I’ve been thinking a lot lately about homeownership and, given demographic shifts with influxes of millennials like me moving to cities, whether we as a society should continue to rely on the home as a primary vehicle of wealth for the middle class.
US policies really push the idea homeownership. Personally speaking, the mortgage interest deduction will probably save me around $3,000 this year and if I end up selling my home, I’ll be able to keep hundreds of thousands of dollars of gains from appreciation tax-free. Because of my 30-year fixed, I can continue to pay my stable mortgage as interest rates eventually rise and bond yields wobble round me. And once I finally pay off my mortgage, I’ll have imputed rent for as long as I live in my home.
But there’s a dark side to these policies too. The mortgage interest deduction benefits the wealthiest Americans who can itemize their taxes and can cause an upward pressure in housing prices.
And it is not just financial policies that surround homeownership that I question, but homeownership as a good in itself. Perhaps everyone wants to be a homeowner (yes, even millennials), but I doubt so many really want to be home stewards. As workers become more geographically mobile, home ownership less accommodates the needs of our workforce. And the conflation of homeownership and middle class interests creates a NIMBY-esque political environment that makes, for instance, rezoning efforts that would increase housing stock and lower prices unpopular even among populists.
Of course, high rates of homeownership help stabilize communities, long-time residents working hard together to build their neighborhood’s character and caring for its long-term prospects. And homeownership concentrated into too few hands could lead to price gouging and perpetuate inequalities even more than what we’re seeing today.
But what if we tipped the scales just a little? Made it less enticing to be a homeowner by cutting the mortgage interest deduction or perhaps building more government housing to rent across income levels, giving renters more options in our current chasm between private and public housing. Would it, I wonder, be so very bad if homeownership was decoupled from the American Dream?
Do you think homeownership should be a part of the middle-class American Dream? How would you change public policy around homeownership where you live?