The Case Against Home Ownership

This morning on the Streetsblog Network, we’re featuring a thoughtful post from Greater Greater Washington in which David C dares to challenge the very foundation of the "American Dream" — home ownership.

186433302_143913ed9e.jpgPhoto by Transguyjay via Flickr.

A
variety of government policies and programs have dramatically increased
home ownership. But lately, some have been advocating that the
government stop subsidizing home ownership, arguing that it locks
people to a place, and when the economy goes sour people need the
flexibility to go where the jobs are. I would say that we need to take
it farther and that, in addition to allowing the unemployed to move to
work, encourage the employed to move closer to work.

He goes on to cite several studies that show
home ownership can be an inefficient use of a family’s financial
assets, as well as Richard Florida’s recent article in the Atlantic, "How the Crash Will Reshape America":

Florida
talks about creating national rental companies that will allow you to
transfer a lease to another property and facilitate your move, instead
of charging you for breaking your lease and leaving
you to fend for yourself in the next town. That’s similar to the way
people trade in a car for the new one. Our public policy should
encourage that as well.

Furthermore,
we need to change tax laws that don’t accommodate all types of
mobility. Current federal tax laws allow deducting moving expenses. But
the time and distance requirements do not allow you, as bankrate.com
puts it, to move just "to ease your daily commute to work."
But why shouldn’t we subsidize a move to ease your daily commute? We
subsidize your commute through tax deductions for commuting expenses.
Why not subsidize easing the commute? Doesn’t it also carry
environmental advantages that we want to encourage? Shorter commutes
strengthen families, and ease everyone else’s commute too. Isn’t that
more of a public good than home ownership?

A piece we ran a couple of weeks back on a similar topic, Where’s "Against Transportation,"
generated a lot of comments. We’re interested to hear your thoughts on
this one. Should we become a more mobile society, picking up and moving
where the jobs are? Is this even remotely realistic in a country where
many families rely on the incomes of two adults?

Bonus reading: Making Places (the PPS blog) has a related post called "A World Where Cars Have a Right to Housing and People Don’t."

  • “some have been advocating that the government stop subsidizing home ownership, arguing that it locks people to a place, and when the economy goes sour people need the flexibility to go where the jobs are.”

    I think it is better social policy to encourage more stable communities than to turn people into migrant workers who follow the jobs around. The modern economy will inevitably cause movement and displacement of people, and we need social policies to mitigate that at least somewhat.

    We shouldn’t be so eager to sacrifice community to the economy.

  • Jeffrey W. Baker

    The Swiss have a owner-occupier rate half ours, and I don’t think anybody would describe them as a nation of rudderless migrants.

    The case against subsidizing home ownership is very simple. Home “owners” have got us into the mess we’re in now, and wage earners (whether owners or renters) are having to pick up the tab. Axing the mortgage interest deduction and other federal incentives is only fair.

  • What would you do for all those homeowners who use their home as their long term savings account? What I mean is that they can build up equity and then get a loan on that equity.

    I am a renter and it would be great to be able to move to a different place more easily w/o worrying about the deposite so much.

  • Jeffrey W. Baker

    Jim F: Cashing out illusory equity is what got us into our current troubles. What I would do for/to home equity cashouts is reset their Prop 13 basis, to make them think twice about doing it.

    After all, I can’t cash out my 401(k) or SEP IRA without a severe tax penalty. Why should housing cashouts be a tax-preferred form of spending?

  • Americans have always been much more mobile than the Swiss (and other Europeans), so we have more of a need for policies to promote stable communities.

    The mortgage deduction has been around for many decades without causing economic crisis. The current crisis was caused by irresponsible bank lending (and the irresponsible borrowing that it enabled), and that is what we need to regulate.

  • Labor mobility and home ownership are not incompatible. Home ownership has taken on the role of retirement account in the presence of rising home values and the absence of retirement security.

    Interest rates also were kept low to avoid a recession 5 years ago, and that inflated home prices as well, further reducing labor mobility. Bankers then kept rates low in order to inflate the loans that generate interest which is income to a bank. This is part of the flaring of the FIRE (Finance, Insurance and Real Estate) economy that arose after Gramm/Leach repealed Glass/Steagall, broke down the divisions between banks and insurance companies which allowed for the financialization of housing and real estate and consumption and the debt which serviced them.

    Reregulating finance, insurance and real estate is critical to removing the incentives towards gaming the system into the ground. The purpose of finance and debt is to lubricate capitalism not to become capitalism, and the financialization of the economy with the attendant globalization/free trade is what led to the offshoring of the real manufacturing economy to be replaced with the FIRE economy.

    Housing should serve as a piggy bank more than a casino. And retirement reform is critical towards definancializing housing.

    The social relationship of tenant/landlord dates back to the feudal regime and even in San Francisco with the strongest pro tenant laws in the country,still carries an oppressive taint.

    If capital is going to flow unrestricted, than labor needs to be able to flow to follow it. The European Union allows this. I speak as much Spanish to people in shoppes in London as I do at the tiendas here. NAFTA, on the other hand, does not allow for labor mobility. Could it be the various nefarious fears of our vecinos south of the border?

    -marc

  • zig

    “The mortgage deduction has been around for many decades without causing economic crisis. The current crisis was caused by irresponsible bank lending (and the irresponsible borrowing that it enabled), and that is what we need to regulate.”

    I don’t disagree with this at all but I think the point many are making (and it appeals to many on both the far right and left) is this has been a continuum of resource (over) allocation towards homeownership since WWII, banking crisis or not, and it can’t be separated from excessive suburbanization in this country. I see the mortgage deduction, the tax exemption for home profits, the implicit backing of the mortgages by the GSEs, the allocation to more highways as all being part of the same phenomena. The sh*t has now hit the fan for other reasons too but the fact still remains that we have basically told lower middle class people to live far from cities, drive excessively and to buy single family homes and have done everything possible to make that happen.

    I could be wrong but I believe a housing market as it existed before WWII would necessitate up to 40% down and banks could not risk providing 30 year fixed loans so all loans would be adjustable.