Homesteaders in the HoodSquatters are multiplying in the recession—what should cities do?

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So far, local governments have split over how to handle the influx. The Atlantic recently documented the efforts of officials in San Bernadino, Calif., to keep squatters out: One officer had removed an unemployed nurse and her family five times from different homes in the community. In other cities, meanwhile, officials have decided to look the other way. Rep. Marcy Kaptur, D-Ohio, has even advised constituents who have been foreclosed to squat in their own homes by refusing to leave. Until he backtracked after negative publicity, Sacramento Mayor Kevin Johnson had considered making that city's tent encampment permanent and providing its residents with utility services.

But these ad-hoc reactions aren't really the answer. Squatting can be dangerous for squatters and can, depending on the circumstances, harm neighboring property owners by driving down property values, as neighbors of the Sacramento tent city have complained. At the same time, some of the danger and harm of squatting results from ill-advised efforts to keep them out, and squatters who take over boarded-up housing might actually improve neighborhood conditions and increase property values. Cities should therefore resist the temptation to respond to an increase in squatting by simply ratcheting up enforcement. Instead, governments should attack the problem on both the supply and the demand side.

On the supply side, local governments should penalize owners who stockpile vacant housing, perhaps by imposing increased property tax rates on properties left vacant, and by moving aggressively to seize vacant properties when the owners fall behind on paying those taxes. On the demand side, governments should expand homesteading programs that permit and help low-income people to take over vacant housing—but only after it finds its way into city hands.

To be sure, these programs were only marginally successful in the 1970s, in part because of lack of funding, but also because of the difficulty of restoring abandoned urban properties to habitable condition. The housing that is becoming vacant during the current downturn, by contrast, is relatively new and should be easier for homesteaders to repair. The federal government should also move quickly to protect those in financial trouble from foreclosure and eviction by requiring foreclosing banks (many of which are themselves receiving taxpayer bailouts) to rent out foreclosed homes to their former owners at fair market value. In fact, as this letter to the editor in the New York Times Magazine on Sunday correctly observed, allowing owners to remain as renters in their foreclosed homes helps safeguard the value of the houses—which is good for the occupants, good for the banks, and good for the housing market as a whole.

The sudden increase in squatting shows that the housing market that is out of kilter. The solution is not to chase squatters off, but to bring the market back into balance by helping them find a place to call home.

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