The Cult of Homeownership
In The Economist, Will Wilkinson, a Missourian by birth, recently argued that the financial crisis was caused by the government’s attempt to reduce wealth inequality through homeownership (bolded emphasis mine):
If you ask me, the ultimate culprit in the financial crisis was the American cult of homeownership. There are many ways to help poorer Americans accumulate wealth, such as channeling payroll taxes into personal retirement accounts. But we don’t do that. Instead, because we consider it a humiliating indignity not to have a room or ten of our own, we subsidise home-buying six ways to Sunday and tell banks they won’t have to suffer the downside of loans offered to bad credit risks. I think it’s safe to say that this hasn’t turned out to be the best scheme for helping poorer Americans into the ownership class.
This commentary is consistent with my previous discussion of the negative policy implications of encouraging homeownership in Missouri, such as promoting inflated housing prices.
Unfortunately, the emphasis on homeownership persists in Missouri public policy. There have been recent calls from politicians in Missouri to make the federal homeowner tax credit permanent. From the Think Progress blog (hat tip to Audrey Spalding):
[T]he home buyer’s tax credit was enacted as part of the stimulus and then extended a couple of times, and by all accounts it was a complete and total boondoggle, costing taxpayers billions to subsidize activity that was going to happen anyway. Even the credit’s staunchest supporters have said that its “sunsetting is an incentive to drive people to the marketplace” and poo-pooed the notion of extending it forever, which clearly turns it into a permanent subsidy to the real estate industry.
Additionally, just as the government shouldn’t favor certain businesses and industries over others, the role of government should not be to favor or subsidize one lifestyle over another — like homeownership over renting, or rural lifestyles over urban ones. Despite its infinite wisdom, the government does not know the mix of goods and services that an individual or family should consume in order to maximize their level of utility. Missourians would be better off if the government stayed out of the housing market entirely.