In the 1930′s the Federal Housing Administration was created to help provide long-term financing for homeowners. The housing policy of the country was that home ownership was great for the country. By the 1980′s the home ownership rate had increased to almost 70 percent. In the early 1990′s Congress mandated that HUD loosen its policies to provide for more home ownership. After all, if it was such a good thing then the more people who owned homes would be good. The problem was that the only way for more people to own homes was to make those homes more affordable. The only way to make those homes more affordable was to lower the down payment and other costs to get into a home. You know the rest of that story. People who could not afford to be home owners – at least not in the homes that they were “qualified” to buy – could not pay their mortgages, especially the variable rate mortgages. That led us to the current massive oversupply of houses in some states and the current situation, i.e. chaos. That is the present.
The future of home ownership may not be ownership at all, but renting the home. The arguments for such a policy go like this: Young people (the creative class) are mobile and will go where the creative economies are located, people (especially immigrants and lower income people) cannot afford to buy because of high initial costs and credit conditions and home ownership is “trapping” Americans who are upside down in their unsold homes and cannot move to where the jobs are thus causing local economies to go down.
As I digest all of this – “digest” being the operative word – I am reminded of the time that I overate a delicious spaghetti and meatball meal. The food was so good that I gorged myself (I was younger then.) only to suffer the consequences later. You know the consequences of such an action so I will not describe them in detail, but it wasn’t pretty. I could not eat spaghetti and meatballs for two years. Just the thought made me nauseous. In short, we have overeaten the delicious home ownership meal and we are now throwing up. But our future housing policy should not be to give up the partaking of home ownership. It should be to have that meal in moderation so that its digestion is good for our growth and sustainability.
That does not mean that I disagree with those who advocate more renting of homes. Indeed, I have written before that not every household should be in an owner-occupied dwelling. Home ownership is not for everyone. But let’s not throw home ownership in the garbage disposal just yet.