23.7.08

Homeownership, Schmomeownership

[You could live next to me in this fine home. Note the newly planted 'for sale' sign.]

The house next door to me has been empty for almost two years. The last family to live there was a large Hmong family that kept chickens and grew corn in the backyard. There's a hole in the roof, and the large house has sat there while its fences fall down. Workers from the bank come every few months to do yardwork (shoveling snow, mowing lawns, etc.). I usually mow their front lawn and collect the random phonebooks sitting on the stoop, just to keep up appearances.

But I noticed the other day that there's now a real estate sign in the yard, and people have been stopping by with increasing frequency to look at the interior. I think there's real hope I could have a neighbor in the near future.

If the house did get sold, though, it would seem to be bucking a housing trend. All across America the housing market is tanking, and neighborhoods in every type of city are hurting from vacancies. Somehow, the myriad movements of the American real estate market have left vast numbers of houses empty and falling apart. Entire cities seem abandoned. New developments are instantly obsolete? How did we get here?

Well, one answer is that we subsidized the hell out of homeownership. A while back I really enjoyed reading a Paul Krugman column on this very topic, the economic problems with real estate subsidies. He writes:

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!


Krugman goes on to argue that homeownership presents a large financial risk (esp. for borrowers with shaky credit), limits the mobility of the workforce, and encourages large-scale commuting.* To pursue this "American dream" of everyone with a house on a green postage stampe, our government has subsidized homebuyers in huge ways... most importantly through the hugely expensive income deduction on mortgage interest**, and by building a hugely expensive system of roads (and sewers). But there are also the more hidden subsidies, like providing FHA loans, and implicitly (and now explicitly) propping up "corporations" like Freddie Mae and Fannie Mac. As far as I can tell, these companies were created in the depression to fuel the home construction and real estate markets, pursuing the goal of universal homeownership.

Kunslter lays all this out in his book, The Long Emergency. Writing in 2005, he pretty much pegged the current mortgage lending crisis:


The part that gets me, though, is that I'm not sure how many people really realize the extent to which our government backs and pushes this one particular kind of social order.

And the latest news on the housing bill, it seems Washington is putting our government on the line (yet again) to prop up a bunch of private companies who've made money screwing the system. And all in pursuit of a Jeffersonian dream of homeownership, which probably isn't that great an idea anyway. At the very least, it has a lot of unforeseen negative consequences.



* Though on this last point, I wonder if that's necessarily true. Surely we could design a "condo" society, where homeownership didn't entail such environmental damage. Still, the American vision of the "home" almost always includes a backyard, and that would seem to preclude a certain level of density.

** For a great deal more on the Mortgage Income Deduction, see David Cay Johnston's book
Perfectly Legal. To make matters worse (for my point), Johnston also describes how the deduction is set up in such a way that gives people larger credits on larger mortgages, giving an extra benefit to those who buy the most expensive, largest, and most energy-intensive homes.

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