I had lunch today with a smart young Intercollegiate Studies Institute staffer. As we talked about the mortgage credit crisis, he challenged me to go beyond identifying the problem and the threat it poses to "family values" and not just family home values.
I started thinking aloud. The talk has thus far all been about helping distressed homeowners...and using government money to do it. That, I take it, is the point of departure for any Democratic discussion of the subject. But why not adapt something churches, faith-based organizations, and other non-profits have been doing (with varying degrees of success) for years? I have in mind the Community Development Corporation, the mainstay of faith-based and non-profit urban neighborhood redevelopment efforts. Why can’t we take this model, tested in urban neighborhoods, into the suburbs where declining home values and job losses have threatened the capacity of families to stay in their homes? Successful CDCs find a pool of capital to purchase and rehabilitate distressed properties, rebuilding a neighborhood to the point that it becomes attractive to private investors and purchasers. They try to establish long-term relationships with the people they help, and often ask that they provide "sweat equity" (if nothing else) as their stake in a new house.
So here’s my thought for a suburban CDC: a big church or group of churches creates a CDC to raise capital from its members and from local foundations. It uses the capital to help community members restructure mortgages that imperil their homeownership. In exchange, those who are thus assisted give a certain number of hours of service to the CDC. (I’m sure that church members who were once or are still in the financial industry would also be willing to provide assistance.) Those who are assisted still have to repay a loan, but the terms are set by people who wish to save a neighborhood and its inhabitants, rather than by those who have a responsibility to shareholders--wherever they are--to make a profit. Since the CDC would have lower overhead and employment costs than a for-profit lender or a government agency, the terms of the loans it makes or facilitates could be more generous. Those who are assisted do not become dependent upon government but rather are integrated into a community.
If this can work in neighborhoods where "social capital" is relatively scarce, it ought to be very promising in neighborhoods where one might reasonably expect to find more people with stakes in the area, contacts in the community, and job (and other coping) skills. Rather than government handouts, we have communal self-help, orchestrated by churches, faith-based organizations, and other non-profits.
What doyou think?