I’ve always been interested in houses: fixed up a couple of old ones and built a new one last year. Home ownership has been a major factor in middle-class wealth accumulation and upward mobility in the United States and certainly contributed to mine.
Growing up in a tiny apartment gave me an appreciation for home ownership. My parents scrimped and saved until a modest inheritance from my grandfather gave them a down payment on a house.
My generation was luckier. I bought my first house in 1969 at age 26 for a little more than twice my annual income and (as a military veteran) practically nothing down. Over the years steady growth in home values enabled my family to move up to nicer houses. Tapping my increasing home equity put my kids through college and paid my late wife’s medical bills. Meanwhile, the sale of my parents’ last house covered their elder care and final expenses.
Today, however, the escalator to prosperity of home ownership is out of reach for a growing number of Americans.
There are many reasons for this. Crushing student debt has caused many millennials to delay marriage and children, and makes it difficult for them to qualify for home mortgages. The housing supply has not kept pace with population growth and demographic changes. Builders find it more profitable to build McMansions than starter homes. Zoning laws set minimum lot sizes and discourage low-priced homes. Environmental building codes make homes in some areas more expensive.
To make matters worse, the overheated housing market we’re now seeing has jacked up home prices. Large corporations are snapping up single-family houses and converting them to rental properties. When I downsized to a smaller place last year, I chose to build a new house because available homes in my desired size and price range were hard to find.
Every politician genuinely wants to make housing more affordable for working families, but government interventions in the housing market have been inconsistent and sometimes have had harmful side effects. Federally-insured FHA and VA mortgages have been a long-term success. Yet the 2008 housing crisis was triggered by a well-intentioned policy to grant mortgages to people who could not afford to pay them, which led to runaway speculation by financial institutions.
Government efforts to create affordable housing focus mostlly on rental apartments. Renting certainly makes sense for many people at different stages of life, but many renters still want to be homeowners and nearly half worry they won’t be able to buy a home.
Build more starter homes
We clearly need to expand the housing supply, and especially need more moderate-priced houses to lower the threshhold of home ownership. About 1.5 million housing units are built in the U.S. each year, millions fewer than needed to meet demand.
Watching my new house being built reminded me that home construction hasn’t changed much over the years. The roof trusses were prefabricated but the rest of the house was nailed together on-site, board by board. My old house in Oak Park was built in much the same way in 1911. No wonder houses are so expensive!
Wider use of manufactured housing can reduce construction costs. Not just mobile homes: Modular homes (even luxury models) can be quickly assembled on-site from factory-built components. This will require changing the artificial barriers of zoning laws and lending requirements. It also makes sense to overhaul zoning laws that create artificial scarcity in areas where people want to live.
Equity for renters
We subsidize homeowners with a federal tax deduction for mortgage interest and property taxes. Renters get squat. If we want to help working families build wealth, how about a comparable tax break for renters? What if renters could start building equity by investing a refundable tax credit in tax-deferred savings toward a down payment on a house or condo? This will require some tax-law gymnastics, but that’s what Congress does best.
I have problems with most proposals to forgive student debt and grant reparations to correct past discrimination. But if we are going to do this sort of thing in the pursuit of equity, the best way to reduce the wealth gap is to include a mechanism and incentive to purchase homes.
If our policymakers are serious about helping working families — whether they seek to Make America Great Again or Build Back Better — one of their objectives should be to make it easier for young people to become homeowners as a down payment on the American dream.
The American dream in four walls
I’ve always been interested in houses: fixed up a couple of old ones and built a new one last year. Home ownership has been a major factor in middle-class wealth accumulation and upward mobility in the United States and certainly contributed to mine.
Growing up in a tiny apartment gave me an appreciation for home ownership. My parents scrimped and saved until a modest inheritance from my grandfather gave them a down payment on a house.
My generation was luckier. I bought my first house in 1969 at age 26 for a little more than twice my annual income and (as a military veteran) practically nothing down. Over the years steady growth in home values enabled my family to move up to nicer houses. Tapping my increasing home equity put my kids through college and paid my late wife’s medical bills. Meanwhile, the sale of my parents’ last house covered their elder care and final expenses.
Today, however, the escalator to prosperity of home ownership is out of reach for a growing number of Americans.
There are many reasons for this. Crushing student debt has caused many millennials to delay marriage and children, and makes it difficult for them to qualify for home mortgages. The housing supply has not kept pace with population growth and demographic changes. Builders find it more profitable to build McMansions than starter homes. Zoning laws set minimum lot sizes and discourage low-priced homes. Environmental building codes make homes in some areas more expensive.
To make matters worse, the overheated housing market we’re now seeing has jacked up home prices. Large corporations are snapping up single-family houses and converting them to rental properties. When I downsized to a smaller place last year, I chose to build a new house because available homes in my desired size and price range were hard to find.
Every politician genuinely wants to make housing more affordable for working families, but government interventions in the housing market have been inconsistent and sometimes have had harmful side effects. Federally-insured FHA and VA mortgages have been a long-term success. Yet the 2008 housing crisis was triggered by a well-intentioned policy to grant mortgages to people who could not afford to pay them, which led to runaway speculation by financial institutions.
Government efforts to create affordable housing focus mostlly on rental apartments. Renting certainly makes sense for many people at different stages of life, but many renters still want to be homeowners and nearly half worry they won’t be able to buy a home.
Build more starter homes
We clearly need to expand the housing supply, and especially need more moderate-priced houses to lower the threshhold of home ownership. About 1.5 million housing units are built in the U.S. each year, millions fewer than needed to meet demand.
Watching my new house being built reminded me that home construction hasn’t changed much over the years. The roof trusses were prefabricated but the rest of the house was nailed together on-site, board by board. My old house in Oak Park was built in much the same way in 1911. No wonder houses are so expensive!
Wider use of manufactured housing can reduce construction costs. Not just mobile homes: Modular homes (even luxury models) can be quickly assembled on-site from factory-built components. This will require changing the artificial barriers of zoning laws and lending requirements. It also makes sense to overhaul zoning laws that create artificial scarcity in areas where people want to live.
Equity for renters
We subsidize homeowners with a federal tax deduction for mortgage interest and property taxes. Renters get squat. If we want to help working families build wealth, how about a comparable tax break for renters? What if renters could start building equity by investing a refundable tax credit in tax-deferred savings toward a down payment on a house or condo? This will require some tax-law gymnastics, but that’s what Congress does best.
I have problems with most proposals to forgive student debt and grant reparations to correct past discrimination. But if we are going to do this sort of thing in the pursuit of equity, the best way to reduce the wealth gap is to include a mechanism and incentive to purchase homes.
If our policymakers are serious about helping working families — whether they seek to Make America Great Again or Build Back Better — one of their objectives should be to make it easier for young people to become homeowners as a down payment on the American dream.
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