There is a "silver bullet" for the U.S. economy that would put large numbers of the unemployed back to work and insure GDP growth well-above 3%.
Home building used to be 6% of GDP, it is just 2% now. A main culprit are the banks which have to follow very conservative lending guidelines and property appraisals in the aftermath of the role subprime lending played in the Great Recession of 2008. Well over half of all homes are reported to be "unaffordable" in most major markets.
Banks are starting to make loans to buyers with smaller down payments and slightly lower credit scores -- but, standards still remain tight on a historical basis and any credit problem is the kiss of death.
A better source of financing for home purchases is urgently needed -- and there is one.
The silver bullet is to have employers consider assisting employees with their housing needs through loans for down payments, and mortgages or mortgage guarantees; and, assistance to those renting where financial requirements have prevented many from getting the apartment they want and stopped builders from developing projects for them. After all, employers are in a much better position to know their employees and their prospects than a bank or building rental office.
Many of the unemployed can work at various aspects of home building; and, other jobs will be created by the affect of the economic multiplier. No need to fantasize that large numbers of the unemployed can be retrained for high tech jobs.
This silver bullet does not require every company to devote part of its human resources department to employee housing needs; nor, those that do, to make loans available to every employee. The initiative is completely voluntary; devoid of government involvement; and, should satisfy all political ideologies.
There are several reasons to be sanguine about this approach to the jobs creation:
* Many companies have big cash reserves. By lending to their employees they might share in real estate price appreciation experienced by the employee and in some cases improve the area surrounding their place of business. Since I first advocated this approach in 2007, real estate prices have risen and over time they always do; and, now increased supply will cool down the overly-heated, inflationary markets.
* Employees can be more productive when their housing needs are fulfilled. Employee housing is already recognized as crucial by some employers such as New York University which cannot attract top talent without housing assistance. Google goes to elaborate lengths to transport employees to their headquarters and provide services there commensurate with being at home.
* In some countries such as Mexico and Colombia, employees are routinely assisted with home financing, either directly or through employer contributions to a government fund.
* The Bank of America funded a non-profit -- the Neighborhood Assistance Corporation of America -- with $10 billion to provide home loans to people who would be refused by a bank. This substantiates the challenge; but, the lenders lack the information on the prospective home owner available to an employer.
Each company can decide how to handle the property when an employee leaves. The company will have collected interest on its loan; and, barring a reversal in real estate price increases, will be repaid the principal through a pay-off, refinancing or re-sale. Repossession and sale at a loss is the risk inherent in the silver bullet which each company will need to assess.
Surprisingly, even companies like Citicorp, which have large mortgage subsidiaries, apparently do not have a human resource initiative for its bank employees to acquire a home -- they are treated with the same robot-like, conservative response as customers walking in off the street, often told they fail to qualify.
This silver bullet is a win-win-win for U.S. employees, employers and the economy. It is an antidote to the empathy we feel for the unemployed; a way to close some of the gap in inequality in living standards; a celebration of free-market principles to solve an economic challenge; a better use of dormant capital in corporate coffers; and, is the kind of epiphany we need more of to save the ailing patient.
Next, corporations adopt formal agendas for providing small businesses with loans where banks are failing.
The request here is that companies consider national priorities when they deploy their capital; especially, since the economic returns can exceed the ones they presently receive with social returns an added bonus. One source of available capital is the money that U.S. companies spend on repurchasing their own stock,$160 billion in the first quarter of 2014 alone.
All countries take notice!
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