An issue that has been sliding under the radar in this municipal election has been that of the proposed new city charters.
Naheed Nenshi and other tax and spend style civic politicians have long been salivating at the prospect of gaining new powers of taxation in a city charter. Left wing politicians prefer to simply suck ever more dollars from the productive rather than take the time, effort and difficult choices required in order to balance their municipal budgets.
Thankfully, in the new proposed municipal charters there are no new taxation powers being offered. Notley jealously guards her taxation powers and doesn’t want to share them with municipal governments. This is one of the few benefits we can see from having multiple layers of left wing administrations.
While we dodged the taxation bullet in the city charters, there are still two proposals within them that cause some serious concern. The charters give municipalities the ability to run deficits, and allow municipalities to get into the finance game.
Right now under the municipal government act, municipal governments cant run deficits. Under the proposed changes, municipalities will be able to run deficits as long as they budget to pay them off over the subsequent three years. Lets not beat around the bush here. We know damned will that most of our free spending municipal politicians will run huge deficits that they will claim are short term. They will then hit the fiscal wall a few years later and come crying cap in hand to the provincial government. How that mess will be solved is anybody’s guess but you can be assured that taxpayers will be the losers in the deal as usual.
A more subtle but even more serious concern is in giving municipalities the ability to lend money to individuals and developers in order to finance housing. This could lead to an utter disaster.
I view banks as a necessary evil. They are a pain in the ass to deal with and you often feel more like a supplicant when dealing with them rather than a customer.
That said, banks simply are essential and they are good at what they do when they are left alone. The requirements for mortgage qualification are very carefully crafted to be able to service as much of the market as possible while minimizing risk of default. This can be frustrating for folks with limited capital, or poor credit when they are trying to enter the housing market but it simply is necessary. If the requirements are lightened, defaults will rise and interest will shoot up as non-defaulting mortgage holders are forced to take up the slack. In other words, the productive get punished for the actions of the irresponsible (socialism for short).
Many on the left hold a misguided notion that there is a giant pool of people out there who are would be able to responsibly maintain a mortgage if only they were given the chance to get into the market. We should overlook their poor or non-existent credit ratings. We should ignore their spotty employment history. We should set aside the need for a down payment to secure financing. If we just got these people into houses, they would do fine!
Alas, the above notion is utter bullshit. It is that kind of thinking that led to the US subprime lending disaster which caused the real estate collapse a decade ago that some regions are still trying to recover from. Backed through the government agencies of Freddie Mac and Fannie Mae, countless loans were given to people who simply would never qualify for mortgages otherwise.
In what should have been obvious to everybody, the whole thing collapsed as defaults exploded.
If we give municipalities the ability to lend money for housing, we can rest assured that flocks of well meaning but delusional municipal politicians will go on a lending binge to people who really should not get loans. The defaults will be inevitable and the damage will land as always on responsible home owners and taxpayers as the market artificially grows and then collapses. This is not theory people, it happens every time when government gets into the mortgage business and sets aside reasonable loan requirements.
Whether we like it or not, there simply are a great deal of people out there who are incapable of managing and maintaining a mortgage for countless reasons. Perhaps one day, these people will get there. Setting aside conventional credit requirements wont teach these folks responsibility.
I doubt that these charter proposals will become dominating issues in this civic election but I wish that they would. These are some time bombs waiting to go off on us all. I hope people corner their candidates and question them on these proposals. It may not save us from them but its worth a shot and we will know exactly who to blame when it all falls apart.