The Self-Defeating American Dream

Sometimes, the world works in mysterious ways.

For centuries, property ownership, and especially homeownership, has been used as an economic weapon by the rich and privileged (e.g. white, or Protestant, or whichever group was favored at the time) against the poor and unprivileged. In recent history, the US government has provided major financial subsidies to homeowners, while simultaneously encouraging and enabling policies that blocked Black households from purchasing homes in certain areas (i.e. redlining).

Meanwhile, since 1980, the federal government has been steadily tearing apart the New Deal: lowering taxes on the rich, and finding every excuse to cut back on programs that help the poor.

When you put these two together, you end up creating a generation that has systematically lower homeownership than its predecessors. The percentage of Americans between ages 23–34 who own homes is 15% lower now than it was 30 years ago. The same result holds for the subset of those Americans who are married but have a single income. (Homeownership is still high among those young households with two full-time workers, but we’ll see how long that lasts, given that there’s pressure at both ends.)

In other words, it turns out that the most effective thing the government can to do boost homeownership is to provide a social safety net, so that young couples can buy homes without worrying that doing so will bankrupt them. When you pull out that rug, homeownership collapses.

(You might ask: if no one can afford to buy a home, then why are homes so expensive? Who is buying these homes at their current high prices? I think there are a few answers. In a lot of markets, almost no one is selling, which creates high prices for the few homes that are on the market. The number of potential buyers is increasing much more quickly than the number of owners. The people who can afford homes, e.g. tech workers, are able to pay ludicrously high prices. Some subset of the available housing stock is bought by investors or developers who ultimately want rental income. And a lot of people will never, ever sell their home for less than they paid for it, which reduces the effective supply of homes and thus increases prices.)

Homeowners represent a comfortable majority of the electorate in the US, in every state (though not DC), and in the vast majority of US cities. Even in places where most people rent, homeowners are still more likely to vote, largely on account of their age, race, and/or wealth. But what happens when that’s no longer true? What happens when the renter generation starts to wield its political power?

A likely first step, of course, is pushing for rent regulation. This is happening right now in Seattle, where city councilmember Kshama Sawant is working to build public support for rent control. But a renter majority at the state or national level could go even further. Why is there a mortgage interest tax deduction, but no corresponding deduction for renters? Why are home sales largely exempt from capital gains taxation? Why does the government subsidize FNMA and FDMC, but not rents?

People who know they are lifetime renters may also ask the government to make long-term renting more appealing. In countries with a tradition of lifelong renting, the landlord-tenant relationship often looks very different than what Americans are used to. In Germany, for example, the standard lease agreement is for an indefinite duration. Tenants can give three months’ notice to leave, while the period for landlords is often much longer. Tenants also have the right to make any modifications they want to their home, so long as they’re willing to restore everything when they leave (if the landlord asks them to). Combined with rent regulation, these provisions make renting a lot more like owning — at least in the good ways. It’s not hard to imagine a renter majority voting for candidates who pledge to enact new landlord-tenant legislation. Maybe they can’t own their home, but they can get the next best thing.

I have no problem with any of these changes. In fact, I’d be overjoyed to see them. I think that an overreliance on homeownership is one of the biggest economic problems in the US (and particularly in cities). But I think it’s ironic that the “ownership society” may have been destroyed by the very people who claimed to value it most highly, and by the very policies that they thought would bring it about.

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