Subsidizing Homeownership
Tyler Cowen observes:
There is a very good (modern) liberal case against more home ownership: behavioral economics is true, people overestimate their prospects, poor people shouldn’t take too much risk, and the natural market tendency is too much home ownership, not too little. That’s without taking environmental issues into account.
But you really should take the environmental issues into account! The issue here isn’t well-understood, but it’s pretty clear-cut. A home, when owned as opposed to rented, is in part a savings vehicle. An investment. When you subsidize homeownership you are, among other things, encouraging people to save in the form of housing rather than stocks or bonds or whatnot. At the margin, this causes people to live in larger houses than they otherwise would have. That increases the amount of energy it takes to heat the house. And it increases the amount of energy it takes to cool the house. And it increases the amount of energy it takes to provide light to the house. And it increases the distances between stuff, pushing people to drive further.
This isn’t the biggest environmental problem in the universe, but it’s an unusually senseless one. Absent the subsidies there’d be nothing stopping people who really wanted to live in big houses from buying them.
68 Responses to “Subsidizing Homeownership”
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January 11th, 2009 at 8:56 am
I suppose if you thought that homeownership actually had negative environmental externalities, you’d actually want to tax that form of saving at a higher rate than shares, bonds, and whatnot.
January 11th, 2009 at 9:07 am
Well, I spent most of Saturday improving the insulation of my 100 year-old Petworth home. Over the 7 years I’ve lived there, I’ve cut the heating bill by 50%. Pretty much the opposite scenario that MY describes: urban densification and owner-residual incentives to invest in greening.
January 11th, 2009 at 9:18 am
Matt,
This raises a somewhat related question, I believe. In the course of various tax cut proposals, is there anyone suggesting that we simply raise the standard deduction to a much higher value. For one thing it can be sold as a tax cut for everyone, and it would be progressive friendly in that it would be a large fractional reduction in taxes paid for poorer folks (at least among those who pay income taxes). For another, if it were to be raised high enough the mortgage deduction would become a non-issue. Why is this so invisible as a proposal?
January 11th, 2009 at 9:26 am
It’s amusing that over the last few decades average house sizes have steadily gone up even as average family sizes have steadily gone down.
January 11th, 2009 at 9:29 am
Since home ownership in america has only rarely meant owning apartments (co-op or condo), or even attached townhouses, encouraging it has almost always meant–again, in our society, in our housing psychology–encouraging sprawl. That is, miles and miles of detached houses, each with its yard.
Most environmentalists will argue convincingly that sprawl may be the single most dramatic pollution generator and most wasteful aspect of how we have developed America. the loss of greenfield with terrible consequences for carbon balance and for water quality and storm water runoff, the reliance on cars (and on diesel trucks for commercial and freight traffic), the hugely wasteful and destructive results of spreading utility lines, water supply lines, and so on across miles and miles — all of which would be reduced radically by closer, denser growth, etc.
this is not the only way ownership could be played out–other countries have, for example, incentivized or required development along heavy or light rail lines, for example. And even within our country there are some exceptional locations, such as NYC most famously, where ownership has grown along with density and transit. But the general pattern has not been that way here, and the bulk of our incentives and real estate and development industries and skills and lending patterns and so on, are heavily weighted toward–in fact, only contemplate–some impressively destructive patterns.
so, if indeed we are going to encourage home ownership, it is time to rethink what we mean by it, how much of what (like air quality, climate stability and so on) we are willing to sacrifice or underwrite (e.g., our astonishing highway construction and maintenance budgets), to get there, and so on.
a very BIG set of environmental issues, in fact.
January 11th, 2009 at 9:53 am
Yes, what brendan said. We really need to get our shit together with regards to the natural world. We are also presumably subsidizing building all those houses in fire ecosystems in California then paying for fire protection and rebuilding etc. Meanwhile all the brain-dead so called environmentalist – remember that acre of rain forest you purchased, you can now sell for a profit because it is now a soybean field. You chained yourself to a tree to stop the evil loggers from felling it, instead all the million of board feet of timber it takes to build you dream house came from clear-cuts overseas. But we all have nice houses with a view of the water but never mind the runoff. At least you’ve stopped the loggers and saved the whales, never mind what is happening in your own front yard
January 11th, 2009 at 9:55 am
The environmental issues seem entirely separate from the issue of whether home ownership is a form of investment that should be encouraged.
That the “natural market tendency is too much home ownership” also seems debatable—until the recent bubble, we had a system where banks didn’t make home loans beyond people’s ability to repay them, which served as a brake on that tendency.
January 11th, 2009 at 9:57 am
Ugh, forgot to make my point. Which is, there’s no reason that home ownership can’t exist in a city of dense multi-family buildings (e.g., condos and co-ops in New York.)
January 11th, 2009 at 10:01 am
“The environmental issues seem entirely separate from the issue of whether home ownership is a form of investment that should be encouraged.
not to be disagreeable, James, but i’d argue that this separation of investment and other financial decisions from their environmental consequences–good or bad–is in fact the very sort of reasoning we have to change in order to move toward sustainable economies and societies. we can no longer treat these or other economic decisions or soical policies as if they were ONLY economic or social decisions, or only in the short term.
time to change all that. past time.
January 11th, 2009 at 10:10 am
Mr. Yglesias continues his war on suburbs and home ownership to go along with his war on automobiles. Apparently, Mr. Yglesias thinks that all American cities should look like Manhattan. Ugh.
January 11th, 2009 at 10:13 am
Brendan, my point is that if environmental issues are important, one can adopt policies that encourage people to buy units in multifamily buildings in dense-population areas.
The environmental impact of renting a McMansion on a one-acre lot is the same as the environmental impact of owning a McMansion on a one-acre lot.
January 11th, 2009 at 10:18 am
If you want people to care about their town, their county, and their state, then make them homeowners. Of course, MY knows that homeowners want lower taxes and pay attention to government regulatory burden much more than apartment dwellers.
January 11th, 2009 at 10:18 am
Timeline:
2008: Matt buys condo in D.C.
2011: Matt gets married.
2014: Matt’s first child is born.
2016: Matt’s second child is born.
2017: Matt moves to a big house in Bethesda.
2018: Matt stops writing about how cities need less parking and starts writing about the need for more zoning to prevent developers from ruining communities by putting up all those apartment buildings.
January 11th, 2009 at 10:21 am
I gotta say, Steve, that based on Matt’s writing on copyright/intellectual-property issues, you’re probably 100% right.
January 11th, 2009 at 10:21 am
People want to buy a big house because they want to be in a school district so expensive that poor people can’t live there and send their kids to the public schools.
January 11th, 2009 at 10:22 am
Perversely, this creates a situation where we apparently feel a need for the state to prop up property values.
When gas prices get too high, it’s a catastrophe; when housing prices got too high, nobody complained because we all thought of it as an investment.
January 11th, 2009 at 10:25 am
Yes, what brendan said. I used to be able to hike, snowshoe, cross country ski hunt and fish out back. Now, because the demand for housing was so high recently it is all housing developments. I know the people who live there must love the forest because the streets are all named after tree species that used to grow there. I guess there is nothing I can do about it but I wish I could at least stop subsidizing it with my on tax dollars. How can issues of home ownership not be entirely separate from environmentally issues? What do you think happens to, say water quality, when you replace a forest with a housing development?
January 11th, 2009 at 10:33 am
Brendan (5) is right and SLC (10) is wrong. The what where and how we live has huge environmental impacts. I happen to live in a sub-urban part of San Francisco – single-family detached homes with yards – not dense high-rise. I have some solar and have room for more; I’ve upgraded my 100-year-old house (windows, insulation etc) to lower my utility bills and carbon footprint; and if I were more together I could grow some of my own veggies. I can walk to shops a few blocks away, and take the (hydro-)electric powered Muni (light-rail) downtown or to transport hubs like the airport. If it were not for a cross-town work commute I would rarely use the car, and in fact would be a candidate for a Volt or similar limited-range plug-in electric vehicle which I could keep charged from solar at both home and work. In other words my impact is probably on a par with a Manhattanite, it could be a lot less with a few adjustments, and I would support density infill along local major urban routes. So yes our housing choices matter – a lot -but there is plenty of room for densification between the extremes of exurbia and Manhattan.
January 11th, 2009 at 10:51 am
It’s not that home ownership, even the investment part of it is bad, it is that it is (largely) targeted towards size. Perhaps with some regulatory changes we can bias housing investment towards superinsulation, and PV panels, instead of excessive size and granite countertops.
January 11th, 2009 at 11:05 am
SLC says that Matt thinks all cities should look like Manhattan. I don’t think that’s quite right. Throw in the public transportation issues (buses, trains, etc.) and I think the city that Matt wants to have emulated is Hong Kong. And after just visiting Hong Kong let me say this: if only it could be so! What a magnificent place! I’m already looking to move!
January 11th, 2009 at 11:07 am
Hong Kong’s airport express, sure beats the Metro-North:
http://lh6.ggpht.com/_eh4DaxH9IWo/Rm-lEH4ORBI/AAAAAAAAAdg/tzZy2tDgJz0/P1030688.JPG
Ah, U.S. infrastructure. What an embarrassment!
January 11th, 2009 at 11:41 am
I doubt that removing the incentive on home ownership (i.e. by making mortgages non-tax deductible) would really change much. Just look at Canada’s home ownership rate 67% (vs. 69%) or Canada’s average home size of 2000 sq feet (vs. 2300).
And if this were just about the environment Matt would be advocating some form of suburban renewal (e.g. bring the jobs to the families etc.). Housing policy is one of the most partisan issues and Matt’s attempt to try to rise above it convinces no one. As an aside I doubt Matt would be as supportive of urbanism had he grown up poor in New York. Cities must be nice for families when you can summer wherever you want or afford the luxury of privacy.
January 11th, 2009 at 11:59 am
Encouraging “homeownership” in this country has been a form of de-factor aid to the banking and real estate businesses. In the meantime it has been no-holds-barred as far as what landlords are allowed to do to renters. Hefty punitive fees are charged for every conceivable thing, from paying rent by computer, to painting the walls when you leave. The interests of households and communities have been entirely overlooked.
January 11th, 2009 at 12:12 pm
the best part about housing discussions is the pop
psychology from the conservatives.
January 11th, 2009 at 12:47 pm
Even though real estate isn’t always a great investment, owning a home is great for your long-term wealth, if you have a normal loan where you’re paying principal as well as interest, because it forces you to save. Most people just wouldn’t save that much. Then you look up in 10 years and you own 80 percent equity in a half million dollar asset.
Of course, that doesnt apply if you have a stupid loan and you’re not paying the principal.
January 11th, 2009 at 12:58 pm
Absent the subsidies there’d be nothing stopping people who really wanted to live in big houses from buying them.
That doesn’t make sense. It makes it sound like subsidies are what’s keeping people from buying Really Big Houses, when the rest of the post seems to argue that subsidies are part of what’s prompting the unending “bigger, bigger” drive in home-sizes.
Wouldn’t it be more that “without subsidies, investment/home sizes would be smaller, reflecting people’s lower spending power”?
January 11th, 2009 at 1:18 pm
There’s an even more basic point here: other rich countries (Canada, UK) that do little or no tax code subsidation of home ownership enjoy rates of home ownership exceeding that in the USA. So, it’s not even clear if we’re getting any benefit whatsoever in exchange for the various I’ll effects Matt highlights.
January 11th, 2009 at 1:22 pm
That should have been “ill” not “I’ll” — I love my iPhone but it’s not great for blog commenting.
January 11th, 2009 at 1:29 pm
To a man with a hammer everything looks like a nail, and to Matt everything looks like a mortgage interest deduction. But that’s not the motivator. If it were, people would take the next step and rent out the home they just bought- that’s your real goldmine on the 1040.
Owning your home means not having to say you’re sorry. If you’re a minority, if you own pets, if you like to work on your home, if you want to grow your own pot- all of these are things that are a lot better if you own your home.
And in a country where rates of home ownership are high, landlords are justified in looking carefully at who’s renting.
It’s only natural that Tyler Cowen would be mixed up in this stupidity. Basically these are very young people who have only ever seen a housing balloon, and only ever wanted a place where loud parties can be held once in a while. Mixed with their marginal knowledge of economics and garnished with philosophy, it only seems natural to them that everyone would think as they do.
The fact is, there would have been a bubble in something else if it hadn’t been for houses. It’s as American as apple pie.
January 11th, 2009 at 1:35 pm
Steve,
Matt will only move to Bethesda if he wants his children to attend Georgetown Prep or Holton Arms. My guess is that he purchase a single family house west of Wisconsin Avenue and puts his kids in National Cathedral/St Albans. I doubt if Matt would think that public schools are good enough for his children.
January 11th, 2009 at 1:48 pm
Matt’s post seemed plausible to me when I first read it, but after a walk it just doesn’t. (1) It runs together consequences of a mortgage deduction: issues of affordability and energy efficiency. The latter might be more efficiently addressed directly, by regulation and tax deductions (like NYC’s energy credits, subsidies for solar panels, better mass transit, gas taxes, and so on).
(2) We’ve had cycles of boom and bust, while the deduction has been there for decades. While a crisis is as good an excuse as any to rethink everything, it’s not caused by the deduction. There we’d look instead at corrupt unregulated financial practices, individual stupidity, and globalization with corresponding influx in foreign capital.
(3) Similarly, the unaffordability of rental housing in NYC is also of recent vintage. Consider the lapse of support for construction of affordable housing, rent stabilization, Mitchell-Lama protections, and so on. (4) People invested the deduction in homes rather than apartments for reasons. Aside from wanting space to raise family, they sought better schools, and homes clustered around federally funded roads rather than vice versa. Why can’t policy address those instead?
(5) Rental markets are still about profit, just transferring profits from individuals to developers. (6) It’s circular reasoning befitting a libertarian and not a liberal to argue that we need freer markets because prices are too high, and prices are too high compared to the norm of free markets.
January 11th, 2009 at 2:07 pm
Sprawl wouldn’t matter that much if everything sprawled together– that is, if retail outlets, entertainment, schools, churches and, most importantly, jobs all stayed close at hand. I grew up in an outer suburban city, then sprawl country, of the Detroit metro area. Most people in the area worked either right in town, in the surrounding township, or in Ann Arbor, right next door. My father’s sixteen mile (one way) commute was very much the exception not the rule. Shopping was even closer (walking distance), as were schools and churches– though you did have to drive two or three miles for a movie or a nightclub. Nowadays however people routinely commute thirty miles (one way) or more to work, and shopping and entertainment can be quite a road trip too. People drive long distances to church, and too few children can even walk to school. That’s the problem, not sprawl itself.
January 11th, 2009 at 2:29 pm
I don’t think there’s all that big of connection between housing subsidies and house size (as opposed to housing prices) that MattY frequently states. The biggest part of the cost for any (suburban/urban – and in some places even exurban) real estate in the country has been the underlying land. And the price increases that were occuring until ‘06/’07 were due to the land becoming more expensive. The cost of construction has actually gone down considerably in real terms over the past few decades, mostly due to increasing pre-fab and other assembly-line like productivity increases. So, in aggregate people are buying more of the house itself for the same amount money.
Now, like I said, there’s no doubt that the subsidies have increased the total price of housing, and I’ll be the first to agree to eliminate them (including the mortgage deduction). And I’ll agree that on the margin, if your buying a house on relatively expensive land, it’s easier to do the ‘upsell’. But as mentioned above, a lot of the ‘upsell’ is in stuff like better (more efficient) appliances, better insulation and windows, and even solar systems for water and/or electricity, which reduces the net environmental footprint
January 11th, 2009 at 2:56 pm
Uh, no. The traditional rule-of-thumb for lenders is 80% buildings, 20% land. Get much outside of that and you’re looking at a different kind of loan.
Outside of the recent insanity, the 80-20 rule had several consequences- if the land was valuable, the house had to be valuable too. This mainly applied to spec builders and real estate developers and people who wanted to buy bare land and build a house on it.
Normally, if you had a small house on a lot surrounded by more expensive houses in a great neighborhood, i.e., your house is worth less than the lot, buyers could work around that. But not always. Before all this housing boom stuff started it was not uncommon to find inner-city houses that couldn’t be financed because the house was worthless- the property could only be financed for development, essentially as bare land.
In theory, advances in construction mean solid savings in the cost of the 500-sq foot houses of the past. If you have the cash, you can actually realize those savings, but if you have to go with lender’s guidelines, they will want to finance something someone else might want to buy if you decide to sell.
All of this, of course, refers to the non-insane part of the lending industry.
January 11th, 2009 at 3:07 pm
Uh, no. The traditional rule-of-thumb for lenders is 80% buildings, 20% land. Get much outside of that and you’re looking at a different kind of loan.
Maybe for newcon in the exurbs, or for anywhere several decades ago. But not now within 20 miles of any of the top 30 metro hubs (where iirc a majority of the people in this country live). And most property tax bills separate out lands from improvements. I’ve lived all over the country for the last 12 years, and the only places it was even close to 50/50 was Macon, Ga (house worth more than land), and Ledyard, CT (land worth more than house)- neither exactly bustling locations. My parents house in Arlington (built either during or right after ww2) is appraised at around 500K (down from 600K at the peak) – like every other house in the neighborhood. Any 1/8 acre lot in Arlington will fetch at least 400K just for the land. Simimlarly, on Oahu, what’s common these days is to see POS houses built during the 60’s and 70’s that are advertised for around 575K specifically for tear and rebuild projects. Even the newish multimillion dollar mansions at Diamond Head and Portlock didn’t cost much more a million to build.
January 11th, 2009 at 3:51 pm
I think there is a philosophical good in home ownership. It is, after all, credal to the American national understanding. People who own larger homes, and thus accumulate greater equity (let’s face it, stocks and bonds aren’t for most people), will over the long term be more productive because if they were to engage in capital-based activity they would have more capital to play with.
There is something sinister and evil, in my mind, about the French system of small condos for the mass population. It even feels vaguely Soviet.
January 11th, 2009 at 5:21 pm
Well, there you have it. It’s not hard for me to believe that lots are worth more than houses within four miles of Seattle’s city center.
But when you talk in those terms you’re not talking about home ownership or house speculation, you’re talking land speculation.
And, unless you’re an eccentric type of person, you end up dealing with the same pressures- putting a small investment in building on a large investment in land means a small return on the total investment and cost in taxes.
There can be local factors that make that work, but as a general rule it doesn’t.
January 11th, 2009 at 5:33 pm
There is something sinister and evil, in my mind, about the French system of small condos for the mass population. It even feels vaguely Soviet.
Hey! i am hoping the economy keeps my income high enough, and drives apt prices down far enough so i can buy a smallish (1,300 sq ft would be fine) condo in Greenwich Village! yes, to McCainites the Village must be the same as the Soviet Union, but not to the rest of us.
i grew up in nyc, although mostly in Queens, which is half very dense suburb, half city, mostly in garden apts. i loved, love, being a city kid–was on the subways by 12 years old and the world was open to me.
i have now owned three houses in and outside of nyc, and my family (not me, sigh) still owns one here. i now rent, and would be fine with that if i had not signed the last lease at the height of the market.
but home ownership does not necessarilly mean detached houses on a greensward. and i found out through painful experience that ‘good schools’ in the suburbs usually just meant no minorities–in fact the educational systems were often not so hot. in GV we have fabulous public schools, and owning a condo here would be a dream come true. second choice, a co-op (largely unknown outside nyc, but still many here).
BUT denser, non-sprawl development does not mean that everything has to look like manhattan, or even brooklyn (although very nice, that. it does mean, however, zoning based on rail and bus lines not on highway access, an end to strip malls, incentives for job development that orients to transit, too–not just housing density but economic activity has to become transit-oriented. and so on.
personally, i think our society and families and especially our children would also benefit if we went back to more than one generation under one roof. just my opinion, of course, but as a parent, i think our families are too scattered. See, there are lots of approaches to this density/sprawl issue once you start looking at things this way.
there are numerous examples around europe and asia of different models of how more dense development can be done. and a few in the US, too. it is a question of WILL.
i do think most writers here underestimate the degree to which sprawl, in and of itself, has been studied and identified as the critical environmental challenge in our country. it’s a very big deal, and should be a key consideration in all our investment and land use and economic development policies.
January 11th, 2009 at 5:38 pm
A home is shelter first, a forced-savings vehicle second (and I disagree about why some people think this is a good thing; you shouldn’t be forced to save and if you are, you’re doing it wrong), and lastly an asset that may rise or fall in value. The notion of looking at that the wrong way around is partially responsible for the absurd and irrational rise in prices, until they could rise no more.
January 11th, 2009 at 5:51 pm
With all due respect, brendan, you sound laughably out of touch with the average middle-class American. A NYC co-op? You mean those pre-war buildings with steep fees and unbelievably steep house prices? You must be kidding me. That has no application for the normal American family, whatsoever.
January 11th, 2009 at 6:34 pm
People who own larger homes, and thus accumulate greater equity (let’s face it, stocks and bonds aren’t for most people), will over the long term be more productive because if they were to engage in capital-based activity they would have more capital to play with.
What? A residential house not an income-generating asset in the same way an apartment building or a farm is. In fact, larger mortgage payments are going to end up consuming income streams that could have been used to amortize the debt on Actual capital-based activities. Which isn’t to say that it’s not a good idea to buy a home in many circumstances– it is. But the whole “buy as much house as you can possibly afford, and then some” will hurt your ability to engage in “capital based activity”– it’s called being “house poor.”
January 11th, 2009 at 6:53 pm
And as for Steve, the thing is that Bethesda is, in many ways, precisely the sort of dense, walkable development (yes, which includes SFHs) that MattY has been talking about all along. MattY doesn’t strike me as the sort to move out to Prince William county.
January 11th, 2009 at 6:56 pm
With all due respect, brendan, you sound laughably out of touch with the average middle-class American. A NYC co-op? You mean those pre-war buildings with steep fees and unbelievably steep house prices? You must be kidding me. That has no application for the normal American family, whatsoever.
yes Stephen that does sound out of touch. i just said it would be a dream come true for me. i don’t expect to get there, to be frank. my version of the mansion dream, maybe.
but there ARE lovely apt or two or three unit townhouse options for me–especially in bklyn., and my wife and i have been looking at some. who knows? [and who can figure out in this economy whether to rent, buy, or run for the hills?]
as mentioned, i’ve lived in and out of the suburbs and the city, and most of my life in the city was not at all in Manh., but in garden apts in queens—very very working class, in fact. and i loved growing up that way.
my goal was not to have someone here toss me a moderately priced, three BR pre-war village townhouse apt. (although i don’t want to discourage that offer either, if you are tempted. i also buy lottery tickets), but just to say they are many different value systems we could a. encourage and b. plan and zone for and c. build to fulfill. we don’t have to encourage–or tax-subsidize, or build highways to promote–the McMansion with a three car garage as the only American dream.
other cultures have developed otherwise, and we can study and learn from these examples. i’m sure we’ll come up with our own, american versions of solution.
my dreamhouse will probably have to remain that. but i ain’t going back to the suburbs, unless the economy forces me out. i thought the burbs were particularly bad for my kids. too many very, very bored teenagers. and very bored parents, too, it seemed to me. not to mention tolerance-challenged, but that’s a different story. or maybe its the same story.
January 11th, 2009 at 8:55 pm
Comparing the 2 types of properties (rented vs. owned) is not as simple as Matt makes it sound.
Your basic rental property is not going to be built with agressive attention to energy conservation and building performance as long as the tenant pays the energy bills.
So you get crappy windows, minimal insulation, leaky (air infiltration) construction, etc. You get shoddy construction from the outset, with initial cost (as opposed to life cycle cost) as the governing factor in material and systems choice.
A home-owner occupied house, in general, will be better maintained and more likely to have energy saving features either originally installed or retro-fitted later.
January 11th, 2009 at 11:04 pm
How about a tax credit for hunting/gathering?
January 11th, 2009 at 11:37 pm
I don’t know if you are aware of this, brendan, but without suburbs it is impossible to maintain the present American standards of living at comparative levels of wages.
January 12th, 2009 at 1:36 am
And I don’t know how many of you are aware of the role of the “ownership society” concept in the enormous success of Thatcher in the 80’s. She made homeownership a priority, she delivered, and Britain today is a much better and prosperous country than the trades-union dystopia of the late 70’s.
January 12th, 2009 at 1:23 pm
What would the effect of amnesty for nonviolent drug offenders be on the housing market?
January 12th, 2009 at 1:26 pm
Clemency I mean, a one-time amnesty — I suppose that would be a way to find out, to measure the recidivism rate to see if a full blown amnesty would be worth it for some drugs.
We need to have the DEA focus on the deadly and hard stuff; for now pot, e (MDMA), and LSD are probably the least of our worries. Those nonviolent offenders would be good candidates for clemency.
January 13th, 2009 at 9:32 am
It’s not as though once you own a house you don’t have to PAY for all that extra energy you are using. Attacking home ownership subsidies on the basis of environmental effects is a pretty indirect way to go. Tax the energy if you want to reduce consumption of it. As for own vs rent, there are societal benefits to owning (some of which also are based in behavioral economics), and they are independent of the size of the home. Someone who owns rather than rents an apartment will probably be a more stable member of his community, will probably take better care of his property and the property that surrounds it, and will probably feel a greater desire to make constructive contributions to his neighborhood and the well-being of his neighbors.
January 13th, 2009 at 9:32 am
SLC wrote: “Apparently, Mr. Yglesias thinks that all American cities should look like Manhattan. Ugh.”
That’s a pretty crude way of looking at it (and I don’t think it’s a fair characterization of Matt’s rather modest point).
There are many models of what a viable, eco-friendly community might look like. I lived for several years in a small Maine coastal town (year-round pop. about 5 or 6,000) where it was eminently possible to get along without a car, or with a single car for an ordinary-sized family. All the ordinary services for everyday life — grocery shopping, banks, the post office, schools, a pharmacy, a hardware/lumber store, restaurants — were clustered within walking distance. Health care unfortunately required a drive of a few miles out of town, as did access to some specialized stores in a larger town down the road. Still, one could own a single-family home on a modest in-town lot without suffering the misery of sprawl.
This won’t work as a nationwide model, of course, but my point is simply that there’s a wide field of possibilities between Manhattan and Agrestic.
January 13th, 2009 at 9:48 am
Oh how I miss the days of horse, buggy, and candles before electricity.
January 13th, 2009 at 10:36 am
brendan knows what’s up.
A good program of incentives to encourage developers to build multi-level housing, including financial incentives for green materials, energy efficiency, and renewable power sources, would do wonders for the quality and desirability of multifamily housing in the US.
Ideology aside, the “ownership society” has turned into a society of debtors. That ain’t my American dream.
Time to think small, simple and neighborly everyone.
January 13th, 2009 at 11:37 am
This whole discussion just kills me. The overall assumption is that “poor people” tried to “move on up to the east side” in some over the top way. The foreclosed subdivisions in Nevada, Arizona, Florida and California (note which states these are) were not by some “welfare mom and 4 kids”. It was by people watching too much HGTV, DIYNetwork and TLC’s ” Flip this house” programs. People buying up “shacks” in bad neighbourhoods and putting “granite countertops” in vandalized homes in Watts. These “investments” were made by “middle class” people looking to “flip this house”, or by builders, not reinvesting in the “city” but going to the outskirts of Phoenix, Las Vegas, Riverside and Orlando, putting up houses “in the low $600k”. These are the mortgages that are wrapped up in the Credit Default Swaps.
The idea that “low income” should just perpetually rent, because “middle class home flippers” tried to buy and sell a home, with a mortgage, in less than 90-days is just simply insane! A “home” is a long term investment. Somehow, through these “TV Shows” we came to think of homes as some “extended credit card to wealth”. Carlton Sheets made infomercials all night about how to buy and sell real estate with “no money down”. Guess where the “money down” came from? Loans. Loans on a “home” is called a “mortgage”.
Please, let’s get off this “low income people” shouldn’t “buy” a home (like YOU did) and should simply rent. How about looking at a home as it was supposed to be – A LONG TERM INVESTMENT TO LIVE IN!
BTW, I’ll bet that even those of you who “own a home” or have a mortgage have not kept the same job your entire life. So there were some “poorer times”. Consider those times as you sling that blame.
January 13th, 2009 at 12:44 pm
Forgotten in all the speculation and “investment” aspects of property ownership over the past decade or two is the simple truth that houses are first and foremost, places to live, shelter from the elements: homes.
Subsidies for housing were originally subsidies for local and national stability and quality of life. It is only recently that houses have been thought of as investments, and that due to the financial industry.
In the 80’s and 90’s Wall Street started looking around for stagnant capital to exploit and saw trillions in home equity sitting, just waiting to be sucked out. Hence the rise of HELOCs and refinancing to withdraw equity, encouraged by the end of credit card interest deductions. Hence the rise of
“creative” loans and CDO’s. The rising culture of credit-card debt and consumerism made housing debt more acceptable.
Homes in most areas (apart from Manhattan and areas like Southern California) are historically only so-so investments, tracking the rate of inflation very closely.
February 1st, 2009 at 11:23 am
I can think of nothing that has been more damaging to the economy and our traditional free market system that the government’s meddling in the housing market. It was a social engineering experiment to prove that the poor, mainly minorities, were worthy of owning a home. Well, the experiment failed badly, but that hasn’t stopped the government from throwing billions, if not trillions, of good taxpayer money after bad investments, all for the purpose of disproving the results of the failed experiment.
As long as we had housing inflation, the economy could continue to sputter along despite a shrinking manufacturing base. The problem is that housing inflation can only be maintained with ever increasing subsidies for first time buyers. Anyone with at least a basic knowledge of economics realizes that to keep throwing good money after bad is a recipe for disaster. It is also immoral because it takes money from people who live within their means and gives it to those who don’t.
February 22nd, 2009 at 2:46 pm
Owning a home is always better than renting in the long term. As long as you have adequate income, don’t buy beyond your means and improve your home incrementally while you reside in it, you’ll always come out on top in the end.
Sure, buying requires an initial upfront payment, but what kind of solid investment doesn’t? Outfitting your home with Energy Star approved appliances helps, too.
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