The Case Against Home Ownership

This morning on the Streetsblog Network, we’re featuring a thoughtful post from Greater Greater Washington in which David C dares to challenge the very foundation of the "American Dream" — home ownership.

186433302_143913ed9e.jpgPhoto by Transguyjay via Flickr.

A variety of government policies and programs have dramatically increased home ownership. But lately, some have been advocating that the government stop subsidizing home ownership, arguing that it locks people to a place, and when the economy goes sour people need the flexibility to go where the jobs are. I would say that we need to take it farther and that, in addition to allowing the unemployed to move to work, encourage the employed to move closer to work.

He goes on to cite several studies that show home ownership can be an inefficient use of a family’s financial assets, as well as Richard Florida’s recent article in the Atlantic, "How the Crash Will Reshape America":

Florida talks about creating national rental companies that will allow you to transfer a lease to another property and facilitate your move, instead of charging you for breaking your lease and leaving
you to fend for yourself in the next town. That’s similar to the way people trade in a car for the new one. Our public policy should encourage that as well.

Furthermore, we need to change tax laws that don’t accommodate all types of mobility. Current federal tax laws allow deducting moving expenses. But the time and distance requirements do not allow you, as bankrate.com puts it, to move just "to ease your daily commute to work." But why shouldn’t we subsidize a move to ease your daily commute? We subsidize your commute through tax deductions for commuting expenses. Why not subsidize easing the commute? Doesn’t it also carry environmental advantages that we want to encourage? Shorter commutes strengthen families, and ease everyone else’s commute too. Isn’t that more of a public good than home ownership?

A piece we ran a couple of weeks back on a similar topic, Where’s "Against Transportation," generated a lot of comments. We’re interested to hear your thoughts on this one. Should we become a more mobile society, picking up and moving where the jobs are? Is this even remotely realistic in a country where many families rely on the incomes of two adults?

Bonus reading: Making Places (the PPS blog) has a related post called "A World Where Cars Have a Right to Housing and People Don’t."

  • MrManhattan

    I was thinking of renting a condo in Orlando for a family reunion, but it was cheaper to buy.

  • Why not go even further and encourage telecommuting? With home ownership and telecommuting, people can drastically reduce their cost of living, while cutting out most of the effects of transportation, public or otherwise.

  • Rhywun

    I’ll go one further and say that the government should not be in the business of “encouraging” one lifestyle over another, period. If home ownership is so great, people will do it on their own without me having to subsidize it. If the government had kept its nose out of this, our built environment wouldn’t likely be nearly so crappy as it is.

  • I agree with Rhywun with regards to subsidies. However, I have a hard time believing there isn’t a benefit to communities when people set up shop for a long period of time (either by owning or by renting long-term), get to know their neighbors, become involved in community activities, etc. Encouraging people to move from place to place to follow work seems like it could make live very impersonal.

  • garyg

    I’ll go one further and say that the government should not be in the business of “encouraging” one lifestyle over another, period.

    I somehow doubt you’d like the results. That bus ride for which you pay $1 actually costs more like $4. The government pays the difference. If the government did not encourage people to use transit via massive subsidies, transit use would probably fall dramatically.

  • Aaron

    To some degree, I think this short-changes the benefits of home ownership. In addition to Josh’s point about being anchored in a place, a home is often the largest single asset that most people own in their lives. While the current crisis shows the limits of the home-as-savings approach, we can’t ignore the fact that renters are simply paying for a service, and at the end of their lease, receive no return whatsoever for their expense. After two or three years, buying a home almost always becomes the more prudent financial strategy. In this sense, homeownership is about promoting financial stability (and it’s worked for most of the last 50 years) as it is about neighborhood stability

  • Max Rockatansky

    If I owned a home that was truly affordable I wouldn’t be living in the city. I would accrue extra expenses and lose a significant percentage of time in travel. Since I bike commute now for exercise, I would also have to schedule some gym time into my day. More time lost. All that to own a house which takes constant maintenance (= more money) only to become upside down on the mortgage? No thank you.

  • Jeffrey W. Baker

    “After two or three years, buying a home almost always becomes the more prudent financial strategy.”

    False, wrong, absolutely completely bogus, please stop repeating this.

    A renter rents his house, and a buyer rents his money. There is no underlying moral/ethical difference between the two. And there are many confounding factors that complicate the buy/rent decision. Buying a house involves the opportunity cost of the down payment, while renting does not. For example, you pay a $100,000 down payment on a $500,000 house and you lose all potential investment returns from the $100,000 (e.g. returns from starting or expanding a business, investing in stocks and bonds, etc). If the other investments have better returns than housing, then you lose.

    And then there’s the small matter that, over the long term, housing is the worst investment you can make. Housing never, ever, ever outstrips wage inflation over long periods of time. The whole idea of a house as an investment is bunk. A house is a cost. You live in it, and presumably you find some value in that. But it’s not an investment.

    With all factors considered, renting has been a better deal than buying in all major American cities for the last five years.

  • garyg

    Jeffrey Baker,

    Actually, over the long-term owner-occupied housing is a very competitive investment. Not through price appreciation alone, but through the combination of appreciation and the value the owner gets from living in the property. And because the cost of selling is relatively high, homeowners are discouraged from the kind of short-term trading that causes so many stock market investors to do poorly.

  • Jeffrey W. Baker

    Ask yourself this: would you want to live in a place where home values are always appreciating relative to wages? If you did live in a such a place, it would mean that your children would have less disposable income, and their children would have even less disposable income, and so forth until everybody spends 100% of the income on their mortgage.

    After completing this thought experiment you should now be able to understand why housing never appreciates relative to wage inflation in the long term.

  • oscarfrye

    I agree with Douglass

    Telecommuting & flexible work hours can and should be a major part of this discussion. I see the hours of 7-9am and 5-7pm as the some of the most environmentally damaging and economically unproductive hours of the day.

    And regarding owning vs renting, its really easy to jump on the “owning sucks” bandwagon right now…There are pro’s and cons to both, but the ability to have your housing cost relatively fixed for 30 years, followed by it being relatively nominal, makes it a win over renting IMO for the long term, provided that you buy within your means while factoring in related costs (transportation, energy, maintenance, etc – which many people hardly consider until after moving in).

  • oscarfrye

    Jeffrey, wouldn’t that also be the case for renting? Rents go up just as home values do over the long term , although you and I can selectively pick 5 year periods where one seems better/worse than the other…

    (Of course I am assuming free market rents)

  • Rhywun

    If the government did not encourage people to use transit via massive subsidies

    The government has done far, far more to encourage the exact opposite over the last 100 years. In fact those massive subsidies you decry are largely a result of the recognition of the damage that was done by the government pushing the American Dream so hard for decades. If the government didn’t have its fingers in every little corner of life, we would all be paying the “fair” cost of travel and the train would be a better deal than the car, by far.

  • garyg

    The government has done far, far more to encourage the exact opposite over the last 100 years.

    I think you’d have a very hard time making that case. Transit use has fallen dramatically despite aggressive government efforts to encourage people to use it because cars are simply so much more practical. Faster, more comfortable, more convenient. The same trend has occurred in Europe and throughout the developed world. It’s starting to happen on a large scale in China and India too, as incomes are rising and more and more families are able to afford to buy a car.

  • Gary, many people have refuted your anti-transit arguments in past comments, yet you continue to repeat the same claims without acknowledging the refutations. Let me ask you the same question that Mark Walker did yesterday, and maybe I can get an answer:

    This blog is for people who are interested in promoting livable streets. What is your commitment to this issue? Because if you’re just here to repeat the same tired lies and misconceptions, we can do without you.

  • garyg

    Gary, many people have refuted your anti-transit arguments in past comments,

    Really? Where?

  • Exactly. You drive by, post your repetitive comments, and don’t bother to read anyone’s responses. Please go back and look at the comments you’ve made and stop wasting our time.

  • John

    I like to think of owning a home as locking in a rent for the next 30 years. Instead of having to worry about how much my landlord will charge me next year and if I want to renew my lease, I know I’ll be paying the same monthly payment in 30 years as I do now. There are still taxes, but overall it seems beneficial? After 30 years, you don’t have to pay any money to the bank at all, which would be nice for the lower-income retirement years.

  • glrrrp

    Bring back the mobile home! Just think, Central Park could be full of tin shacks when economic times are good in NYC, and when the bottom falls out, take your trailer to the bahamas and cash your unemployment check whilst slurrping on a pina colada and enjoying another carribean sunset.

  • Or maybe Guadeloupe?

  • Miguel Marcos

    I’m with Josh. I have a concern for the health of community when society has become so ultra-mobile. There needs to be a balance between mobility and permanence.

  • This is a very interesting discussion. I’d just like to point out that renting does not necessarily mean transience, any more than home-owning necessarily means permanence. As a renter, I lived in one house for nine years– longer than I’ve lived anywhere, including all the houses that my family owned when I was growing up.

    I would like to see more pro-active steps taken to provide access to appropriate rental housing for people of various ages. I don’t mean necessarily by the government– private developers can have at it too (of course). There’s a good market for people who would rather pay $XXXX in rent for a well maintained urban home instead of the same amount in mortgage, plus maintenance costs, plus property taxes, plus upgrades, for a home further out. Hey, I’m one of them! Take my money!

  • Alicia

    Homeownership has been the single worst mistake I’ve made in my life financially. Yes I did make some mistakes to my own choosing such as taking out a home equity line. (which was made way too easy for me) but with this marketing ploy that I’ll be able to repay it easily with all this equity I’ve earned when I sell at such incredibly huge profit!! Well that was a myth. My house is worth way less than my buying price. But I bought into all that. I’m way smarter now and I’m going back to renting as soon as I can make this homeownership nightmare go away.

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