The Obama administration has had a lot of terrible ideas over the years, many of which have demonstrated that he simply does not believe in capitalism or the free market as a philosophical matter. The latest of these ideas, which has been largely flying under the radar, is a proposed HUD regulation that would – no joke – involve the Federal Government in the makeup of all neighborhoods across the country. If you thought involving the Federal government behemoth in individual healthcare decisions was bad, wait until they get ahold of the housing market:

The Obama administration is moving forward with regulations designed to help diversify America’s wealthier neighborhoods, drawing fire from critics who decry the proposal as executive overreach in search of an “unrealistic utopia.”

A final Department of Housing and Urban Development (HUD) rule due out this month is aimed at ending decades of deep-rooted segregation around the country.

The regulations would use grant money as an incentive for communities to build affordable housing in more affluent areas while also taking steps to upgrade poorer areas with better schools, parks, libraries, grocery stores and transportation routes as part of a gentrification of those communities.

I am all in favor of the diversification of America. However, that is not what this policy will achieve or is designed to achieve. This is designed flat out to punish rich people for being rich and the ultimate result of this program may very well be the decimation of the real estate sector of the market. The plan essentially has two parts – the first is to spend money on improving poor neighborhoods by adding schools, libraries, etc. The second, however, seeks to move “affordable” (i.e., lower quality) houses directly into affluent neighborhoods.

The first part of this plan is likely to largely be a waste of money (if history is any indicator) but is otherwise harmless. The second, however, will have devastating economic and social effects. It is no secret to anyone at this point that a large part of what drives real estate cost is the quality of surrounding property. Wedging lower cost housing into expensive neighborhoods will not result in more minorities living in expensive neighborhoods – it will instead result in there being no such thing as an expensive neighborhood anymore.

I am quite sure that, to the people who cooked up this scheme, that’s not a bug, it’s a feature. However, ultimately it will result in the loss of huge amounts of money from the American economy both in terms of the commerce sector and also in terms of the decimation of individual savings plans, many of which rely on equity built up in real property. To ignore the trickle-down effects this will have on the economy as a whole is either ignorant or malicious. And with the Obama administration, you can’t rule either possibility out.