Re-inflating the bubble

What could go wrong?

Large investment firms have spent billions of dollars over the last year buying homes in some of the nation’s most depressed markets. The influx has been so great, and the resulting price gains so big, that ordinary buyers are feeling squeezed out. Some are already wondering if prices will slump anew if the big money stops flowing.

Last week the Times-Picayune ran a feature series on the New Orleans rental market. Louisiana law is not particularly kind to renters.  And, as a result, neither are many landlords. Jarvis DeBerry followed up the series with this opinion piece.

Think about it this way: If a renter steals $750 from her landlady, Louisiana law says she can be imprisoned for five years and fined up to $2,000. If that landlady breaks the law and withholds her tenant's security deposit, she can only be fined a tenth as much.

Consider that another consequence of being poor, or at least poorer than your adversary. The law treats your victimization as less significant than everybody else's. But how could it not be even more significant, when you've got fewer resources at the start?

The city is considering tougher laws on substandard housing. But we still need laws in Louisiana that will require landlords to meet minimum housing standards and stop them from demanding that tenants trade their legal rights for a place to lay their heads. We also need legislation that gives people more than 24 hours to pack up and move after a court-ordered eviction. Even an attorney representing landlords acknowledged the harshness of that.

So things are bad enough as they are.  Imagine, though, how much worse they can become when the landord is no longer some local flake but instead a huge out of town investment firm.

Los Angeles prosecutors are calling Deutsche Bank one of the city's largest slumlords, accusing it of allowing hundreds of properties it owns to fall into disrepair and breed crime.

The Los Angeles city attorney's office filed a civil lawsuit Wednesday against the world's fourth-largest bank, seeking hundreds of millions of dollars in penalties and restitution and an injunction forcing it to clean up its foreclosed properties in Los Angeles.

Of course, in New Orleans, there's always a demand for condo conversion and re-sale. So if banks are ever looking for someplace to buck the trend when the next bubble bursts, they might like to invest here.