Three professors at NYU's business school look at home-ownership and the problems inherent in bringing (needed) reform to an American institution:
Americans love the idea of a house and a white picket fence. The government encourages ownership through housing subsidies, believing that it stabilizes communities. Owners see their homes as their share of the American dream, and their best way to save money.
But according to the Congressional Joint Committee on Taxation, these tax breaks add up to $700 billion in lost government revenue over the five-year period through 2014. As the government struggles to come up with spending cuts and revenue sources, housing subsidies are an obvious place to look....
According to data collected by Alex J. Pollock of the American Enterprise Institute, a comparison of homeownership among economically advanced countries shows that the United States is in the middle of the pack, which suggests that subsidizing housing with tax breaks is neither a necessary nor a sufficient condition for a flourishing housing market. Rather, these subsidies enabled people to borrow more than they could afford so they could buy houses bigger than they needed, leading to a house price bubble. The policies encouraged homeowners to make highly leveraged bets on real estate that turned sour and wiped out nearly $8 trillion in household net worth.
Moreover, homeownership policies and mortgage subsidies in the United States benefit the rich a lot more than the poor. For example, the economists James Poterba and Todd Sinai recently estimated that the benefits from the mortgage interest deduction for the average homeowning household that earns between $40,000 and $75,000 were about 10 times smaller than the benefits that accrue to the average household earning more than $250,000. These policies increase income inequality instead of reducing it.
A better policy would be to gradually wind down Freddie Mac and Fannie Mae and to scale back homeownership subsidies.
We favor a long-term focus on rental assistance programs for the poor that are on budget and housed in the Federal Housing Administration, and whose costs are transparent to taxpayers.
And yet I could imagine many -- though perhaps not most -- working poor renters supporting tax-breaks for homeowners. Keying off our last thread, aspiration is an incredible psychological force. The Left has long believed that a significant swath of the working American electorate does not vote their interests. But this defines "interests" in a narrow and crude terms.
Part of your "interests" may well be in the maintenance of a financial aristocracy which looks culturally familiar to you. (Think Wal-Mart.) Part of your interests may be the dream -- however slim -- that your kids may one day enter into that aristocracy. Indeed, there's a way of looking at the American Dream as precisely that -- the Dream of fighting your way into the aristocracy.
If you imagine yourself as a future homeowner, or your children as
such, if you actually believe that the Dream is possible, you might well
support tax-breaks for such people. After all, you're going to be among
them some day. That this vision is flawed is important to note, but
isn't uppermost when it comes to the work of trying to understand how
And we're just talking about
reform. What if we decided that home-ownership was morally evil? What if
we decided that renting was an economically superior system which could
not co-exist with home-ownership, that America could not continue
half-owning and half-renting? Would the lines cut neatly between renters
and home-owners? Or would some renters, imaging themselves one day
partaking of the fruits of home-ownership, support a rebellion of
Forgive me for stretching here.
I'm trying to get us past the horror of slavery, and into the minds of
humans who may themselves be good people, and yet subscribe to a system
in which owning other presumably good people is not only acceptable, but
grants financial, as well as social, capitol.
also know I've used this metaphor before. But I think it has something
to teach those of us in the progressive tradition. I think there's
something here about how people create institutions, and then the
institutions, in turn, create people. Douglass had it right -- "A man is
worked on, by what he works on. He may carve out his circumstances, but
his circumstances carve him out as well."
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is a national correspondent for The Atlantic
, where he writes about culture, politics, and social issues. He is the author of The Beautiful Struggle
, Between the World and Me,
and We Were Eight Years in Power