Real Estate Boom to Blame for Housing Crunch

It is quite possible that urban Humboldt County's current housing problems are the result of a bursting housing bubble rather than a byproduct of semi-legal marijuana grows taking over the area.

Yes, we previously opined that growers are to blame for the current lack of rental properties in Arcata and Eureka, but we need to revise that opinion a bit in light of recently acquired information.

It turns out that, while there are definitely many, many pot growers in this area who rent or own multiple properties and use them for criminal marijuana growing operations rather than renting them to families and students, the recent real estate boom probably had a big affect on the situation as well.

Back in 2005 and 2006, interest rates were low and lenders were pretty much giving away jumbo mortgages to any and all takers. So called no-doc loans were being granted to thousands of first-time and experienced buyers alike. Banks like Countrywide were approving 100% financing of homes for people who simply claimed, without any proof, that they had the income to handle the loans, and houses were selling like hotcakes for nearly two years solid. That made it really easy for both legitimate investors and marijuana growers to acquire home loans. Especially for growers, who have no proof of income, but frequently have lots of extra income that banks and government entities are not aware of.

With interest rates low and lenders handing out mortgages like candy, there were bidding wars for homes in Humboldt County as growers and investors alike bid property values way up, then closed deals with 100% financing on greatly inflated home prices. Then, when the bubble burst and everyone realized they not only paid too much for their homes, but they also have $3000 monthly mortgage payments to make, the problem became clear. No renter is going to be able to cover the mortgage for these high-priced properties. That means the owners have three choices: sell the home at a gigantic loss, live in the home and struggle to make the mortgage payments, or grow 20 lights of marijuana in the home and make a cool $250,000 a year off the place.

Odds are good that lots of these people chose option 2 from above -- live in the home and make the damn mortgage payments. Maybe they rent out a room to help cover the expense. It's also true that many people also chose option 3, grow tons of pot in the house and turn it into a criminal enterprise that pays the bills. And nobody was doing option 1 for obvious reasons.

So, we are now blaming two issues for the housing crunch in urban Humboldt County: The housing bubble, which was spurred by low interest rates and liberal lending practices back in 2005, and criminal marijuana growers who either own or rent multiple homes and use them for growing pot in for-profit, non-medical criminal operations.

This conclusion comes from the realization that the recently released "statistic" regarding the number of grow houses in Arcata was fabricated and false. You see, that number came directly from the mouth of Jack Nelson of the Humboldt County Drug Task Force, during an interview with Kevin Hoover that was published in the Arcata Eye on March 25, 2008, and Nelson even says the number is not real and he cannot back it up with actual statistics or research. But then, around the same time that Hoover was delivering form letters to the homes of suspected growers, other press outlets picked up that number and ran with it, including the L.A. Times. So, it is true what Mariellen Jurkovich said in her 3 minute public address at the Arcata City Council meeting on June 4, 2008, that the statistic (1000 out of 7200 homes are grow houses) is, by definition, hearsay, and is not backed up by any actual research or legitimate information.

So, in conclusion, the L.A. Times was wrong about the number of grow houses in Arcata, the Arcata City Council should not base any decisions on the false numbers reported in the papers, and Kevin Hoover really, really wants pot growers to go away. Oh also, local blogger Anon.R.Mous is actually suggesting we call the DEA to report marijuana grows we know about. It's getting crazy around here!