As President-elect Trump prepares to take office, and as Dr. Ben Carson prepares for the confirmation process to take over HUD, many housing advocates are wary of what the Trump administration will mean for housing. However, it’s unlikely that a Trump housing policy would be all that different from President Obama’s or President Bush’s. Both parties have always had a consensus on promoting one thing: homeownership. Despite the fact that 64% of Americans own their homes, this policy consensus has been a disaster for our country. Our national obsession with owning a home has actually made it harder for Americans to obtain the American Dream.
Homeownership policies cost a lot of money. According to the Center for Budget and Policy Priorities, in 2015 the US Government spent $135 billion on subsidizing homeowners through mortgage interest tax credits and real estate capital gains exclusions — while rental programs like public housing and Section 8 cost just $50b. What’s worse, over 60% of federal spending on housing goes to homeowners with incomes exceeding $100,000. That’s quite the handout for a country that has nearly 600,000 homeless and close to 50 million living in poverty.
For most of our history, fewer than half of Americans owned their homes (it wouldn’t cross 50% until 1950.) There are many economic and social reasons for this: homeownership required significant upfront capital and risk; a large portion of the labor force was transient, working either in seasonal agricultural work or in urban industrial work; and most immigrants settled in urban neighborhoods dominated by tenements, off-setting a lack of economic capital with concentrated social capital.
There was nothing organic or market-driven about the dramatic rise in homeownership that started after WWII. The US Government chose to promote it and subsidize it by guaranteeing individual mortgages (through the Federal Housing Administration), which removed the risk to banks. Perhaps surprisingly, the government did so as an economic stimulus for the construction industry during the Great Depression as opposed to a grand social realignment.
What really tilted the economy towards homeownership was the federal creation of a secondary market for mortgages through the forerunner of the Federal National Mortgage Association (Fannie Mae). This opened a lucrative market to resell packaged mortgages, which artificially incentivized banks to offer more mortgages. Homeownership became big business. Today, even well after the 2008 crash, Fannie Mae and Freddie Mac, both government-sponsored private entities, are two of the largest financial entities in the world, holding over $5 trillion in assets.
The US Government also subsidized homeownership through the construction of highways that opened up millions of acres of cheap land to home construction. Although highways were initially conceived to create inter-city rather than intra-city travel, in practice many cleared entire (mainly poor) neighborhoods in cities to move people from their suburban homes to their urban jobs. The environmental and social costs of promoting homeownership this way — causing decades of suburban sprawl and urban displacement — are immeasurable.
That brings us to the original sin of our homeownership policies: systemic racism. Homeownership rates for whites (72%) remain significantly higher than blacks (42%) and Hispanics (45%) and that isn’t an accident. While white Americans were subsidized into suburban homeownership, black Americans (and other minority groups) were blocked from obtaining mortgages through massive ‘red-lining’ of urban neighborhoods. Even if they could buy homes, they were racially segregated from many towns and housing developments.
Back in the cities, hundreds of thousands of families endured mass-eviction through now infamous urban renewal projects that funneled them into poorly conceived public housing developments that were abandoned by the federal government before the paint dried in some cases (See: Pruitt-Igoe.)
Though the most overtly racist policies in housing have been eradicated, decades of discrimination and exclusion baked into the American landscape have left a haunting legacy in our society. Generations of Americans were blocked from the opportunity to own a home — and build wealth — and became trapped in economic and political isolation. The recent, shocking violence in some corners of our nation speak to this in heartbreaking clarity.
Denying millions of Americans access to the middle class wealth creation of homeownership is a national shame that we have been slow to acknowledge let alone address. But is the assumption that homeownership is an automatic vehicle to wealth creation even accurate?
The Nobel Prize-winning economist Robert Shiller has studied decades of housing data in the US and has shown that, adjusting for inflation, home values haven’t increased — at all. For every hot housing market in the in the Sunbelt, there are markets in the Rustbelt and elsewhere where prices are declining. The idea that buying a home is always a good way to build wealth is simply not true.
Additionally, the 2008 crash exposed the insecurity of homeownership for many Americans. Almost 10 million lost their homes and over 3 million more remain underwater in their mortgages. Far from a being a safe and lucrative asset, homeownership has devastated many Americans financial security and trapped them in precarious economic conditions. And though Fannie and Freddie were effectively bailed out by the US Treasury to the tune of $187b, no such comparable relief has found its way to homeowners.
There is a lot of blame to go around for the 2008 crash. It’s easy to moralize individuals that should have known better than to buy expensive homes far above their income levels. It’s easy to blame predatory lenders and bad actors at the local level. It’s easy to trash Wall Street for creating exotic products to recklessly speculate on the housing market. It’s easy to disparage Congress for trying to encourage low-income or poor-credit individuals to buy homes.
But none of this goes far enough. The crash should have prompted extensive soul-searching from our policy makers about the purpose of homeownership. Both parties’ platforms show that little has occurred. This is irresponsible.
Until we acknowledge the severe economic costs of our homeownership policies, we cannot make the changes necessary to ensure that the 2008 crash doesn’t happen again. Without recognizing the social costs, we cannot begin to address the systemic injustices and inequalities that have defined post-war America. Finally, without rejecting the fallacy that owning a home produces a civic virtue unachievable by renting one, we can’t bring new ideas to organizing our communities. If we were to expand the American Dream to include the right to an affordable home regardless of ownership, we could perhaps unlock a new American era of ingenuity and opportunity.