A Case Against Homeownership

The received wisdom is that it's just better to own a place. And even after the shambles of 2008, that hasn't changed much. Emily Hamilton writes, "Even though the financial crisis revealed the risks that homeowners take on by making highly leveraged purchases, policymakers are still developing new programs to encourage home buying." 

As the housing crisis made clear, low-income people shouldn't take the decision to buy lightly. "Joe Cortright recently pointed out that homeownership is a particularly risky bet for low-income people who may only have access to credit during housing market upswings, leaving them more likely to buy high and sell low."

Even for those in a stabler financial position, buying a home isn't necessarily the best investment. "Politicians across the political spectrum tout homeownership as key to a middle-class existence, but homeownership will make many buyers poorer in the long run compared to renting." Renters, after all, can theoretically invest that down payment into vehicles that pay greater long-term dividends. But it should be noted that this argument depends a great deal on where you buy.

Hamilton discusses the faults of online "buy-versus-rent" calculators that may be skewed to favor buying property. And she emphasizes another downside of buying: it reduces mobility in an economy that prizes it. 

From the article: "Often, home ownership simply leads to higher levels of housing consumption rather than wealth-building. [...] But from a policy perspective, does it make sense to encourage people to save up for a poor investment, or would those resources be better spent on financial literacy programs?"