If you want to appear terribly sophisticated at dinner parties, then what you need is a controversial, but non-bigoted, opinion.
Examples include ‘we must legalise all drugs‘ and ‘if we’re serious about climate change then we must switch to nuclear power‘.
Here’s another one: ‘we must end our obsession with home ownership‘. That fits the bill nicely: sacred cow duly slaughtered, but with no hint of political incorrectness.
But are we really ‘obsessed’ with home ownership? I don’t think so. After all, every home has to have an owner – the only question is whether or not that should be the people who live in it. In most cases, in most countries for which we have the figures, the answer to that question is yes. The US and UK don’t have especially high homeownership rates – at 64.5% and 63.5% they are lower than Canada’s (67.6%), Sweden’s (70.8%), Italy’s (72.9%) or Spain’s (78.2%). In supposedly Communist China – homeownership runs at 90%.
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Of course, no one sane is suggesting that we should abolish owner occupation. Rather the accusation of ‘obsession’ is attached to those for whom buying for the first time is a bit of a stretch – and to the politicians who try to help them.
But as Conor Sen and Noah Smith argue in a piece for Bloomberg, extending home ownership is a progressive aim. If you want see equality of wealth and not just income, then what is it that you want non-wealthy people to own more of?
“There are big obstacles to building wealth for many Americans. Stocks — the obvious alternative to real estate — can be extremely volatile, and lower-middle class people can’t afford to run the risk of having their assets wiped out. Stocks are also difficult to understand; people who try to invest their own money tend to do very badly, and people who use professional managers to invest for them tend to pay large fees that swamp their returns. This keeps low-income people out of the market.”
A house, though, is a tangible asset. Its market value can fall, but it is very rarely wiped out – and though specialist help is sometimes required for repairs and such, it doesn’t need expensive professional management. Oh, and you can live in it – which is nice, seeing as you have to live somewhere.
Sen and Smith acknowledge some of the drawbacks:
“Housing certainly has its own disadvantages — it’s undiversified, and it can tie people to the economic fortunes of a specific location.”
Home ownership is also said to act as a drag on labour mobility. However, rental contracts can tie tenants in for long periods too, as well as imposing all sorts of other inflexibilities – such the inability to extend or modify your home to meet changing needs. Worst of all, if you happen to live in an up-and-coming area don’t expect to share in the benefits – your landlord will be having those when he puts your rent up or kicks you out.
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Home ownership provides a people with a direct stake in national and local economies – and inculcates habits that enhance that stake:
“Homeownership can also encourage low-income people to build more wealth on their own. Monthly mortgage payments can act as a behavioral nudge that prompts people to save more each month. And homeowners have an incentive to maintain their dwellings, which both improves the quality of the housing stock and helps teach people the basic skills of property management.”
Of course, there are good ways and bad ways to help people become home owners. Subsidies, soft loans and tax reliefs are, in my view, generally bad – because they artificially push up property prices.
Stopping speculators from bidding up land values is a much better way forward. Especially promising is the Community Land Trust model, which as well as freezing out the speculators provides a means by which the risks of ownership (e.g. repair costs) can be pooled.
More community land trusts could transform the housing debate
So, while exercising careful judgement as to the means, let us be confident about the ends: Far from being an obsession, the extension of home ownership is an open door to a fairer, more equal society.