What irks me today: Extreme Makeover: Homeless Edition.

There are at least three instances of houses built for poor people on Extreme Makeover: Home Edition are in danger of being foreclosed on. If you are unfamiliar with the show, the premise is as follows: The show selects a family in desperate need of financial help and a housing facelift (complete rebuild) and, with the help of local good samaritans and a large construction crew, they rebuild the house into a beautiful mansion and help pay off the bills. Sort of a more corporate Habitat for Humanity on steroids.

The houses come fully equipped with televisions and electronics far better than I will dream of affording, so it really does look like the families get a free a dream home. Of course, the houses often multiply in value, causing the property tax to likewise skyrocket.

At the beginning of the credit crisis, I remember hearing several times how most American homeowners in general considered their homes an investment as well as a domicile. In the case of EM:HE, families were therefore given not only a new house, but also a giant new asset from which they could withdraw money in the form of a mortgage.

A few of these families did something which was either very smart, or very stupid, and used the newfound source of funds to invest in capital generating ideas. One family mortgaged their new home to invest in a construction firm. At the time, it seems like the best of all worlds. Use the house your community has built, to help build more houses for your community.

Of course, we all know the housing market has tanked, construction has since just about stopped being a profitable business, and foreclosures skyrocketed across the country. Like many Americans, these families are losing their homes. Unlike many families, these houses were the result of community effort, leading to these houses being seen as community property.

The backlash has been enormous and negative. People demand to know, how dare you squander away the wonderful gift we have given you. In the vast majority of these cases, the families who were given these houses were the perfect candidates. The families had enough income to keep up the infrastructure of houses. When similar housing programs fail, it usually because the houses have been given to truly destitute people who have no means of supporting themselves.

In one notable instance of free housing gone bad overseas, an charitable organization built an entire neighborhood for the poorest people in the area. The first day of revealing the new houses was the happiest and most successful day for the new homeowners. After a while, it became apparent the people really needed education, job training, and a source of income, as plumbing and electrical systems began to fail, and the new homeowners lacked the experience to fix the problems, and the income to have them fixed. The ideal solution at the time would have been to give the houses to families with incomes to small to purchase their own homes, but large enough to support owning a house.

What irks me about the stories that are coming out about these EM:HE foreclosure stories is this program seems to have been successful over 90% of the time, and when it failed, it failed because the homeowners attempted to create new revenue streams to support the house and the family. The perception of most commentators is the people were lazy failures who lacked the foresight and discipline to keep up the community's new gem of a property. The reality is the homeowners are taking chances at being successful, made smart looking gambles, but failed.

http://blogs.wsj.com/developments/2008/12/09/yet-another-extreme-makeover-home-may-face-foreclosure/