Posted by: adam | March 12, 2010

Rethinking Homeownership

A great post on Omaha By Design » The Public Space questions America’s never-ending push for home ownership. In his post Ken Mayer makes five excellent points:

1. Are homes truly assets or are they more likely liabilities:

Sure, lots of people told me they had sold their house for so much more than they paid, but when I asked about how much they really had in the property, they seemed dumfounded. I wanted to know how much interest, taxes, commissions, maintenance and the value of their own time had contributed to the real cost of ownership. That’s how I had been trained to evaluate an investment… Silly me.

2. We have become extremely dependent on homes as assets.

Note how dependent we are on home equity to be our nest egg, particularly as we get older. That’s a lot of eggs in one basket. If I were to say that well more than half of my net worth, that is, assets less liabilities, is invested in a single corporate stock or bond, people would say I’m crazy. But, do it with a house, and I’m a solid citizen.

3. Owning a home has great opportunity costs. Instead of furthering education, producing more at work, engaging in the community, recreating, etc. homeowners must spend enormous amounts of time taking care of their home.

4. In my mind, his most troublesome point was the anxiety that comes from being so dependent on home equity.

Anybody with the bulk of their nest egg in a single immoveable asset is naturally going to be pretty sensitive about anything that might reduce that asset’s value. That means no matter what values you profess, even the slightest little thing that has even a whiff of reducing your property value can be a threat. So whether it’s a wind turbine or a nonwhite family moving in, it may be a cause for concern, even resistance.

5. Homeowners can feel like a prisoner in their own home. If your home cannot sell, that makes it very difficult to move for a new job or when you don’t need the space when your children move out. Lack of adequate public transit can make it very difficult for elderly to age in place.

Most of our policies in this country seem to favor homeowners over renters. For nearly a century and especially in the past 50 years, Federal policies beginning with the National Housing Act and later the creation of Freddie Mac and Fannie Mae. Most recently, the eight thousand dollar tax-credit for first time home-buyers (recently extended through April of 2010) seem to be more in support of the wall-street investors rather than actually supporting and enhancing our communities.

I am struck by the lack of support that exists for renters. As a renter myself, I am appalled at the lack of rights I have if my landlord would go into foreclosure. According to the Urban Institute’s report, The Impacts of Foreclosures on Families and Communities, I could be immediately evicted and lose my security deposit with practically no notice at all. With no time to plan and save for a move, and without the security deposit, many renters would risk losing their jobs and lose any ability to secure housing again.

There is a strong argument that homeownership is good for communities because of longer tenure and therefore a greater sense of a stable community. However government policies should support true community development. Community development is not just about homeownership; rather, it is about enhancing assets that increase the capacity of residents to improve their quality of life. When I say asset, I do not mean just financial assets. I mean all types and forms of community capital: physical, human, social, financial, environmental, political, and cultural. In addition, I must emphasize Ken Mayer’s first and fourth points. Homes may not be strong financial assets and may cause people to fear anything may that hint at degrading their value. Federally policies that pushed homeownership falsely increased the price of homes to the point of bursting. I seriously hope we do not make the same mistake again by creating the false idea that a home is a financial asset rather than a single component of community development. But above all, a home is shelter and is a right of all, even if it is not owned.

The UN’s Special Rapporteur on adequate housing recently made a trip to the US. Ironically, it seems that our push for housing may have led us to join the poor housing ranks of third world countries.

For information on the UN’s Special Rapporteur on adequate housing, Raquel Rolnik:

http://www2.ohchr.org/english/issues/housing/overview.htm

http://raquelrolnik.wordpress.com/

http://cityroom.blogs.nytimes.com/2009/10/23/special-rapportuer/

Because of the specific link between the financial crisis and the issue of housing and especially housing for low-income people, a great interest raised to the situation of the United States. – Raquel Rolnik

-adam

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