We Need a Better Homeownership Society
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Highlights
- I do believe we can talk people out of the idea that ever-rising real home prices are desirable, or that public policy should promote rising real prices. Indeed, I think we’re already having some success at talking people out of this — because while ever-rising prices are disastrous for people who don’t own homes, they’re not even really any good for people who do. We can even succeed at changing this attitude without unwinding much of the policy apparatus that prefers owning over renting. (View Highlight)
- Housing is consumption. Consumers should always prefer low prices, even if they consume by owning.
A house is a depreciating asset that should decline in value over time.2 Really, buying a house should be a lot like buying an expensive car that lasts a really long time — the purchase has “investment” characteristics, in that you’re putting out money now to provide yourself benefits later, but those benefits should be coming in the form of consumption (your use of the car or the house) not through increases in asset value. (View Highlight)
- The thing about persistently rising real home prices is that, while they are a disaster for people who need to buy homes, they’re no great shakes for people who already own them. Sure, if your house rises in value, you become wealthier on paper. But if you sell your house, then you don’t have a house — effectively, your increased wealth is tied up in financing the increased implicit cost of living in the house you already live in. Homeownership is a hedge against rising housing costs — this is one of the valid reasons people prefer owning over renting — but a hedge simply means that homeowners are largely held harmless from housing cost increases, not that they benefit from them.3 (View Highlight)