When Michigan voters approved an $800 million bond issue for the environment and recreation in November 1988, little did they know that the state would use a portion of the bonds to create a program – the Home Ownership Savings Trust (HOST) – for first-time home buyers.
HOST purports to provide first-time buyers a guarantee against rising housing prices, but the program will actually have the effect of forcing taxpayers to subsidize savings for the purchase of expensive homes in wealthy, upper-income areas. Under HOST, residents purchasing homes in upscale areas such as north Oakland County, Ann Arbor, Grand Rapids, Livingston County, Macomb County and western Wayne County would have their purchase underwritten by the state, including taxpayers who live where housing prices have increased less than an annual housing index. First-time buyers planning to purchase homes in upscale areas are likely to take advantage of HOST.
For first-time buyers in Battle Creek, Detroit, Downriver, Flint, Holland, Jackson, Kalamazoo, Lansing, Midland, Monroe, Saginaw and other middle class areas, HOST is an illusion: an ill-designed concept that substitutes a political promise of home ownership for the traditional American notions of thrift and savings. From an economic perspective, HOST is unnecessary because investments such as money market accounts, certificates of deposit, zero coupon bonds, tax-free municipal bonds and stocks provide after-tax rates of return greater than housing price increases in many middle-class areas.
Furthermore, there are serious questions about the existence of secondary markets for HOST bonds. Will other first-time buyers be able to purchase HOST bonds in secondary markets? Can a HOST bond be sold by a first-time buyer to a home owner? What happens if housing prices statewide increase at a rate faster than the rate of return on tax-exempt securities? The guarantee to HOST participants would then have to be fulfilled at the expense of the general fund. Why should Michigan voters pay more than necessary for environmental and recreation programs they approved at the ballot box in order to underwrite a housing program they never had the chance to vote on?
By using a bond issue intended for environmental and recreational purposes to promote a housing program and guaranteeing a rate of return to a narrow spectrum of buyers which could be higher than the state would have to pay to attract buyers from the general public, HOST seems to run counter to the spirit, if not the letter, of the acts which created the voterapproved bonds in the the first place.