From the New York Times:
“Owning a home lies at the heart of the American dream.” So declared President Bush in 2002, introducing his “Homeownership Challenge” — a set of policy initiatives that were supposed to sharply increase homeownership, especially for minority groups.
But here’s a question rarely asked, at least in Washington: Why should ever-increasing homeownership be a policy goal? How many people should own homes, anyway?
Listening to politicians, you’d think that every family should own its home — in fact, that you’re not a real American unless you’re a homeowner. “If you own something,” Mr. Bush once declared, “you have a vital stake in the future of our country.” Presumably, then, citizens who live in rented housing, and therefore lack that “vital stake,” can’t be properly patriotic. Bring back property qualifications for voting!
Even Democrats seem to share the sense that Americans who don’t own houses are second-class citizens. Early last year, just as the mortgage meltdown was beginning, Austan Goolsbee, a University of Chicago economist who is one of Barack Obama’s top advisers, warned against a crackdown on subprime lending. “For be it ever so humble,” he wrote, “there really is no place like home, even if it does come with a balloon payment mortgage.”
First of all, there’s the financial risk. Although it’s rarely put this way, borrowing to buy a home is like buying stocks on margin: if the market value of the house falls, the buyer can easily lose his or her entire stake.
This isn’t a hypothetical worry. From 2005 through 2007 alone — that is, at the peak of the housing bubble — more than 22 million Americans bought either new or existing houses. Now that the bubble has burst, many of those homebuyers have lost heavily on their investment. At this point there are probably around 10 million households with negative home equity — that is, with mortgages that exceed the value of their houses.
Owning a home also ties workers down. Even in the best of times, the costs and hassle of selling one home and buying another — one estimate put the average cost of a house move at more than $60,000 — tend to make workers reluctant to go where the jobs are.
And these are not the best of times. Right now, economic distress is concentrated in the states with the biggest housing busts: Florida and California have experienced much steeper rises in unemployment than the nation as a whole. Yet homeowners in these states are constrained from seeking opportunities elsewhere, because it’s very hard to sell their houses.
Finally, there’s the cost of commuting. Buying a home usually though not always means buying a single-family house in the suburbs, often a long way out, where land is cheap. In an age of $4 gas and concerns about climate change, that’s an increasingly problematic choice.
And while we’re at it, let’s try to open our minds to the possibility that those who choose to rent rather than buy can still share in the American dream — and still have a stake in the nation’s future.