The War on Homeownership and Unintended Consequences
It is inevitable, I guess, in light of the recent troubles that have befallen consumers and our economy that some—scholarly types—would, in the search for solutions, and in order to prevent a recurrence, suggest that homeownership itself may be to blame. Recently, the Harvard Joint Center on Housing Studies released a report entitled: Getting on the Right Track: Improving Low-Income and Minority Access to Mortgage Credit. One mortgage industry publication summarized the report’s views on homeownership in this way:
Despite the view of homeownership as the American dream, its direct and indirect contribution to numerous positive outcomes and that it can enable a household to secure decent housing for a relatively low monthly payment, homeownership is not necessarily the best choice for all individuals and families at all times and many households fail to weigh the benefits and costs of ownership. The rapid expansion of homeownership also may have imposed numerous costs on society in general and high costs on racial and ethnic minorities in particular.
From my reading of the 75-page paper, this summary of the Harvard research group’s findings is fair. The paper views housing policies as simply one component of a comprehensive set of economic and social justice activities of government. In their defense the paper does speak of homeownership as a worthy goal, but believes that government support of the housing market should only benefit low- and moderate-income homebuyers. Among the changes the paper advocates are strict income limits for government-backed loans, relegation of all other loans to a currently non-existent private secondary market, direct subsidization of down payments for purchase, or vouchers for rental housing, and modification or elimination of the mortgage interest deduction.
Why is it, I wonder, that we must view the encouragement of homeownership as simply another welfare program? Aren’t the benefits of homeownership, which the paper rightfully acknowledges, worthy of promotion for all our citizens. Why must we only support the first-steps on the social-ladder?
Of course, I understand the need to do more for those struggling to establish a secure life for themselves and their families. I also understand that buying a home isn’t appropriate for everyone. But the goal of homeownership and of building wealth to support security throughout life should be supported up and down the social strata.
This is not a zero-sum game—the broader support of the housing market and most homebuyers through loan guarantees and favorable tax policies does not mean that there will be less housing support for those at the bottom of the income scale. In fact, the changes being proposed in this paper could result in unintended consequences that destabilize the housing system and ultimately hurt all homeowners and the broader economy. Declaring war on homeownership and proposing to dismantle the housing finance system may be an acceptable academic exercise, but in the real world it is an exercise fraught with unacceptable risk.
David J. Coster is senior editor of National Mortgage Professional Magazine. He may be reached by phone at (919) 559-2171 or e-mail email@example.com.