Disownership Society

There was a time a few years ago when I connected home ownership to a personal sense of accomplishment. I got a realtor and started going around and was ready to make the deal (the market has dropped 30% since then, so I was right to be wary). I couldn't get past the fact that the idea of this as a personal sense of accomplishment was really the only accomplishment. Buying a home, if done correctly, is a hedge against inflation, but in a market like we have currently even that isn't true. So I don't know if I view this retrenchment of home ownership as a bad thing, except for the fact that the backsliding is mostly due to foreclosure. Outside of intrinsic benefits I'm not sure that it's so desirable anymore.

The percentage of households headed by homeowners, which soared to a record 69.1 percent in 2005, fell to 67.8 percent this year, the sharpest decline in 20 years, according to census data through the end of March. By extension, the percentage of households headed by renters increased to 32.2 percent, from 30.9 percent.

The figures, while seemingly modest, reflect a significant shift in national housing trends, housing analysts say, with the notable gains in homeownership achieved under Mr. Bush all but vanishing over the last two years.

Rents have gone up, but buying a home with no money down and never lowering the principle is just renting your home from the bank. And Paul Krugman takes it a step further:

In effect, U.S. policy is based on the premise that everyone should be a homeowner. But here’s the thing: There are some real disadvantages to homeownership.

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.

That last point is important, the exurbs are going to die out if we don't come up with energy solutions quick. You're going to see slums on the far edge of towns.

It's an interesting question. The fact that the mortgage interest deduction subsidizes homeownership and that renters basically pay for that means that it's established policy to encourage it. And yet it STILL comes fraught with risk. Maybe that risk is too great. Maybe we should rethink the policies that allow homeowners the ability to fail so easily. We have $76 billion dollars deprived from the federal treasury in mortgage deductions, some of that tied to second homes and vacation spots, and $0 on a rental deduction. Perhaps it's time we ask why. And maybe we should be subsidizing denser development and growth that lessens energy demand, and we could do that through the tax code.