"The economy is sinking into a recession and faces the worst financial crisis since the depression. The unemployment rate is rising, the foreclosure rate is soaring and home prices are plummeting. It's time to settle some scores with the people who brought us to this sorry state of affairs.
The identity of some of the villains is already widely known...But there is one group that still needs to be singled out for their role in bringing about this disaster: The ideologues of homeownership. These are the folks who push the ideology of homeownership as an end itself. They insist on lavish government subsidies, even in situations where homeownership is not a good solution for the people affected.
To be clear, homeownership is often desirable. It can be a mechanism for providing good secure housing and, also, for accumulating wealth. It is, therefore, reasonable to have policies like a limited mortgage interest deduction or credit that make it easier for low- and middle-income people to become homeowners.
However, homeownership should not be viewed as an end in itself. One of the reasons millions of families face foreclosure and/or the loss of their life's savings is the ideologues of homeownership continued to promote homeownership even when it was clear buying a home would be financially detrimental.
In the interest of promoting better housing policy in the future, it is important to have a public acknowledgment of the follies of homeownership ideology."
Comments
Out the Truth
"The homeownership ideologues really screwed over an awful lot of low- and moderate-income families because they didn't know what they were talking about. If progressives ever advocated policies that were as wrong-headed as pushing homeownership in the middle of a housing bubble, we would be hearing about it for the next 40 years."
I don't remember "progressives" decrying homeownership for low and moderate income families in general nor did I hear much from them during the housing bubble. I'm sure somebody can produce some articles but it was never a major national issue until after the bubble hit the fan. The reality is many Americans are terrible at dealing with their personal finances but those with less money don't have much of a cushion to fall back on once they have squandered their money. "Keeping up with the Jones" and the "American Dream" usually entail homeownership of some sort which precede Alan Greenspan, among others, by decades.
Hypocrisy...
...thy name is "progressive." After all, wasn't it the same sort of people who railed at the banks and mortgage companies a few years back, complaining that they weren't lending enough to lower-income residents in poor neighborhoods? Maybe I was just imagining it.
a plague on both your houses
Both liberals and conservatives are to blame for the ideology of homeownership and its unfortunate results. Liberals started it- in the 1930s, Roosevelt created the FHA to subsidize homeownership.
And in this area, as in some other areas related to land use and transportation, far too many conservatives and libertarians have slavishly adored the FDR legacy. As the cliche goes, "conservatives worship dead revolutionaries."
Agree with much, just not interpretation
I actually agree with the "facts" of the article...that there are several forms of "home ownership ideologues" that push homeownership as a panacea to everyboy's financial ills. Homeownership is not for everyone, because although there is an asset (the home) there's a corresponding liability (the mortgage, not to mention potential repair costs). For people with limited fiancial means, the liability is to much to handle without a sufficient cushion. Renting really is the answer for lower-income folks as it is just an expense (and an expense that can be subisidized if need be).
The one thing I did notice is that the author blames everybody but the folks who actually took out the mortgages. Not that there's not plenty of blame and wrongdoing that went around, but surely the get rich quick notions of many of the people that took out 100% financing to flip 2nd homes in NV and AZ (downtown San Diego) were equally at fault. For every human interest story about genuine suffering from people who took out a bad mortgage, I also read one about some 25-year old who had 7 properties that he was going to flip and is being foreclosed upon, or someone who ran up their HELOC buying cars and what not... are they really victims that need protection?
Plus, he's wrong about "progressives" not pushing the very same type of policies. One has to look no further than this story in the SF Chronicle (there's also a link to the original story in the following):
http://www.sfgate.com/cgi-bin/article.cgi?f=/g/a/2007/08/03/carollloyd.D...
Now, you can't tell me "progressives" in SF didn't push for inclusionary zoning, especially on-site affordable units versus the in-lieu fee that leads to the above types of situations. Apparently, "home ownership ideologues" know no particular place on the political spectrum.
Republicans and Democrats
While it is true that both sides of the political spectrum have ridden this bandwagon for decades, it did not begin with Democrat FDR in the 1930s. Republican Herbert Hoover, first as Commerce Secretary then as President, led the charge for increased home-building and home-ownership a decade earlier via the creation of several public-private cooperative organizations with this goal. Roosevelt's New Deal programs were the first to heavily subsidize this policy agenda that was already underway on a more laissez-faire basis.
And long before this, home ownership ideology was being ingrained into the national culture via popular literature, church sermons, newspaper editorials, and architecture pattern books. All of this working together provided the societal foundation --an ideological creation-- for the work of Hoover, FDR and others since.
-Citizen
Bravo! Conventional homeownership isn't for everybody
I am so pleased to see somebody in the mainstream media finally recognize that conventional homeownership isn't for everybody. Far too many households who had no business buying a house or condo bought one with ridiculously low downpayments and obscenely one-sided mortgage deals. It's long been known that very low downpayments of 0 to 5 percent result in astronomically higher default rates. Why is anybody surprised at today's high default rates?
But more troubling is the mindset that led to so many people purchasing a home -- people who had no business buying a home in the first place. If you think they are hard pressed by their mortgage terms, imagine how hard pressed they'd be if they had to replace their roof, furnace, air conditioning, and make any of the other many expensive repairs homeowners routinely encounter. They simply did not have the resources needed to own (not to mention purchase) a home.
Unfortunately the mainstream media and planning community have bought into the homeownership mania generated by the real estate community that forced condominium conversions on us in the 1980s (one of the primary causes of today's continuing affordable housing crisis). And unfortunately the politicians in both parties are owned hook, line, and sinker by the real estate community. Otherwise our elected representatives would be reviving funding for low-equity cooperatives -- the most successful housing program in our nation's history and the most cost-effective tool for preserving affordable housing -- and supporting mandatory inclusionary zoning -- the most effective way to get new affordable housing built.
But instead they give us the extremely wasteful tax credits for affordable housing (incredibly cost-inefficient) and other band aids that do little to get people into decent, housing they can afford. And it is a shame that the planning community plays along.
Daniel Lauber, AICP
APA President, 1985-1986
AICP President, 1992-1994, 2003-2005
http://www.planningcommunications.com
http://www.lauberlaw.net
Common Sense About Home Ownership
It is clearly true that, in the last decade or so, the cost of buying has gone way up compared with the cost of renting, making it foolish for moderate-income families to buy, as the article says.
But that is not a good reason to reject all incentives for home ownership. Some comments on the list are going much to far by blaming the current crisis on Roosevelt and Hoover. Federal incentives for homeownership worked for more than a half century without causing a foreclosure crisis.
The housing bubble and the current crisis were caused by creative mortgage products aimed at families that couldn't really afford to buy homes. They were not caused by Hoover and Roosevelt's policies suddenly having bad effects 70 or 80 years after they were adopted.
Charles Siegel
other unintended consequences
"Federal incentives for homeownership worked for more than a half century without causing a foreclosure crisis."
It all depends on the meaning of the word "worked."
By gunning up demand for homes, and by encouraging people to put most of their wealth in homes, government has caused Americans to live off ever-increasing home prices. This in turn led to exclusionary zoning to protect the dream of ever-increasing prices, which led to out-of-control housing prices, which in turn meant that lots and lots of people couldn't afford to buy houses without being highly creative in their financing.
Even if there'd been no subprime lending or federal foolishness, the housing situation was a disaster waiting to happen. Either lots of people live on the streets and in their cars, or housing prices go down and go down hard. Neither result is particularly desirable.
Historical Home Prices
Michael:
Do you have a record of historical home prices? I suspect that they did not go up much during the 1950s and 1960s, because so many new houses were built - in part because of federal programs to encourage home ownership. Historical Statistics might have these figures.
(We know that rents on urban housing were so low that some inner-city neighborhoods were abandoned in the 1960s, and I expect that was also because the large amount of new housing built drove down prices.)
As I remember, people started thinking of homes as speculative investments in the 1970s, because 1)NIMBYism and tighter zoning were driving up prices and 2) homes were considered to be a hedge against stagflation. I don't think we can blame that on Roosevelt and Hoover.
Charles Siegel
But....
I would suggest that maybe the NIMBYism and the tighter zoning and the homeownership obsession were intertwined. When most of your wealth is in your house, you and your neighbors are more likely to move to use government power to protect that investment.
Origins of NIMBYism
Where I come from, NIMBYs always talk about two things: traffic congestion and parking problems. I would suggest that the NIMBYism of the 1970s was caused by the growing auto-dependency and the increasing number of cars per household of the 1950s and 1960s, which made driving such a pain that people tried to stop the pain from getting worse.
Where I come from, in fact, NIMBYs are against development that would clearly improve their property values. People who live near streets filled with low-grade auto-oriented uses don't want mixed use development there because of congestion and parking problems. Yet neighborhoods with mixed-use walkable shopping streets here have higher property values that neighborhoods with auto-oriented shopping streets.
Michael, do you own or rent your home?
Having been both a renter, sometimes with very bad landlords, and a homeowner, I much prefer being a homeowner, because I like being able to make my own decisions about improving my own house, as well as because of the financial advantages. I didn't like landlords' arbitrary decisions about improvements and landlords' failures to make improvements; and I didn't like the fact that I paid the rent and the landlord got the homeownership and wealth.
Charles Siegel