Housing. In recent times, have there ever been more problems associated with this word? In fact, there are so many problems that the government is passing a $275 billion bailout plan as a solution. However, there is an easier and cheaper way to fix these problems: open up the borders.
The plan, published in an op-ed for The Wall Street Journal, by Gary Shilling, an economic consultant, and Richard LeFrak, a real estate builder and developer, would grant immigrants who buy these homes resident status in the United States. Shilling claims this plan will not only fix the current housing crisis but also put the nation back into a period of growth. While it may sound too good to be true, the plan makes sense.
Currently, the housing crisis in the United States is as follows: Shilling estimates that we have 2.4 million excess homes in the United States. Thus, there are more houses than the demand necessitates, leading to a decline in prices. Since the housing market reached its peak in early 2006, prices have dropped 27 percent. Even worse, Shilling projects the housing market will drop another 20 percent by 2010. This means that approximately half of homeowners with mortgages in 2010 will be in debt. It would take over $1 trillion tax payer dollars to fix the situation at that point. These unfortunate facts are not just projected by one individual either; housing analyst John Burns and Professor Robert Shiller of Yale University corroborated Shilling’s findings.
While bailing out the housing market with taxpayer dollars may help fix the housing bubble, it is not nearly as effective or efficient as Shilling’s plan. Granting resident status to immigrants who are willing to buy homes will decrease the number of excess homes substantially. Simple economics tells us that as the number of excess houses decline, housing prices will begin to increase. Thus, the housing crisis will begin to disappear.
However, Shilling does not want just any immigrants to cross the borders; he suggests the government only allow immigrants who can borrow against the value of their home. Or even better, immigrants who already have enough capital to purchase a home outright. This way, the government does not have to worry about bailing out these new homeowners in the future. Also, if the immigrants have enough money to afford a home, they generally are educated and have useful skills as well. This translates to high income jobs and the ability to spend and stimulate the economy.
According to an article by John Maudlin in 2006, of the 1.1 million immigrants allowed into the United States, 63 percent of them were issued a green card because of relationship ties. Only 13 percent, however, were allowed access to the United States because of their skills. This needs to change.
While allowing immigrants fair passage due to family ties may be heartwarming, it does not necessarily guarantee these immigrants will bring anything but that relationship to the United States. Instead of granting the majority of immigrants citizenship based on a relationship, the United States needs to begin accepting the majority of immigrants based on skill. Not only will such immigrants be able to support themselves better, but the United States would also be granting resident status to future citizens who have enough capital to invest in job-creating businesses.
Shilling reports that in 2006, 25.6 percent of patent applications were filed by foreign nationals residing in the U.S. In an increasingly technological world, this type of innovativeness is necessary for the United States to compete against other developed countries. New technology and ideas that these immigrants produce will stimulate the economy.
Thus, not only will the immigrants be fixing the collapsed housing market, but they will also put the economy on the road to recovery. There is no need to worry about the possibility of stress on the economy that the immigrants will cause from living in the states because they are residents. They will be paying taxes and performing every service that non-immigrant citizens perform.
That being said, a bailout may still be necessary to fix the housing problem. However, before spending $275 billon of taxpayer dollars, the Obama administration should consider Shilling’s plan. At the very least, the plan can subsidize, if not eliminate, the amount of taxpayer dollars needed to pull America out of this ditch.
Neil Thakor is a first-year political science major. He can be reached at email@example.com.