[PULSE] A reality check on accessible homeownership
January 30, 2020
Last week on HousingWire, Julian Hebron made a forceful argument against what he called the “homeownership backlash” and claims of an unfair playing field by socialist-leaning Millennial renters.
The column, which appears to be in response to recent reporting in The Economist on the inequities inherent in capitalist housing markets, instead suggests that the American Dream of homeownership is already heavily socialized and, moreover, available to most renters if they really want it.
There are several assumptions, generalizations and fallacies in this argument, but for the sake of brevity I will address a few of what I consider to be the more egregious claims with some reality checks:
Federal policy has always unequally granted access to homeownership
To make the point that homeownership is widely supported by government interventions, Hebron lists a slew of federal efforts to support access to homeownership – or more accurately, to mortgage credit, since none of the policies mentioned benefit owners who do not finance their purchases – going back to the New Deal.
While it is true that the U.S. government subsidizes mortgage lending, it has never been the case that this support was equally available to all who wanted it.
The long history of racial discrimination in the Federal Housing Administration, the Department of Veterans Affairs and other government-backed programs meant millions of Americans were directly denied access to mortgage credit.
That disadvantage has only compounded over the decades, as those able to buy homes accumulated wealth to pass on to their descendants, while most people of color have remained renters. The legacy of this inequity is a chief driver of the racial wealth gap today.
Homeownership is not as affordable as renting
The next point raised is that homeownership is just as affordable as renting, with proof given by comparing monthly mortgage costs on a median-priced home to the median rent in eight cities, four in the South and four in California. This data, taken at face value, shows rents slightly higher than mortgage costs in three of the southern cities, and within $400 of mortgage costs in two others – sufficiently close in Hebron’s view to be considered “similar.”
These cherry-picked examples, however, ignore some vital differences between owned and rented homes. For one, owned homes are often farther from city centers and thus necessitate spending hundreds of dollars more each month in commuting costs. Owned homes also require maintenance and upkeep, which further strain homeowner budgets.
Hebron also fails to account for the affordability challenges that many renters currently face; nearly half already spend more than 30% and a quarter spend over 50% of their monthly gross income on housing. Renters with such burdens have enough difficulty keeping a roof over their heads, much less saving for the 10% down payment assumed in the calculation of monthly mortgage costs.
Hebron, perhaps anticipating this critique, counters that 5% down payments are just as affordable and easy to get, so long as your income is at least $80,000 a year – which only 21% of renter households earn, according to the latest figures from the U.S. Census Bureau.
Relaxed regulation will not solve housing inequality
Having argued that homeownership is affordable and easy to access, Hebron makes one concession to current challenges in housing markets: that burdensome regulations are preventing some markets from building enough housing to provide affordable options to all.
This is certainly true, but removing these barriers will not alone resolve the housing imbalance in most parts of the country.
Rapidly staffing up to meet a rush of new demand will add expense to any potential new developments. New construction will also take time to build and, without additional incentives or subsidies to encourage more affordable development, will still disproportionately focus on luxury units in high-cost areas that have limited trickle-down effects on the rest of the housing stock.
Make no mistake: “Financial and housing literacy,” as Hebron puts it, is well and good, but when it comes to leveling the playing field for people at a variety of income levels and backgrounds, it can only go so far.
Housing affordability is also a two-sided coin, with some household incomes just too low to afford decent housing at almost any cost. Without a major commitment to adjusting this half of the equation with more subsidized units, higher minimum wages, and better supportive services to help households in a crisis, no amount of deregulation and new construction will fix this crisis.
Dr. Rachel Bogardus Drew is a Senior Research Analyst in the Public Policy group at Enterprise Community Partners.
Content is the most important part of having quality links to your website. With Area-Info.net, we provide a quality location to share your story and include links to your website to help you grow. If you would like to learn more, visit this page to see how you can use Area-Info.net to rank higher and quicker in search engines.
Contact me directly at [email protected] with any questions, or to schedule speaking engagements.