Posted by: jhamon | July 7, 2009

City under gun to ease blight fight

The unforeseen consequences of regulation or,  “It seemed like a good idea at the time…”  More Game Theory in action from San Diego:

Chula Vista’s tough anti-blight ordinance has become a national model for requiring lenders to maintain vacant foreclosed homes before they fall into disrepair, but the city is under mounting pressure to reduce the measure’s stiff fines and give lenders more time to improve properties.

So far, Chula Vista has levied fines totaling more than $1.3 million and collected about $752,000. Registration fees for vacant homes under the program have reached about $183,000.

Some critics say an unintended consequence of the ordinance may be to delay the recovery of the local real estate market. Faced with large fines, some banks may become reluctant to do business in the city, they say.

One has to read several paragraphs further to learn that the unidentified “critics” worried about banks not funding purchases in Chula Vista is the local realtors who are living this nightmare first hand as banks back away:

Initially, there was little opposition to Chula Vista’s abandoned-property ordinance from agents, said Pat Russiano, president of the Pacific Southwest Association of Realtors, a trade association for South County.

The group has come to believe that banks eventually may avoid doing business in Chula Vista because of the ordinance, Russiano said. With credit tight and many lending institutions struggling to maintain solvency, real estate agents say they don’t want lenders to have another reason not to approve home loans.

“They are already scared to death,” Russiano said. “Why give them one more thing to worry about?”

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  1. […] San Diego: unforeseen consequences of “anti-blight” lender regulation [Outside the Box] […]

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