March 2008 Archives

March 16, 2008

Wisconsin's State Bar Plans to Cut Access to Affordable Legal Services

[The following is an op-ed piece by James Turner (Executive Director of HALT), published in the Madison Capitol Times on March 13, 2008.]

The Wisconsin Supreme Court is considering a new definition of the practice of law that could force consumers to hire a lawyer to deal with even the most routine legal needs. If the court approves this State Bar proposal, instead of being able to use an affordable legal document assistant, an income tax preparer, or a real estate agent, Wisconsinites would have to shell out the hundreds of dollars an hour that lawyers charge.

HALT (Help Abolish Legal Tyranny), the nation's largest and oldest legal reform organization, is urging the court to reject the lawyers' naked power grab and, instead, encourage the development of innovative ways to expand the availability of affordable legal help. Our view is supported by the U.S. Justice Department, which also opposes the proposed rule. After complaints about their original proposal were filed with the Supreme Court by consumer advocates like HALT and many Wisconsin businesses, the State Bar added an exception for service providers that are licensed by the state.

We agree with the Justice Department that this new exception "would still prohibit non-lawyers from performing services for which legal expertise is unnecessary" and believe that it would only confuse consumers and deter meaningful competition from non-lawyers.

How do the lawyers defend their monopolistic proposal? They say it is really to protect the public from scam artists, particularly "notarios" who falsely claim to be attorneys and prey on the Latino community. But after two years of beating the bushes, the State Bar could produce only six complaints by consumers about non-lawyer legal service providers. During this same time frame, consumers filed over 2,000 complaints against Wisconsin attorneys.

What makes the lawyers' proposal all the more appalling is that it comes in the midst of a legal access crisis in Wisconsin. As a blue-ribbon panel found just last year, more than "half a million Wisconsinites -- people with families, many of whom have jobs, own homes, and pay taxes -- must contend with significant legal troubles without any legal help because they cannot afford the professional legal help they need." Instead of responding to this access crisis, Wisconsin's organized State Bar wants a new rule that would make it all but impossible for consumers to get help when they can't afford to hire a lawyer.

There is a better way to both serve and protect legal consumers. For many years HALT has argued that the unauthorized practice of law is claiming to be a lawyer when you're not. We believe that the defining characteristic of the practice of law is the establishment of an attorney-client relationship. In recent years, the U.S. Justice Department and the Federal Trade Commission have endorsed this common-sense view. The Wisconsin Supreme Court should too, by defining the practice of law as only including activities that require specialized legal skills where an attorney-client relationship is present.

James C. Turner is the executive director of HALT (Help Abolish Legal Tyranny), www.halt.org, a nonprofit public interest group dedicated to promoting simple, affordable and accountable justice for all.

March 3, 2008

Government Should Let Property Values Sink Lower to Close the Affordability Gap

Many blogs and articles dealing with the foreclosure crisis advocate that the government should act to prevent a further decline in property values. To the contrary, I think the government should let property values continue their decline so that nonprofit community housing organizations such as Habitat can afford to purchase foreclosed properties, and provide the community housing organizations with grants or low-interest loans to purchase the properties and convert them to affordable housing, whether that be in the form of condos, apartments, or multi-family houses. Robert Shiller, Yale finance professor and author of Irrational Exuberance, a book about asset bubbles, appears to share this viewpoint. In a February 19, 2008 article by Karen Jacobs in Reuters entitled "Habitat says affordability gap persists", Professor Shiller is quoted as saying: "Most of us care about our children and grandchildren, and these people have to buy houses, so why would we want high home prices? We want economic growth, we don't want high home prices."

From the perspective of youth and millions of poor and lower-middle-class families, home prices soared far beyond the affordability level. Home ownership for these people could only be achieved through a number of gimmicks, including co-signers, no income documentation, no down payment, interest-only loans, and so on. Even as home prices continue to sink, homes and apartments in many parts of the country are still unaffordable for the majority of the local population .

As real estate values increased during the boom, so too did rents. Rental housing has long been a cottage industry for small investors, giving them a steady income and a means to retire. But to produce income for the investor, rents must at least cover the ownership costs, and the higher the mortgage, the higher the rents. So, in addition to not being able to afford a house, many people have been priced out of the rental market as well. The stories about people not being able to live close enough to their jobs to commute are legion.

Somewhat paradoxically, plummeting real estate prices are forcing rents higher because of the pressure on the rental market caused by folks leaving their foreclosed houses. And because refinancing has become so difficult, investor/landlords have not been able to reduce their mortgages to the value of their properties -- so they could lower the rents they charge.

There are many suggestions floating around for how the government and housing finance industry should react to the foreclosure crisis. These suggestions range from 1) adjusting the bankruptcy laws to allow modifications of mortgage debt, 2) preventing foreclosures by providing people or communities with low-interest loans, and 3) helping homeowners modify their payments to deal with their arrearages.

For obvious reasons -- tax receipts and profits among them -- local governments and the housing finance industry want to prop up real estate values by any means necessary. And this, of course, is fine with existing homeowners. The higher the real estate values, the better their bottom line will be. As you know from my opening lines, however, I believe prices ought to go in the opposite direction. While I'm all for preventing foreclosures, they are going to happen anyway, in large numbers. Why not take advantage of this opportunity to increase the stock of affordable housing?

Letting property values slide and shoveling money to nonprofit community housing groups will help to reduce the imbalance in affordable housing that the boom in property values caused to happen in the first place. As an important side effect, a policy that will encourage the creation of affordable housing will help prevent the blight caused by thousands of vacant houses resulting from the foreclosure crisis. Finally, a massive conversion of single-family dwellings into affordable dwelling units will stimulate employment opportunities for the thousands of contractors who now are suffering right along with the rest of the real estate industry.