A Nation of Renters Becomes A Nation of Owners
All thanks to Big Government. Thomas J. Sugrue writing in the WSJ:
In 1934, F.D.R. created the Federal Housing Administration, which set standards for home construction, instituted 25- and 30-year mortgages, and cut interest rates. And in 1938, his administration created the Federal National Mortgage Association (Fannie Mae) which created the secondary market in mortgages. In 1944, the federal government extended generous mortgage assistance to returning veterans, most of whom could not have otherwise afforded a house. Together, these innovations had epochal consequences. Easy credit, underwritten by federal housing programs, boosted the rates of home ownership quickly. By 1950, 55% of Americans had a place they could call their own. By 1970, the figure had risen to 63%. It was now cheaper to buy than to rent…
It’s a story riddled with irony—for at the same time that Uncle Sam brought the dream of home ownership to reality—he kept his role mostly hidden, except to the army banking, real-estate and construction lobbyists who rose to protect their industries’ newfound gains Tens of millions of Americans owned their own homes because of government programs, but they had no reason to doubt that their home ownership was a result of their own virtue and hard work, their own grit and determination—not because they were the beneficiaries of one of the grandest government programs ever. The only housing programs prominently associated with Washington’s policy makers were underfunded, unpopular public housing projects. Chicago’s bleak, soulless Robert Taylor Homes and their ilk—not New York’s vast Levittown or California’s sprawling Lakewood—became the symbol of big government.
Gutted cities and a Jim Crow legacy:
Federal housing policies changed the whole landscape of America, creating the sprawlscapes that we now call home, and in the process, gutting inner cities, whose residents, until the civil rights legislation of 1968, were largely excluded from federally backed mortgage programs. Of new housing today, 80% is built in suburbs—the direct legacy of federal policies that favored outlying areas rather than the rehabilitation of city centers. It seemed that segregation was just the natural working of the free market, the result of the sum of countless individual choices about where to live. But the houses were single—and their residents white—because of the invisible hand of government.
Read the whole piece; it’s a story we all should be aware of.
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11 Responses to “A Nation of Renters Becomes A Nation of Owners”
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I'm a homeowner I didn't take out a mortgage, I bought my home out of my pocket. It might not best the biggest of best home in the world but I didn't rely on the government to get housing for me. There was never a risk to my fellow countrymen that I would go default on my mortgage and saddle them with the risk, there was never a danger to my neighbors that their property values would decline for me defaulting on a loan I could not repay. Now there is nothing wrong with getting loans and mortgages as long as your relatively assured that you can pay them off, and as long as you honor your debts and don't run away from them, but we have seen in the recent past this happening due to big government efforts to bring home ownership to more people.
The big myth is “affordable housing”. Well here is some news, do you know what affordable housing really is? Its not the housing you want, its the housing you can actually afford. Government made a gross mistake about this and sent us on a couse that led to the housing crisis and kept many hard working Americans unable to responsibly buy their homes because of the overinfated market due to government interventions.
Thomas Sowell wrote a great piece on this entitle “Lured to Disaster, I recommend everyone read it.
http://article.nationalreview.com/?q=ODA2NzIwYW…
here is an excerpt:
When I first left home, back in 1948, I rented a room about 4 by 8 feet, costing $5.75 a week. Since my take-home pay was $22.50, that was affordable housing. (Multiply these numbers by about ten to get the equivalent in today’s prices).
After three years of living in rented rooms, I began living in Marine Corps barracks, and sometimes tents—none of which cost me anything. That was certainly affordable.
As a civilian again in 1954, I rented my first apartment, a studio apartment—small but affordable. But a year later, I went off to college and lived in dormitories on various campuses for the next six years. None was fancy but all of them were affordable.
After completing my academic studies, I rented another studio apartment—not a big advance, but it was affordable.
In 1969, I rented my first house, which I could now afford, after several years as a faculty member at various colleges and universities. A dozen years later, I began to buy my first house.
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This is what big government destroys with a sense of entitlement that paints affordable housing as the housing you want instead of the housing you can afford, we saw where that got us.
My wife and I have never owned a home. We have been lifelong renters. We are renting a nice home currently that we can afford. And most likely, we won't buy a home. Our landlords are great people and love that we are here. Can't beat that with a stick! We made a conscious decision that home ownership would impede are larger goal of business ownership. And I can tell ya this much, it has worked out good.
Personally I want to see more renters. Home ownership was turned into a lighthearted game when it's serious business. And the numbers don't lie about renting: if you lose your job, pay $1000/month rent, and have 10 months left on a one year lease, you are obligated to $10,000. But in home ownership, that number is easily 25 – 40 times that easily (on average today).
The WSJ and National Review articles accurately describe the role government played in promoting home ownership in this country. However, little was mentioned about the equally major role of the market in driving home ownership to new heights.
Following World War II, and the Great Depression, the US public was still a nation of savers. Madison Avenue played a huge role on behalf of corporations in changing the public attitudes from savers to spenders. As home buying increased, the housing industry continued to fuel the growth. The financial system also offered easy credit to the mix, and we evolved into a culture of rampant consumers and debters. And here we are now. The fix, I think, won't come from government or the corporate world, but through a cultural change back to more realistic way of living.
Here in Michigan I encountered someone angry and frustrated with the bank bailout and bungled stimulus program, who spoke about many who are worried about foreclosure or eviction? What about vouchers for mortgage and rent payments?
I thought on my own why we didn't see an expansion of Cash for Clunkers not only to involve more vehicles (which is logical, anyway, if auto buying is primarily sought), but also to encompass housing purchases, on the larger, more expensive end, and appliance purchases (to be followed by assisted purchases of stereos, large-screen plasma TVs, etc.) on the smaller, less expensive end.
“Well here is some news, do you know what affordable housing really is? Its not the housing you want, its the housing you can actually afford.”
Aside from that, home prices themselves are still too high. I have no sympathy with those expecting to get easy riches, especially the “flippers” and the parasitical people associated with them.
Note that the federal government could reform itself here, and end its subsidy and social-engineering game, which means no longer to allow deduction of home mortgage interest. (Given our current slump and desire for stimulus, I'm still wondering why all interest on debt wasn't made tax deductible, or at least for home, automobile, and appliance purchases, the items normally most important in this regard.) This is a sacred cow that has a lot of emotional dreck defending it and it won't be slaughtered any time soon (no more than Obama will end the cap-and-trade idiocy for a simple, more honest tax on carbon in fuels), but could at least be modified to be more equitable, such as to allow all mortgage costs and all rent that renters have to pay (or a consistent fraction among these) to be tax-deductible, if nothing else.
Don't expect intelligence from Washington any time soon, however.
I should also mention that Proposition 13 in California is defective, but not for any nonsense spouted by frustrated tax-and-overspend liberals and Democrats in Sacramento and elsewhere throughout the state.
Prop 13 is defective because it is inequitable (as well as a glaring reminder of why ad valorem taxation as well as direct ability-to-pay taxation fails logically as well as morally). There is no justification whatsoever for anyone coming to California today to purchase a home on a street, and have to pay one cent more than the owner of an identical home on an identical parcel of land on that same street, who has lived there since before the mid-1970s pays in property taxes. Not one cent. That is the true defect of Prop 13. The freeloaders who benefit from this resent anything that threatens making them pay more to reduce the unfair burden of those who are now paying much higher taxes (can be ten times or more) for the same thing.
The obvious solution is reasonably low property taxes for everyone, of course. (Beyond the intellectual ability of too many people, sadly, is to ditch the assessed valuation basis for taxation and go with a truly objective as well as equitable basis instead, such as square footage of land and developed structures.)
That's why I think that government repo homes are not the end of the world.
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