There are, generally, great societal benefits to home ownership. It ties the new owners to a huge expense that forces them to work productively for an employer: lose your job, lose your house. Home ownership ties the owners to a community - it's not like renting where you can easily move and switch communities for something "better" - you'll want to improve your community since you cannot as easily move away. Homeowners will pour resources into "their" homes to keep them up - for resale value if nothing else. Home ownership accumulates wealth in the form of equity - it's a wealth acquiring plan - so in your Golden Years you've got, if nothing else, a big wad of cash that either transfers to your heirs (when they can really use it) or pays nursing home expenses.
Lots of benefits. So I get the government desire to incentivize ownership - we're all FOR more home ownership. But when the government incentivizes anything, it distorts markets. That's the downside. So, herewith, the conundrum. First, the government should "do no harm" - following the recipe you cited: stop with the idiot nonsense of regulating home ownership to the point of absurdity. If home ownership is seen as a community good - don't tax and regulate it to death. And insurance costs are now becoming prohibitive - which is driven by horrific inflation in construction materials. And interest rates - which are tied to federal government inflationary spending.
It seems just four short years ago, none of this was a problem.
We have had problems in the past with government distortions. Housing bubbles tied to government trying to encourage an increase in ownership, for one.
Home ownership is a good idea that should, nonetheless, *not* be encouraged by government.
In 1986, I bought a house for 179000 after prices had doubled over three years during the “Massachusetts miracle. Interest rates were 12-14 percent. My payment was $2200 a month and my wife and I made a combined 55k a year. We didn’t take a vacation for 7 years or eat out much.
Yes, indeed, many people aren't willing to clamp down on the balance of their finances to buy a house, but that's actually a separate issue. It remains that housing prices - rent and buy - are made higher by government policies.
Home ownership, one of the main sources of household “wealth building”, is a zero-sum game.
As you point out, decades of guaranteed, subsidized, tax deductible mortgages encouraged urban sprawl, inhibited worker mobility in a changing economy and, aided by “quantitative easing” on the demand side and NIMBY building restrictions on the supply side, inflated the housing bubble (and re-inflated the bubble again after the ’08 meltdown).
I would postulate that without these public subsidies, widespread homeownership might not be sustainable – or even desirable. Maybe historically it was seen as a necessary bit of social/political engineering to inoculate the working classes from the allure of socialism and communism. But going deep into debt to own a home is a good idea only if you know the value of the home will always go up – or at least never go down. Therefore, it became the political imperative to make sure home values always go up (see previous paragraph). And that gets us back to square one with a lot of working class and middle-class folks who can’t afford to buy a home.
Home ownership was 55% in 1950. It got to the low 60s in the 1990s, before the government inflated the bubble. The bubble got to just under 70% before it burst, and dropped back to 63%.
That suggests a baseline value over 50% without meddling. So, I'm not so sure I agree that the ownership society would go away.
Remember - it's not just rising prices. It's equity accumulation. A mortgage amortizes a purchase price, but renting pays down someone else's purchase. A house, lived in for a long time, is a store of wealth, even if it doesn't go up in value any faster than inflation.
A gain in my stock portfolio is, at least in theory, my reward for providing investment capital for new businesses, jobs, etc. But when my home value goes up, does anyone else benefit? Should this type of wealth accumulation be encouraged by public policy?
There are, generally, great societal benefits to home ownership. It ties the new owners to a huge expense that forces them to work productively for an employer: lose your job, lose your house. Home ownership ties the owners to a community - it's not like renting where you can easily move and switch communities for something "better" - you'll want to improve your community since you cannot as easily move away. Homeowners will pour resources into "their" homes to keep them up - for resale value if nothing else. Home ownership accumulates wealth in the form of equity - it's a wealth acquiring plan - so in your Golden Years you've got, if nothing else, a big wad of cash that either transfers to your heirs (when they can really use it) or pays nursing home expenses.
Lots of benefits. So I get the government desire to incentivize ownership - we're all FOR more home ownership. But when the government incentivizes anything, it distorts markets. That's the downside. So, herewith, the conundrum. First, the government should "do no harm" - following the recipe you cited: stop with the idiot nonsense of regulating home ownership to the point of absurdity. If home ownership is seen as a community good - don't tax and regulate it to death. And insurance costs are now becoming prohibitive - which is driven by horrific inflation in construction materials. And interest rates - which are tied to federal government inflationary spending.
It seems just four short years ago, none of this was a problem.
We have had problems in the past with government distortions. Housing bubbles tied to government trying to encourage an increase in ownership, for one.
Home ownership is a good idea that should, nonetheless, *not* be encouraged by government.
In 1986, I bought a house for 179000 after prices had doubled over three years during the “Massachusetts miracle. Interest rates were 12-14 percent. My payment was $2200 a month and my wife and I made a combined 55k a year. We didn’t take a vacation for 7 years or eat out much.
All just depends on your priorities.
Yes, indeed, many people aren't willing to clamp down on the balance of their finances to buy a house, but that's actually a separate issue. It remains that housing prices - rent and buy - are made higher by government policies.
Home ownership, one of the main sources of household “wealth building”, is a zero-sum game.
As you point out, decades of guaranteed, subsidized, tax deductible mortgages encouraged urban sprawl, inhibited worker mobility in a changing economy and, aided by “quantitative easing” on the demand side and NIMBY building restrictions on the supply side, inflated the housing bubble (and re-inflated the bubble again after the ’08 meltdown).
I would postulate that without these public subsidies, widespread homeownership might not be sustainable – or even desirable. Maybe historically it was seen as a necessary bit of social/political engineering to inoculate the working classes from the allure of socialism and communism. But going deep into debt to own a home is a good idea only if you know the value of the home will always go up – or at least never go down. Therefore, it became the political imperative to make sure home values always go up (see previous paragraph). And that gets us back to square one with a lot of working class and middle-class folks who can’t afford to buy a home.
Home ownership was 55% in 1950. It got to the low 60s in the 1990s, before the government inflated the bubble. The bubble got to just under 70% before it burst, and dropped back to 63%.
That suggests a baseline value over 50% without meddling. So, I'm not so sure I agree that the ownership society would go away.
Remember - it's not just rising prices. It's equity accumulation. A mortgage amortizes a purchase price, but renting pays down someone else's purchase. A house, lived in for a long time, is a store of wealth, even if it doesn't go up in value any faster than inflation.
One of the points I was trying to make…
A gain in my stock portfolio is, at least in theory, my reward for providing investment capital for new businesses, jobs, etc. But when my home value goes up, does anyone else benefit? Should this type of wealth accumulation be encouraged by public policy?
Thing is, the stock market is also distorted. I figure its recent gains are driven by government debt and by inflation (but I repeat myself).
Consider also that population growth will drive up housing prices, especially in places that people want to live. Simple supply and demand.