Michael Hiltzik: Homeownership remains a goal that should be encouraged
I have a confession to make: I am a homeowner.
That’s a dangerous thing to say. We homeowners are getting blamed for a lot of today’s economic ills, and labeled dupes besides.
It’s said that we profiteer from an undeserved tax break. That our obsession with ownership drove the nation to make unwise policy choices during the last eight decades. That our 30-year fixed-rate mortgages are dinosaurs dependent on government subsidies.
We’re told that by treating our homes as piggy banks, we impoverished ourselves and our children. That we would almost certainly be better off renting rather than owning. That we would be richer had we sunk our nest eggs into stocks and bonds.
But it’s time to stand up for homeownership. Because if we convince ourselves that just because home values declined after 2007 the U.S. should stop encouraging ownership, we’ll be making a drastic mistake.
The fact is that there are sound reasons for homeownership — though it’s not for everyone — and very sound reasons for government policy to encourage it.
Much of today’s attack on the principle of homeownership doesn’t address that principle at all. It deals instead with the housing crash, and purports to find that the crash was the result of excessive encouragement of homeownership, especially among low-income families.
The culprit, according to this argument, is the Community Reinvestment Act, a President Carter-era initiative that targeted banks’ discrimination against home buyers in low- and moderate-income neighborhoods. The claim is that the CRA induced banks to lower their lending standards to meet CRA lending goals in disadvantaged neighborhoods, setting the nation up for the subprime crash.
This notion has been thoroughly debunked. As early as 2008 it was systematically demolished by Federal Reserve Gov. Randall Kroszner. In 2011 it was so discredited that even the Republican minority of the Financial Crisis Inquiry Commission disavowed it as a cause of the crash.
Make no mistake: Blaming the CRA for the housing crash borders on racism — it’s a way of blaming minority borrowers for a disaster that was wholly the responsibility of Wall Street bankers.
In fact, mortgage banking firms such as Countrywide, not banks subject to the CRA, took the lead in pushing low-quality mortgages on any applicant who could hold a pen. And it was those risky products — bristling with hidden fees, prepayment penalties, exposure to variable interest rates — not risky borrowers, that produced the crisis. Study after study has found that qualified borrowers in conventional fixed-rate mortgages perform equally well across the income spectrum.
Recently, another attack on the principle of homeownership has moved to the forefront. The claim, put forth chiefly by Andrew J. Oswald of the University of Warwick in England and David G. Blanchflower of Dartmouth College, is that a high level of homeownership is associated with a high level of unemployment in a state or community. Their reasoning is that chiefly by hampering workers’ ability to move to find work, homeownership suppresses economic growth.
Yet, as they acknowledged, there’s no evidence that homeowners themselves are disproportionately unemployed, or that the inability to sell a home (this is known as “house-lock”) affects anyone’s ability to find a job. In their latest paper on the topic, published this spring, they conceded that the relationship between homeownership and unemployment “remains poorly understood.”