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Wednesday, January 30, 2008

The 'Affordable Housing' Race



PM Tymoshenko: I promised that every family that is employed or has an income will be entitled, via a government mortgage agency, to receive a loan, for a period of 25 to 30 years, for the purchase of a home; and what’s more, without a down payment and at an annual interest rate of 4 to 6 percent.

Interviewer: I would like you to clarify, what banks will agree to an interest rate of 4 to 6 percent?

PM Tymoshenko: The thing is, it’s not the banks that will be at work here. The rate of 4 to 6 percent will be the product of the government mortgage agency. It’s the kind of agency that taps the cheapest of money — and there are such mechanisms — and then, through refinancing commercial banks and through special rules that do not allow the banks to ratchet up interest rates — we will give such loans to people. Make no mistake: Our task is to make housing so that people can buy it, rather than watch upscale condos being built and passively observe the other guy having a beautiful life. [Amen to that!]

No sooner had PM Tymoshenko unveiled her plan than the Secretariat of the President rained on her parade with a me-too initiative, dismissing Tymoshenko’s low interest rate plan as unrealistic.

As an alternative, the Secretariat championed the idea of a 30 percent government-subsidized down payment, plus cost cuts via issuing free land permits.

All of which suggests that the housing problem is becoming a major theater in the war for votes that will define the outcome of the presidential campaign 2009.

However, until proven otherwise, my satellites will view these initiatives as promise-packed weapons of mass delusion — brand extensions of “No draft in 2008” and “Bandits will sit in prison.”

What Ukraine needs is a housing SDI that will disempower the evil oligarch empire and will empower the Ukrainian Dream. Whoever gets the job done — or at least makes a good start — will get to be President.

Video uploaded from: http://censor.net.ua/go/offer/ResourceID/74579.html

6 comments:

elmer said...

The good news is - at least they're talking about something better than "khrushchovkas" for people - not just oligarchs.

And at least it's not just "nyet" - each is proposing a solution, a mechanism, for the problem.

That's vastly different from the past.

Taras said...

Talking is not enough. Ukraine needs leaders who walk the talk.

Today, most non-Davos Ukrainians can’t even dream of those slummy khrushchovkas.

So, my campaign advice to Ukrainian hopefuls will be simple and stupid: Stop talking. Start walking.

pumpernickel said...

Taras:

We have such an agency in Canada called Canada Mortgage and Housing which provides Mortgage insurance to people who are unable to put more than 5-10% as a downpayment. Ironically, there is actually a surcharge for the mortgage insurance and not a discount here.

Secondly, care needs to be exercised to ensure that whatever policy is put into place does not create a Ukrainian equivalent of the US subprime bubble where average citizens become overextended and then large default numbers cause the whole system to collapse on itself.

pumpernickel

Taras said...

Good to see you again:)!

You’re right about those precautions. Neither Canada nor Ukraine should repeat America’s mistakes. Moreover, Canada and Ukraine actually have some similar housing markets.

I just read an IHT article about Vancouver being the most expensive housing market in Canada. Based on that article, I find Vancouver to be on par with Kyiv, the most expensive housing market in Ukraine.

The only difference is purchasing power: a Kyivite makes about $500 a month. Now you get a better picture of our dystopia.

Nationwide, we have a country of Dickensian social stratification, with most of our “middle class” either below the poverty line or slightly above it. In Kyiv, we have a construction cartel, reinforced by a grotesquely corrupt bureaucracy.

How can this be in a country that has possessed aerospace technology for more than half a century, having paid such a huge human price for it? That’s the billion dollar question that never gets asked at Davos.

I digress. In Ukraine, we need neither a free lunch like the US subprime mortgage crisis, nor any kind of BS that our leaders feed us every time we have elections.

Jeff Mowatt said...

Disproportionate incomes, not to mention the grey economy keeping Ukrainians from mortgages aside, some may be interested in an innovative UK model known as the Community Land Partnership. I introduced the concept and examples in this news discussion.

http://en.for-ua.com/forum/read.php?10,46269

Now before you ask why anyone in Ukraine would accept a return on investment of only 3 percent, hold in mind that this is an ethical model for the community minded investor.

Lack of affordable housing is at the root of many of societies problems. Permanent housing and sustainable incomes are primary needs, economic and social rights.

Taras said...

Thank you, Jeff! Here's the hyperlink for readers' convenience.

It all boils down to one simple question: How can a young educated hard-working person feel at home in a country where he or she has no chance of buying a home?