BLOG VIEW: Bad Idea On The Gulf Coast

Written by Phil Hall
on October 10, 2007 No Comments
Categories : Blog View

When it comes to a housing policy, it often seems the Bush administration flip-flops like a Slinky. Either administration officials insist that all is copacetic and no federal intervention is needed, or they go to the other extreme and insist federal action is required to avert catastrophe.

The latter scenario is beginning to play out along the Mississippi Gulf Coast. The Associated Press has reported that a federal plan has been hatched to purchase up to 17,000 coastal homes in order to make the land into a hurricane-protection zone. The Mississippi Coastal Improvement Program could cost $40 billion, but anyone who is familiar with federal forecasting would know the ultimate price tag would be higher.

The program, as described by the Associated Press, is borderline ridiculous. Only residential properties would be targeted for buyouts – the hotels and casinos that generate much of the region's cashflow would be left alone. Even more amazing, the program might also knock down the homes to create municipal golf courses and bike trails. The benefit of golf courses and bike trails as parts of a hurricane prevention strategy was not explained by the government.

The program is supposed to be voluntary, but development would clearly be hampered if some people agreed to sell out and others don't. It wouldn't be a surprise if the government starts issuing eminent domain orders to deal with balking homeowners, and the courts would not be sympathetic to the homeowners (can you say "Kelo vs. City of New London"?).

This program is still in the consideration phase, and hopefully it will never evolve further. The federal response to the rebuilding of the post-Katrina Gulf Coast has been dismal, and even at this late date things are a major mess. The Associated Press reports that the Federal Emergency Management Agency is considering compensating Louisiana residents who self-financed their repairs on their Katrina-wrecked homes because $1.1 billion in aid is still stuck in a dispute between state and federal agencies.

Shooing away Gulf Coast homeowners is not an intelligent solution. As it is presented, the program is erratic and foolish, and residents in that region should be alarmed that this is even being discussed. Mortgage lenders serving that area should also be alarmed, because they would receive the financial equivalent of a gut punch if that market is suddenly cut away.

Hopefully this proposal can follow the route of other Katrina-related efforts by going nowhere fast.

Phil Hall, Secondary Marketing Executive

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