. Typically with emergency shelters, the person has been in the emergency room, in jail, is circulating in and out of other systems," Kelly said.

Supportive housing also adds stability, she said.

"For individuals with a serious mental illness, unless you know where you're going to sleep every night, it's hard to get recovery. And for families, kids can't do their homework every day if they don't know where they're going to stay," Kelly said.

She said local groups in Manchester, the Farmington Valley and Enfield are organizing supportive housing efforts and 10 communities are creating or have adopted 10-year plans to end homelessness, including greater Hartford, New Britain, greater New Haven and the greater Windham region.  A few years ago, Manchester resident David Blackwell helped create the Manchester Initiative for Supportive Housing, or MISH.

"Supportive housing is the most effective and least costly way to permanently end homelessness," he said.

Since its inception, the nonprofit organization mostly has focused on an awareness of issues facing those without homes and those who are at risk of losing their homes. But recently, the initiative embarked on a new project to find a building in town that it can purchase with the help of other organizations that can be turned into about a dozen supportive housing units.  He explained that the goal of the initiative was to bring a supportive housing project to town "so when we do come out with a project, everybody in the community would come out and say, 'Yeah, we need this.' "

Local shelters also are trying to find ways to help people so they don't have to continue using the emergency shelters. Shelters and nonprofit organizations are using data they collect on their own, as well as statewide data generated from point-in-time counts from this year and last year.

The second annual statewide point-in-time count was conducted Jan. 30, and more than a dozen towns dispatched volunteers to count the homeless in emergency shelters, emergency hospital rooms, the streets, abandoned buildings and wooded areas.  Just like last year, Dennis Culhane, professor of social welfare policy at the University of Pennsylvania, is leading the research team that will analyze the data. The count's data will be used by local and state agencies to quantify their needs and apply for federal funding for emergency shelters and for permanent supportive housing.

The Connecticut Coalition to End Homelessness estimates that there are about 33,000 people, 13,000 of whom are children, who are homeless at some point during the year. Last year's point-in-time count revealed that there were about 2,138 single adults and 392 families with children who were either staying in shelters or outside on Jan. 30, 2007. This year's statewide data won't be released until March.

"The [statewide] point-in-time count is going to be most beneficial going forward ... to get a picture of what's going on in Connecticut to know what to expect from clients or guests who are coming into the shelter," said Sarah Melquist, director of shelter and outreach services for the Manchester Area Conference of Churches.

Although the statewide point-in-time count has happened only twice, groups have conducted smaller counts in their own towns for years. For communities to receive federal funding to help combat homelessness, the federal Department of Housing and Urban Development requires them each year to survey the number of homeless living in their area.  In Manchester, local groups have conducted weeklong point-in-time counts, which have revealed about 115 to 120 homeless people in town during those periods.

Town officials said the findings from the 2007 data show an increase in those needing mental health and substance abuse services, an increase in the use of clinics and a decrease in the use of emergency rooms, a decrease in the number of homeless children found and an increase in those citing unemployment or underemployment as the reason they are without a home.  Kelly said she hopes that the March 4 rally, as well as data from the homeless counts, help the organizations get the 650 units they're looking for.

"Last year, the point-in-time count showed us the need is there," Kelly said.
Taxes Are Reassessed in Housing Slump as Prices Drop
NYTIMES
By JENNIFER STEINHAUER
Published: December 23, 2007

LOS ANGELES — Home owners across the nation are looking to county governments to reassess the values of their homes in the face of flattening and falling prices that have befallen scores of markets. Downward assessments, done at the request of homeowners or pre-emptively by government, appear to be most pronounced in areas where the housing market was exploding just a few years ago, or where economic conditions are poorest.

 In Maricopa County, the largest in Arizona, a “large percentage” of the one million single-family home owners will see their houses reassessed at lower rates in February, said Keith Russell, the county assessor. In Phoenix, the largest city in the county, housing prices fell 8.8 percent over the last year, according to the S&P/Case-Shiller index, which monitors the residential housing market.

Among the roughly 200,000 parcels in Lucas County, Ohio, 7,083 owners requested reassessments in 2007, about 10 times the yearly average, said Anita Lopez, the assessor, who ran for office on a campaign to adjust assessments.

“Citizens know the market is slow if not declining,” Ms. Lopez said, “and they are informed and feel comfortable in challenging their county values. People here can’t sell their homes, they have less money, and they don’t understand why the government is asking for more money in a declining housing market.”

Local governments, which rely heavily on property taxes, will have to find ways to replace lost revenue or face having to cut services, lay off staff members or delay projects. The possibility of those losses has alarmed officials in areas already facing large numbers of foreclosures and slumping sales, products, in part, of the mortgage credit crisis that has rippled through the country. [Sunday Business.]

“Government has been the beneficiary of increasing home prices,” said Relmond Van Daniker, the executive director of the Association of Government Accountants. “And now they are on the other side of that, and they will have to reduce expenses.”

While every state and local government has its own methods for assessing home values for tax purposes — some do it annually, some every five years, and everything in between — many counties are hearing from residents that they would like their homes reassessed, or have taken steps to bring the taxes down of their own volition.

While in some areas, a county or city is required to make whole any loss in revenues to schools, public education is a frequent beneficiary of property tax revenues. “They are obviously concerned,” Ms. Lopez said about her county’s school systems.

No one has aggregated the total number of counties reassessing home values, and many counties take at least a year to catch up to the marketplace. In some places where reassessments are rising, the numbers have yet to approach historical heights.

For example, in 2007 roughly 1,800 homeowners asked for reassessments in Los Angeles County, far above the average of about 500, yet far below the tens of thousands of homeowners in Los Angeles who looked for tax adjustments during some years of the downturn in the 1990s. But elected officials and property tax experts said that the numbers were notable and that they expected them to grow in 2008.

In San Bernardino County near Los Angeles, tens of thousands of owners of the 860,000 homes will have their assessments lowered in the coming year, said Bill Postmus, the assessor, rivaling the numbers during the California real estate crash of the 1990s.

“You should see more of this activity,” said Chris Hoene, director of policy and research at the National League of Cities. “It is mostly in areas most likely to be seeing some decline, like Southern California, Florida, and big cities in the Midwest,” rapid growth areas that are now seeing the other side of the curve.

The United States Conference of Mayors recently released a report showing that the value of taxable residential land had declined by $2.9 billion in California from 2005 to 2008 based on current tax rates, and by hundreds of millions of dollars in other major cities. “We are hearing a lot about this housing market change and its effect on city revenues every day,” Mr. Hoene said

Cities where home values have fallen the most are the obvious first place to look for residents clamoring for reassessments, but that is not always the case. Some states, like California, Michigan and Nevada, have statutory caps in property tax increases, which mean the market value of single family homes almost always exceeds the assessed tax values, except in a major downturn.

However, even in California, if a home buyer made his purchase during a market top in the last several years, he might be in the position of qualifying for lower assessed values. For instance, in Santa Clara County, where pricey Palo Alto and San Jose are located, 17,758 properties were reassessed downward for the 2007-2008 tax period, compared with the same period from 2000 to 2001, when the number was closer to 300.

“Obviously 2001 was the dot-com boom,” said Larry Stone, the Santa Clara assessor. “And the whole assessment role in my county was carried by a very hot residential market,” which has substantially cooled.

In his area, prices, and therefore values, remain strong in high end residential areas with great schools, Mr. Stone said. The coming reassessments are driven in large part in the lower and middle markets, especially the condo market, where the greatest part of the subprime lending problems have occurred.

Indeed, areas with high levels of foreclosures, vacant housing and a reduction in prices expect to see adjustments to the property taxes continue, which is bad news for local governments.

“Rising tax values are not usually a popular thing,” Mr. Hoene said , but homeowners tend to accept it, even begrudgingly, when they know the market value of their home is on the rise. “But the minute you think that your local government assessment practices are out of whack with what is happening in the market,” he said, “you will not accept it.”

Global?
House prices to drop much lower: Greenspan
Fri Sep 21, 2007  3:25 AM ET

VIENNA (Reuters) - A big overhang of property will bring U.S. house prices down further, but it is too early to say if the economy will plunge into recession, former Federal Reserve chief Alan Greenspan was quoted as saying on Friday.
 
Greenspan said in an interview with Austrian magazine Format that low interest rates in the past 15 years were to blame for the house price bubble, but that central banks were powerless when they tried to bring it under control.

"It's a difficult situation, there is an enormous overhang on the real estate market," Greenspan was quoted as saying. "Many buildings which just have been finished can't be sold ..."

"So far, prices have dropped only slightly. But it was enough to cause alarm around the world," he said. "Prices are going to fall much lower yet."

"However, it is too early to answer the question about a recession. We simply don't know yet. It depends on how flexibly the economy can react," he said.

Greenspan said deregulation and the introduction of market economies in the former Communist bloc after the Berlin Wall fell in 1989 had caused a global boom and a worldwide reduction of interest rates, which both helped fuel the property bubble.

"There is no doubt about the fact that low interest rates for long-term government bonds have caused the real estate bubble in the United States," he said.

"The Federal Reserve began a series of interest rate increases in 2004. We were hoping to bring the speculative excesses in the real estate sector under control. We failed. We tried it again in 2005. Failure," he said.

"Nobody could do anything about it, neither us nor the European Central Bank. We were powerless," he said.

Town Unites Against 408-Unit Complex ; Emotional Crowd Fears Affordable-Housing Juggernaut Will Overwhelm North Stonington's Rural Character 
DAY
By Jenna Cho     
Published on 8/11/2007 
 
North Stonington — In this town, four-story residential buildings are unheard of. The volunteer fire company isn't equipped to handle emergencies in structures taller than three stories.

In this town, a proposed development with 408 residential units would significantly add to the town's population, which is about 5,000 and which, between 1990 and 2000, grew by only 2.2 percent, according to the town's 2003 Plan of Conservation and Development.

Now, as the Planning and Zoning Commission reviews a proposal that would add just those things, residents fear the usual zoning measures to prevent such developments will fail them.

That's because the text amendment application to create a new housing overlay district, and the second application to place that overlay zone on 97 acres on rural Boom Bridge Road, are affordable-housing applications. The state recommends that 10 percent of a town's housing units meet affordable housing guidelines, and North Stonington has only 0.58 percent.

The state cannot force a town to add affordable units, but because North Stonington doesn't meet the 10-percent recommendation, any affordable-housing application that comes the town's way can't be rejected for regular zoning concerns.

The commission cannot cite impact on town schools or even town character, for instance.

If it rejects an affordable-housing application, the commission must prove that its reasons for denying it outweigh the need for affordable housing.

The estimated 150 residents at Thursday's public hearing on Garden Court LLC's applications said they felt the proposal was unreasonable for a town like North Stonington and especially for an area of town best known for the cows and cornfields on Beriah Lewis Farm.

The public hearing will continue at 7 p.m. Aug. 30 in the elementary school multipurpose room.

The concept plan for the Garden Court development, which the applicant intends to build if the text amendment and zone change are approved, entails 408 one- and two-bedroom units in 17 four-story buildings. Of that, 30 percent, or 123 units, would be marketed as affordable.

“I look at the scale of the application, and right from the get-go it's out of scale with everything else in this town,” resident Art Pintauro said.

Residents spoke against not affordable housing itself but the density with which it is being proposed.

“My suggestion to this board is, let's do 50 (affordable houses) here, 50 there, 50 there, till we meet the requirement,” resident George Parent said.

Nearly unified in their opposition, residents clapped after each public comment, at times rising to their feet to emphasize their agreement. Only one resident who spoke did not outright oppose the Garden Court proposal. Jane Dauphinais, director of the Southeastern Connecticut Housing Alliance, spoke of the importance of affordable housing.

Residents said the applicant, represented by attorney Timothy Bates of the law firm Robinson & Cole, was forcing change upon a town that wishes to maintain its rural character and develop accordingly.

John Olsen said he heard “an attitude of arrogance” in Bates' presentation of the applications at the opening of the public hearing last month.

“I feel that this developer has said nothing but, 'Try us. We are ready for an appeal,' ” Nita Kincaid said. She said she got no sense that the developer was willing to work with the town to develop a more manageable project.

The town can reject an affordable-housing application if it threatens public safety or health, and residents brought up those arguments on Thursday. They spoke of the already numerous automobile accidents at the intersection of Route 184 and Boom Bridge Road; of how the roads in that area cannot handle a massive traffic increase that 408 new housing units would bring; of the fire hazard of placing what are essentially apartment buildings in a town without a ladder firetruck; and of how the proposed on-site sewer system in Garden Court could fail and contaminate the groundwater in an aquifer protection area.

Ledyard Lewis, who owns 216-year-old Beriah Lewis Farm with his mother, Rosalind, and brother Ted, scoffed at calling the development a “garden.” If you want to see a garden, he said, drive down Boom Bridge Road right now.

“That's a garden,” he said.

Lewis said he hoped his 3-month-old son would one day work with him on the farm, one of four remaining dairy farms in town. Tearing up, he said his father told him before he died to do the best he could “and let the rest go to hell.”

“Please, ladies and gentlemen, stand behind me and don't let this happen,” Lewis said.

Housing Problems Are Far From Over
Hartford  Courant
By GAIL MARKSJARVIS
August 5, 2007

This is what you call "contagion."

With revelations throughout the past week that the housing recession is intensifying and infecting stock and bond investments, as well as lending practices, investors have focused on what could go wrong.

"Recession chatter is surfacing," said Merrill Lynch economist David Rosenberg.

With homeowners still facing mortgage adjustments of an extra 5 or 6 percentage points on their mortgage interest rate, consumers could face more foreclosures and struggle so much with monthly payments that they will cut back sharply on purchases.

There was evidence of that in last week's consumer spending data. On an annualized basis, spending was up just 1.3 percent - the lowest number recorded in a year. Meanwhile, analysts worry that businesses could cut back, too, if they have fewer avid customers and have to spend more to borrow money - an outgrowth of today's nervous lenders.

"It is kind of scary," said Peter Anderson, chief investment officer for RBC, a part of Allianz SE, a German insurance company. "I am normally very bullish, but you have to be careful here. These are real dangers here."

Even as market indexes rose Wednesday, for example, investors were selling the stocks on the New York Stock Exchange by 3 to 1. That is called bad market breadth - a lot more selling than buying, and an indication that investors are leery of most stocks.  Financial stocks in particular were in decline, and more hedge funds revealed subprime-related messes. Analysts also estimated that the insurance company American International Group Inc. had lost between $1 billion and $2.3 billion on subprime mortgage-related securities.

Financial stocks are down more than 8 percent for the year, and are declining worldwide as institutions as far away as an Australian hedge fund choke on U.S. mortgage investment problems.

Meanwhile, the Case-Shiller index of home prices for May was released during the week, and showed housing prices down 2.8 percent over the past year nationally, and as much as 11 percent in Detroit. The stocks of homebuilders and mortgage companies have dropped about 60 percent from their highs. On Wednesday, investors knocked the stock of Beazer Homes USA Inc. down as much as 42 percent when a rumor surfaced that the company was going to file for bankruptcy. The company denied it and the stock ended the day down 18 percent.

Rumors were flowing throughout the week as investment bankers and traders headed to Internet sites such as dealbreaker.com and wallstfolly.com for insight.

The good news last week was that Citadel Investment Group, a giant hedge fund, said it would buy most of the assets of the injured Sowood Capital hedge fund. The bad news, which wasn't lost in Internet chatter, was that Sowood has been considered an outgrowth of the Harvard hedging brainpower that has been lauded and copied by pension funds and wealthy individuals during the last few years.

Also causing a buzz was the revelation that credit default swaps (bonds) for some of the nation's premier investment banking firms have been trading like junk.

The banks, such as JPMorgan, got stuck in a downturn of confidence, agreeing to loan billions of dollars for leveraged corporate buyouts involving private equity firms, and then not being able to unload the obligation--as planned--to bond investors. The total obligation to the nation's premier banking institutions could total about $310 billion, according to T. Rowe Price bond analysts.

"That could leave the burden on their balance sheets," Anderson said. Also troubling, he noted, was increasing evidence that the lax lending which caused a mess in mortgage loans also has been happening in commercial loans, too - with lenders tossing more loans to developers than their property has been worth.

With the tap turned off on the flow of easy money, and caution now well-entrenched on Wall Street, Merrill Lynch strategist Richard Bernstein told clients last week not to expect the good old days of effortless borrowing to return for five years.

And he warned stock investors not to ignore the message bond markets are sending about the risks to investors. Investors buying high-yield bonds are now seeking yields about 1.5 percentage points above the levels they accepted just a couple of weeks ago.

"There is no more argument about contagion," Rosenberg said. Investors are demanding higher yields on risky bonds from the U.S. and in emerging markets too.

"The reappraisal of risk means that lending growth is going to pull back and this will have macro repercussion," Rosenberg said. He noted news that Nomura is thinking about pulling out of the mortgage market entirely and Wells Fargo, one of the largest U.S. mortgage lenders, is shuttering its subprime wholesale lending business.

Meanwhile, Rosenberg, who started predicting outcomes like these in 2004 as consumer appetite for risky mortgages grew, said he thinks the housing troubles are far from over.  He noted that housing affordability continues to deteriorate, even though unsold homes on the market keep mounting.  Unsold inventory of single-family homes has risen to 8.7 months' supply from 6.5 months' supply at the beginning of the year. The build-up in unsold homes has not risen as fast since 1990, a severe housing recession.

Meanwhile, as mortgage delinquencies build among people with bad credit and even those who were considered more stable borrowers, he notes the problems have just begun.  Billions of dollars in mortgages are yet to reset to higher levels.

"If you thought that the $111 billion of mortgage rollovers created some indigestion in the second quarter, look out because they balloon to $126 billion in the third quarter and $138 billion in the fourth quarter," Rosenberg said.

And in the middle two quarters of 2008, there will be another $322 billion in resets.

Open space challenged in Byram
Greenwich TIME
By Michael Dinan, Staff Writer
Published July 30 2007

Advocates of a proposal to create more affordable housing in Greenwich are challenging the notion that a 4-acre parcel in Byram that's critical to the plan is off-limits because it serves as open space.

"You can't just say it's off the table," said Sam Deibler, director of the Commission on Aging, which has endorsed the Greenwich Housing Authority's plan to create more than 200 affordable units in town. "I think you have to look at it and use responsible criteria to review it and ask yourself, 'Do we make a change in this case?' "

The housing authority is calling for construction of 224 new units for seniors and working families in central and western Greenwich, through rebuilding on one property the housing authority owns and another it leases, and on the wooded 4-acre lot that is owned by the town.

Neighborhood leaders from western Greenwich have spoken out against developing the 4-acre parcel, located south of the Post Road near Western Junior Highway. The land is a rare piece of open space in a densely settled area, they say.

Housing authority Executive Director Tony Johnson challenges that characterization, describing the property as "scrub woods" that serve no recreational purpose in western Greenwich.

"That space has not been used as park space, not as hiking space and it's not even practical for that use," Johnson said.

But leaders from a group that calls itself the Western Greenwich Community Coalition say it's still important not to develop the woods. The group includes leaders from the Byram Neighborhood Association, Chickahominy Neighborhood Association, Pem-berwick Community Association, Northwest Greenwich Association, King Merritt Community and Glenville School PTA.

"If you don't consider that (4-acre parcel) open space, then you can't say the Pomerance property is open space or the (Montgomery) Pinetum or anything else in town," said Sylvester Pecora Jr., president of the Chickahominy Neighborhood Association. "I mean there's woods all over town that we own. Why are you picking on Byram? Why should we have to accept the housing when no one else in town will?"

According to Town Planner Diane Fox, property becomes classified as open space one of two ways. Either the town, through the Department of Parks and Recreation, asks for the designation under state statutes, or it's designated as open space through a deed restriction when the town acquires the property, Fox said.

It isn't clear whether the parcel under dispute falls into either category, Fox said.

"Based on our files, it doesn't show as dedicated open space," she said. "Parks and Recreation may have something else in their files, but we don't have anything here. If there is a deed restriction, I don't have any records of that."

Parks Director Joseph Siciliano could not be reached for comment.

The designation "protected open space" does not itself block development. Under a 1963 state law designed to protect against rampant development, "protected open space" is simply assessed at the value it has according to its current use rather than fair market value based on its development potential. Yet it's not easy to undo an "open space" designation once it's in place, Fox said.

The way to change an open space designation depends on how it was made in the first place, Fox said.

If the designation was made by the Planning and Zoning Commission through a petition, then changing it would require a public hearing, Fox said. If it was made under state statutes, then any designated open space that's taken away must be replaced in kind, she said.

In any case, Johnson intends to obtain a lease on the property and build 34 units of workforce housing there. Developing the parcel is key to the larger plan, according to Johnson, since it will spread out overall costs across a greater number of units. The housing authority, which is not a town department, hasn't asked Greenwich officials for municipal taxpayer dollars to help pay for construction.

According to Johnson, the land fails to meet much of the criteria that municipalities consider in designating open space. Those include whether the lot provides recreational and educational opportunities, scenic vistas or street scapes, and if the area provides a buffer between urban infrastructure and residential neighborhoods.

"They want to say it's a 'buffer.' I would say, a buffer from what?" Johnson said. "On one side you have a hill that comes to the Post Road. On the other side we have a baseball field and across the street from us we have Putnam Green."

Pecora said such arguments are designed to single out Byram for additional affordable housing.

"What is it with the western end of town?" Pecora said. "What, it's a place that you can throw everything that no one else wants?"

Meanwhile, Johnson said the housing authority is seeking approvals for the first phase of its overall plan. The agency plans next month to file an application to put a 21-unit addition onto McKinney Terrace, Johnson said. The addition will serve as temporary housing for seniors dislocated when a central Greenwich property, Quarry Knolls, is razed and rebuilt to accommodate more units.
In The Region | Connecticut
When Good Causes Collide
New York TIMES
By LISA PREVOST
Published: February 4, 2007

IN the past 18 months, Christopher and Margaret Stefanoni have made few friends and many enemies. Since announcing that they want to replace their house in a shoreline neighborhood of Darien with an affordable housing complex, the couple and their neighboring opponents on Nearwater Lane have warred across yards, through the media and in multiple lawsuits.

So when the town’s Environmental Protection Commission recently approved the Stefanonis’ application for a permit to build 13 units of senior housing (including four affordable apartments) on an acre adjacent to marshland, Mr. Stefanoni was rather surprised by the margin, 4 to 1. “When I found out the degree to which I won, I was humbled,” he said. “The members of the commission went by the book.”

The Darien Land Trust was not so impressed. Two of the 178 acres that the nonprofit trust owns throughout the town are next to the Stefanonis’ house. After publicly objecting to the project’s potential impact on their property’s tidal wetlands, the trust’s 22-member board voted unanimously to appeal the commission’s decision in Superior Court.

That challenge irks Mr. Stefanoni, who called the opposition “so hypocritical.” A pipe carrying stormwater runoff from Nearwater Lane has dumped pollutants into the tidal area for years, he noted, but the trust has not spoken out. A lawyer for the trust said that was because the all-volunteer organization had only recently learned of the detrimental impact of the pipe. Mr. Stefanoni has a different theory. “The reason they’re fighting is because it’s affordable housing,” he said.

The Darien scenario is a familiar one in Connecticut, where the Affordable Housing Appeals Law frequently pits developers and affordable housing advocates against environmentalists and wetlands commissions. The result is often years of litigation — and slow progress on construction of affordable units.

The law gives developers of affordable housing a density bonus, regardless of local planning and zoning restrictions, in towns in which less than 10 percent of the housing stock meets the state definition of affordable. Developments qualify for the bonus if at least 30 percent of the proposed units are set aside for buyers earning no more than 80 percent of the state’s median family income (currently about $81,000).

Because the housing law does not supersede wetlands regulations, however, projects proposed in environmentally sensitive areas have to meet the same permitting criteria as everyone else. Local wetlands commissions, then, often come under intense pressure to scrutinize these projects carefully.

“The structure of the law puts the focus on the environmental issues right from the beginning if the town wants to oppose it,” said Timothy Hollister, a lawyer who frequently represents affordable housing developers. “The towns realize that if they want to stop an affordable housing project, the environmental issues are the way to do it.”

Some developers complain that towns tend to be overzealous in their application of wetlands regulations to affordable housing proposals.

A wetlands-permit application for an 8,000-square-foot home on a two-acre lot is likely be approved, said Neil Marcus, a lawyer who also represents developers. “But if, say, you want to cover the same size foundation so that it’s four 2,000-square-foot apartments, or six 1,250-square-foot apartments, you will find out that most inland wetlands agencies will find that to be a significant impact to the wetlands. They seem to apply a different standard.”

But town officials and environmental groups justify a more rigorous review for high-density projects by pointing out that such projects usually make use of more of the site — with parking lots, for instance.

“Many applicants stretch the intent of the affordable housing appeals law in order to put units where they don’t belong,” said Natalie Ketcham, the first selectwoman in Redding, where the conservation commission recently rejected a proposal by one of Mr. Marcus’s clients for 10 houses, 3 of them affordable, on 14 acres on Route 53.

When these showdowns wind up in court, Mr. Hollister estimated, affordable housing developers win about a quarter of the time.


One well-known case involved the Wilton wetlands commission’s rejection of an AvalonBay Communities development because of the potential threat to spotted salamanders. The case went before the state Supreme Court in 2003 and resulted in a ruling that reined in local wetlands boards.

Wetlands commissions “are not little environmental protection agencies,” the court ruled, and do not have jurisdiction over wildlife that is not directly beneficial to wetlands and waterways.

As for Darien, its environmental commission held four public hearings and heard from eight experts before concluding that the stormwater treatment system for the Stefanonis’ proposed complex actually exceeded town requirements. But the Land Trust, beset by doubts, felt compelled to challenge the decision.

“Darien is 98 percent developed,” said Shirley Nichols, the group’s executive director, “and our mission is to preserve and protect the remaining pieces of open land.”

Affordable housing advocates say the state is losing its work force because young adults can no longer afford to live in Connecticut. State Senator Andrew Roraback, a Republican from Goshen, agrees, even though he sponsored an amendment last year to repeal the affordable housing law. It failed 17 to 14, but the senator is trying again this year.

“There is no more critical need in my district than for affordable housing,” said Mr. Roraback, “because New Yorkers, whom we love, have driven up property values to a point where natives are priced out of the market.” His district covers 15 towns in the state’s northwestern corner, an area that appeals to second-home buyers and young families priced out of the Westchester market.

The problem with the existing law, Mr. Roraback said, is that it runs up against towns’ attempts to meet a second critical need, for open space.

A legislative proposal drafted by a coalition of business, housing and governmental leaders represents an attempt to make these two needs more compatible. The coalition, called HOMEConnecticut, is suggesting a series of state-financed incentives for municipalities to designate areas for high-density housing.

Towns would receive payments from the state for the total number of units possible in the designated zones, and bonuses would be paid when building permits are issued. Towns would also be reimbursed for additional education costs associated with the families living in the units.

“The idea is to get the production up and avoid some of the costly court battles,” said Mr. Hollister, who sits on the campaign’s steering committee. However, the incentive program is not expected to replace the current housing law, he emphasized, but only to provide a second option. The existing law, he explained, is “meant to remain in the background,” reminding towns that if they don’t choose sites for affordable housing on their own, a developer may do it for them