The concept of cities using eminent domain to obtain homes whose owners are under water on their mortgages has recently come to the fore and is being debated in some towns. Homeowners who owe more money on their houses than the buildings are worth are unlikely to make the necessary repairs and keep up the maintenance on these structures and many of them decay, causing further declines in the homes’ value, and also blighting the neighborhoods in which they are located. And foreclosures are rife in these neighborhoods, with homes standing empty for long periods and often being destroyed. The Mayor of Richmond, California, Gayle McLaughlin, is considering seizing homes that are under water by eminent domain, and selling them back to their occupants with lower mortgage debt and monthly payments.
Richmond is a lower middle-class town, mainly black and Hispanic. McLaughlin believes that by providing the occupants of the homes in Richmond with increased incentives by lowering their mortgages and payments, they will be more likely to maintain and improve their homes and thus the neighborhoods would not become blighted. There are a number of other lower middle-class cities with mainly minority residents scattered throughout the United States that face problems similar to Richmond. In trying to keep these urban areas from being destroyed, the question is whether bailing out the residents of homes that are under water and forgiving their mortgage debt is legal. Seizure of private properties by eminent domain for public projects has been ruled valid by the courts in the past. Is this comparable?
As one might expect, owners of these mortgages such as the banks, private equity firms, hedge funds, and real estate interests, are all opposed to these actions and have instituted federal lawsuits against them. They have also threatened to end mortgages and other loans in any towns that take over homes by eminent domain. Congress is also being lobbied to provide more stringent laws to prevent this from happening. Other cities have reflected on moves similar to what Richmond is thinking of, but have backed off because of the legal ramifications.
Though the financial firms that own the mortgages appear to have a valid case against losing their properties through eminent domain, will any institution or sane person buy up properties in these neighborhoods and rehabilitate them. Will the government step in and buy up the properties and forgive the mortgage debt? There appear to be no easy answers to a very sticky problem. But some way must be found to slow and reverse urban blight in poor and lower middle-class cities or we will have more Detroits on our hands even as other American cities are thriving.
Resurrecting Democracy
www.robertlevinebooks.com
Political junkie, Vietnam vet, neurologist- three books on aging and dementia. Book on health care reform in 2009- Shock Therapy for the American Health Care System. Book on the need for a centrist third party- Resurrecting Democracy- A Citizen’s Call for a Centrist Third Party published in 2011. Aging Wisely, published in August 2014 by Rowman and Littlefield. Latest book- The Uninformed Voter published May 2020