Owning a home has become as American as apple pie and baseball. Much of the nation's strong middle class has historically had a great amount of its wealth as equity in its homes. Indeed, the government has taken great lengths over the years to ensure that residential real estate was made affordable through tax incentives and government-sponsored enterprises that kept mortgage interest rates low. Homeownership has definitely been billed by Washington and the media as a part of the American Dream, but should it be?
A recent Time magazine cover story questions this conventional wisdom. So are many academics and policymakers as Washington decides how to reshape its housing finance policy. The question posed above is an important one.
Buying a Home is Great, But So Is Buying a Toaster
For starters, there are some good reasons to buy a home. When you pay it off, your housing costs are limited to taxes and maintenance. If you like interior design, then you have free reign to make the home your own. The list goes on.
But there are also lots of fine reasons for buying other things. It can also be great to buy a toaster. Then, if your bread gets a little stale, you don't have to throw it away, but can make croutons. You can also make other tasty toasted snacks, like some delicious French bread pizza. Yet no one is out there saying that the government should be subsidizing toasters, because owning them is part of the American Dream.
So what makes homeownership different? Well possibly that shelter is a basic human necessity. But, you can rent and still get that shelter. At this time, most of the advantages for buying instead of renting are provided by the U.S. government, like the mortgage interest tax deduction. If you take out the government's influence, then homeownership and renting begin to look a lot more similar in terms of financial advantage. In fact, if you aren't in a very stable place in your life, then buying a home can actually make matters worse, as it could limit your labor mobility, and your closing costs and fees might not be covered if you must move only a few years after buying.
What is the American Dream Anyway?
Since there's no huge intrinsic advantage to buying instead of owning that immediately suggests it should be considered part of the American Dream, let's take a different approach. What sorts of things should be considered a part of the American Dream? While probably a dozen or more criteria could be thought up to embody such principles or endeavors, I'd like to suggest three that should all be met for anything to qualify: capability, versatility, and essentialness.
First, for something to be a part of the American Dream, all Americans should be able to enjoy it -- no matter their occupation, income, or other characteristics.* For example, parents should be able to earn enough money to provide a relatively decent life for their family. Sure, some people live more comfortably than others, but it's a fairly uncontroversial statement that no family in America should remain below the poverty line if both parents are employed and hard-workers. All Americans should be capable of living all aspects of the American Dream.