Saturday, August 13, 2011

Just Saying No to This Bailout

I read an article in Stars and Stripes about a week-and-a-half ago about active duty military folks asking for government aid because houses they had purchased were no longer worth the purchase price.

The justification they used in asking for the bailout was that since Uncle Sam had made them move, they had gotten screwed over by the other circumstances, they would just stay in the houses they'd bought and ride the storm out, but here they had no choice but to either take the whack on a sale or continue making payments.

And yes, of course, they made a bunch of sympathy-evoking pleas to their Congresspeople to try to get this legislation through.

I may sound like the evil grinch in August for saying this, but if I were in Congress, I would vote AGAINST a bailout in this case.

To explain, let's put all the 'support the troops' stuff to the side, because I think we can generally assume peoples' hearts are in the right place on that (and if it seems like I'm scoring an own-goal there, well, at least I'm doing it from Kabul).

The facts are, the active-duty military moves its people around every few years. That's part of the deal all along. No one should be surprised by that. Except for a VERY small number of people in a VERY select, small number of units, the military does not allow its people to *homestead.*

The next fact is, the military pays its servicepeople a generous BAH (Basic Allowance for Housing), which is not taxable. With a couple Google searches you could look it up for your ZIP code, but as a married Captain living in "the Hanscom AFB area" I get somewhere north of 2500 but south of 3000 (I could look it up myself, but yes, the Wi-Fi here really is THAT slow). Anyway, that's a very generous sum...even with my massive mortgage, that covers the whole enchilada, plus my condo fee and a few other monthly bills. And that's totally separate from my 'base pay' or overseas incentives. But anyway, I'm digressing.

The military treats its people like adults by giving them the BAH, adjusted for rank, ZIP code of duty station, and whether the servicemember has dependents. Then it lets them do what they want.

If you wanted to rent a room in someone's house somewhere for $250 a month and pocket the difference, you could.

If you wanted to rent a 1BR apartment in the Back Bay and blow the whole stipend, you could do that, too.

And yes, if you chose to invest in a house, you could do that, too. But if you were doing that knowing you'd be moving within three years, a lot of people would say you were speculating. And if you were speculating based on the old logic that housing prices only go up, while interest rates only go down, then it's too bad things didn't work out. But the whole *I was forced to move* sympathy bit would only work on someone who didn't realize you knew you would have to move all along.

The fact that the market tanked, and your investment went in a direction you didn't expect is not Uncle Sam's fault. We have to draw the line somewhere, and here I'd say it's a pretty fair place to draw it nice and thick.

1 comment:

C R Krieger said...

I am in partial agreement with what Greg says.  Folks who buy rather than rent or live "on base" are gambling and many of my contemporaries, while we were living overseas, did quite well in the boom markets of the 1970s and 80s.  But, it should have been an informed decision.

My exception would be if you are stationed in Whistle Stop, Wyoming, and Ft Custer is the only thing floating the local economy and under BRAC Ft Custer is closing and it's units and functions being transferred to Ft Knox, KY.  Then there might be a reason to provide some degree of compensation, but not total.  That said, one could always retire back to Whistle Stop and live in the house.  If you were stationed at Ft Devens when it closed and you owned a home in, say, Harvard, compensation would not seem in order, even if the housing market is down this year.

Regards  —  Cliff