Krugman: Bush's (and nation's) "Homeownership Challenge" flops (as it should)

[BurtWorm]

http://www.nytimes.com/2008/06/23/opinion/23krugman.html?_r=1&hp&oref=slogin

Op-Ed Columnist
Home Not-So-Sweet Home


By PAUL KRUGMAN
Published: June 23, 2008

“Owning a home lies at the heart of the American dream.” So declared President Bush in 2002, introducing his “Homeownership Challenge” — a set of policy initiatives that were supposed to sharply increase homeownership, especially for minority groups.

Oops. While homeownership rose as the housing bubble inflated, temporarily giving Mr. Bush something to boast about, it plunged — especially for African-Americans — when the bubble popped. Today, the percentage of American families owning their own homes is no higher than it was six years ago, and it’s a good bet that by the time Mr. Bush leaves the White House homeownership will be lower than it was when he moved in.

...


Listening to politicians, you’d think that every family should own its home — in fact, that you’re not a real American unless you’re a homeowner. “If you own something,” Mr. Bush once declared, “you have a vital stake in the future of our country.” Presumably, then, citizens who live in rented housing, and therefore lack that “vital stake,” can’t be properly patriotic. Bring back property qualifications for voting!

...

O.K., I know how some people will respond: anyone who questions the ideal of homeownership must want the population “confined to Soviet-style concrete-block high-rises” (as a Bloomberg columnist recently put it). Um, no. All I’m suggesting is that we drop the obsession with ownership, and try to level the playing field that, at the moment, is hugely tilted against renting.

And while we’re at it, let’s try to open our minds to the possibility that those who choose to rent rather than buy can still share in the American dream — and still have a stake in the nation’s future.

[iquiring mind]

1. Are you against homeownership?!?

A higher percentage of homeownership in a neighborhood results in a healthier neighborhood.

Ask any real estate agent or view any crime statistic and you find the neighborhoods with higher owner occupied dwellings are kept nicer. The yards are more manicured, the property is better maintained and the crime is less. Owners have more at stake if something is happening in their neighborhood.Renters are transient and know fewer of their neighbors. Owners will know if somebody walking down the alley is simply a neighbor taking out the garbage as opposed to a prowler looking for their next victim. They are more likely to get involved. Cities are better off with higher owner occupied neighborhoods because of higher appraised values mean higher property tax revenues. A renter won't care and will usually move if they no longer like the neighborhood.

Renters can still share in the American dream and still have a stake in the nation's future, absolutely! Unfortunately with the pathetic savings rate in America, the equity one builds through homeownership is typically the only substantial amount of wealth a family has. Owning property is the one proven way to gain wealth. 70%-80% of millionaires created their wealth through real estate.

[ljm2002]

2. Sooo, you read the article, right?

You might have noticed where it points all the folks who saved up and bought houses, only to have their equity wiped out when the housing bubble burst, and now still owe more on the house than it's worth now. So this helped their savings, how?

You don't have to be against home ownership to point out the pitfalls. You don't have to be against home ownership to point out how the tax codes favor owners and punish renters. You don't have to be against home ownership to believe that even non-homeowners have a stake in our country.

Years ago, I remember having a conversation with someone who opined that only property owners should be allowed to vote. It did not sit well with me, given that I had just that year paid $25,000 in taxes. And yet in that asshat's opinion, I did not merit a seat at the table.

Oh by the way, your simplistic thinking is somewhat of a giveaway. As is the misspelling of your username. You must have been in a hurry to set up your account here...

[iquiring mind]

5. I read it thoroughly

Many of the people who are in trouble with their recent housing purchase did not "save up" to buy the house (not ALL but many). There are plenty of people who responsibly purchased only the amount of house they could reasonably afford. I seriously doubt you would be foolish enough to rent something that will take 50% of your income?
The mortgage industry began providing loans with, "no money down", "no income documentation necessary". These were incredibly risky types of loans. People never should have been offered loans (and they never should have accepted them) with variable interest rates where they could barely afford the initial payments. As soon as the interest rate increased they had no possibility of affording the new payments. (Ir)responsibility here should be shared by both parties.
Tax codes that favor owners do so for the reasons I listed in my original post. How do the tax codes "punish" renters?
I never stated that only property owners should be allowed to vote!

Your superiority complex shows in your last line. Because somebody has a different opinion you immediate start with the personal attacks. Oh, and sorry for the typo. ouch!

[ljm2002]

6. Well here's the thing...

...your first 2 paragraphs, where you discuss the problems with the mortgage industry, seem to be in complete agreement with Krugman: not everyone should own a house. From a purely economic point of view, it does not make sense to get into a house under the terms of no-down-payment, APR, and/or balloon payment type mortgages. And the widespread failure of those mortgages brought the whole thing crashing down, to the point where those who did make down payments are seeing that equity dissipate along with the market value of their homes.

Tax codes punish renters because they do not get a break for what they spend on the absolute necessity of housing. Whereas owners get all kinds of breaks. You could argue that renters should get less of a break, and I would agree, since they are not responsible for major upkeep expenses. But no tax deduction at all, when they are often paying the landlord's expenses anyway through their rents? It makes no sense.

Superiority complex? Sorry, I just saw simplistic thinking: you saw an article pointing out that not everyone should own a home, and your first thought is, they must be "against" home ownership. C'mon, you can do better than that.

[iquiring mind]

8. It would have been better ...

if I would have titled the post, "Are you against the GOAL of homeownership". What got me was the "as it should" statement at the end of his title. It seemed like he was against the goal of empowering people to own their residences. He also argued against extreme comments that were never felt were implied.

I don't agree with your "punish" comments. When one person benefits another is not automatically punished. Many times governments will use the tax code to try and encourage what they deem to be behavior beneficial to society or to discourage "bad" behavior, i.e.: cigarette taxes. I don't always agree (and I'm sure you don't either) with the taxes levied or tax breaks given.

[BurtWorm]

10. My title was a capsulation of Krugman's arguments

The "as it should" was a comment on the Homeownership Challenge, not homeownership in general--on the notion that homeownership for all is a realistic or even worthy goal, from an economic standpoint.

[ProfessorGAC]

3. Did You Read The Article?

It seems not. The article isn't slamming homeownership. It's positing a question as to whether or not the drive to home ownership hasn't put a negative tone on renting, which means the demand rises faster than supply and causes things like hyperinflated home values.

Krugmann is asking this question from a purely economic point of view. There isn't really a value judgment in the article.
The Professor

[iquiring mind]

7. I read it thoroughly

“Owning a home lies at the heart of the American dream.” So declared President Bush in 2002, .....
This has been a mantra I've heard in the news and in politics ever since I can remember.

Listening to politicians, you’d think that every family should own its home — in fact, that you’re not a real American unless you’re a homeowner....
I stated in my original reply why cities benefit when someone owns their property. I've never heard a politician say your not a real American unless your a homeowner.

“If you own something,” Mr. Bush once declared, “you have a vital stake in the future of our country.” Presumably, then, citizens who live in rented housing, and therefore lack that “vital stake,” can’t be properly patriotic. Bring back property qualifications for voting!......
Again, I answer this ownership statement in my original post. The "Presumably" comment is an illogical leap. It is not a zero sum game. If a homeowner has a vital stake it doesn't remove "citizens who live in rented housing" from also having a "vital stake".

All I’m suggesting is that we drop the obsession with ownership, and try to level the playing field that, at the moment, is hugely tilted against renting.....
How is it tilted against renting?

And while we’re at it, let’s try to open our minds to the possibility that those who choose to rent rather than buy can still share in the American dream — and still have a stake in the nation’s future.....
When did anybody ever say different? All are entitle to share in the American dream! All have a stake the nation's future!

[CanonRay]

4. It goes back to the old Federalist idea

that only property owners should have the vote. Classic conservative thinking.

[DailyGrind51]

9. The main reason why people prefer to "own" rather than "rent" is

that ownership builds equity for future needs, like health emergencies, college tuition, retirement, etc. However, if we had a true social safety net, like they have in Europe, people would not need to worry about building equity.