Abstract: 

In June 2002, President Bush announced a major new initiative to further raise the nation's homeownership rate, focusing particularly on minority homeownership. In response, NMHC drafted the following editorial to point out the many ways that the conventional wisdom on homeownership is overly optimistic while apartments suffer from inaccurate negative stereotypes. The Council is pleased to make it available for reprint to interested individuals and organizations.

  Homeownership is often touted as the “American Dream,” and we have devoted significant public resources over the past 70 years to encouraging and enabling more Americans to own their homes. Thanks in part to federal tax and other incentives, more than two-thirds of us are now homeowners.

Homeownership is an integral part of the American culture, on a par with motherhood and apple pie. In fact, the belief that more homeownership is an absolute good for the country is so deeply held that no one thought to disagree when President Bush unveiled a new federal initiative to boost the already record level of homeownership even higher.

Before we commit even more of our limited resources to raising homeownership levels – the mortgage interest tax deduction alone already costs the U.S. Treasury $65 billion per year, more than the GDP of all but two African nations – we should stop and seriously consider whether that is in our national best interest. And the truth is that giving more of the housing “pie” to homeownership initiatives actually moves us further away from the more balanced housing policy we truly need.

We face a variety of housing challenges and many cannot be effectively solved through homeownership.For example, homeownership is a blunt and inefficient tool to use to fix our growing shortage of affordable housing. And for a country determined to grow smarter and reduce suburban sprawl, homeownership initiatives may exacerbate the problem by sending families far from urban areas in search of inexpensive land. 

In addition, our single-minded focus on homeownership overlooks the important fact that not everyone wants to own a home. More than 40 percent of renters say they rent out of choice and not out of economic necessity. The pace of life has changed over the past 50 years, and many renters who could afford to buy now prefer to rent because of the convenience and flexibility renting offers. It is questionable social policy to ignore their wishes and push them into a housing choice that does not fit their lifestyles.

Put simply, homeownership is a good goal, but it is not appropriate for or desired by everyone, and it is not a cure-all. More importantly, our relentless effort to drive up the homeownership rate will produce diminishing social and economic returns to the U.S. In some cases it already has. Consider the following:

• A growing number of economists worry that the current level of consumer indebtedness, including mortgage debt, is unsustainable, and that a pending consumer credit crash could usher in the next recession or prolong the current economic slump. We learned that lesson the hard way in the mid-1980s when low- and no-downpayment mortgages led to an increase in foreclosures when the economy turned down. Today the warning signs are mounting. Low- and no-downpayment mortgages are back; marginal households are being pushed into purchasing homes; and consumer credit is reaching all-time highs. In addition to credit card debt, Americans hold more than $700 billion in home equity loans and have cashed out more than $100 billion from their homes by refinancing. No one gains when people are put into a financial situation they cannot sustain, and the economic signs suggest now is not the time to “push the homeownership (and credit) envelope.” 
  
  
• Not only is the inexorable homeownership push questionable economic policy; it also is questionable public policy. Each year, we “pay” more than $100 billion for our numerous federal homeownership incentives, yet more than 16 million low-income households pay more than 30 percent of their income and 12 million very low-income households pay more than 50 percent of their income for their housing. Millions more moderate-income working families cannot afford to live anywhere near their jobs. 
  
  
• More than new homeowners, the country needs a federal commitment to expand the supply of affordable rental housing to meet these needs. The Congressionally-charted Millennial Housing Commission came to the same conclusion after 18 months of research and hearings. Its recommendations to Congress focused heavily on the importance of rental housing, because apartments are uniquely qualified to solve a long list of modern day issues, such as urban decay, suburban sprawl and housing our teachers, nurses, police officers and firefighters.
  
  
• The drive behind the national homeownership push reflects, in part, the idea that communities of owners are stronger. But academic studies and practical experience suggest otherwise. Communities that balance their rental and ownership housing stock are stronger, while communities that exclude or limit the number of renters jeopardize their economic prosperity. Renters are vital to local businesses as both customers and employees, and communities without an adequate supply of affordable rental housing will fail to attract top employers to their area.