Anti-foreclosure movements, government mortgage modification initiatives, proposals to forgive some or all housing debt all assume one thing: home ownership is good. But is it?
It is clearly good to allow people who are the victims of mortgage fraud to stay in their homes. Under current circumstances, it is also a good thing if the officials were to decide that the millions of families sitting on underwater mortgages were ‘too big to fail’ and helped them stay in their homes. But that is not quite what we have in mind when we ask ‘is home ownership good?’ What we have in mind is the long-standing and underlying assumption of public discourse that everyone should become a homeowner, and that public policy should promote this good.
One reason we might think it is a bad idea is because it turns out to be very hard to increase home ownership above a certain level. The massive speculation of the late 19th century gave us the railroads, and the the bubble of the late 20th century gave us the internet, but the first major asset-bubble of the 21st century gave us…a 4% increase in homeownership (since the 40 year low in 1993). See for instance this graph from the United States Census Bureau
And of course, note from the graph above that we have lost nearly half those gains already. Not to mention that these gains came on the back of a disastrous credit crunch, centered on bad mortgages and worse financial instruments built on top of them. Of course, in a different economy, many more workers with better wages would have been able to afford their homes. So it may be that all we learn is that this particular debt-based social model, which made certain basic goods like housing available via easy credit, not increased earning power, is bad one.
But what is that basic good anyhow? Housing. But why assume housing means home ownership? The idea of home ownership retains an aura of independence and security. And to some degree this appeal is transnational. According a recent New Left Review article by Isidro Lopez and Emmanuel Rodriguez, the Spanish housing bubble was built on similar ideas about home ownership. But in the United States, at least, there is an important history to tell about the original freedom to which home ownership, or specifically homesteading, referred, and the narrowing of that ideal in the present.
The early, homesteader vision was based on the settler ideal that the free person owned productive property. He owned the home, the land on which it sat, and farmed that land. In virtue of that property he was independent, because he worked for himself, and secure, because if necessary he could grow his own food. The independence and security of the homeowner was linked to ownership of some piece of the means of production. It therefore guaranteed more than a zone of privacy and intimacy – it also secured a certain condition of economic freedom. As Lincoln put it in a quote we have used before “The prudent, penniless beginner in the world, labors for wages awhile, saves surplus with which to buy tools or land, for himself; then labors on his own account another while…[This] is free labor.” This condition of pure, individual dominion still drifts around in the aspiration towards self-employment.
By the late 19th century, though, industrial capitalism, not to mention the beginnings of industrial agriculture, cast this yeoman farmer ideal into the dustbin of history (an ideal, anyhow, that had always deeply struggle to match reality.) Mass wage-labor, and urbanization, established radically new conditions and social problems. The famous tenements of New York’s Lower East Side, the slums of Chicago, these were the new housing arrangements, and were a key element in the perception that the city was ungovernable. The appeal of home ownership beginning in the interwar period, and exploding in the postwar period, was thus double. On the one hand, it drew on the older association of home ownership with control over the means of production. But it then layered on top of this appeal the narrower promise of rising standards of living. Charles Maier’s famous line that the ‘politics of productivity’ overtook any aspiration for workers’ control is relevant here. The implicit social contract was work hard, maintain productivity, and your income will rise too. This means more consumption goods, including home ownership, will be available to you. And don’t think too hard about the fact that other idea that home ownership means productive control.
The 1950s to 1970s maintained one version of this promise, but, as we have noted, the social contract shifted one final time. Beginning in the 1970s, the stagnation of real incomes was managed by the increase in cheap credit, including mortgages. This new social contract continued to hold out home ownership as one of the basic goods available to society’s members, but now relied on finance and state manipulation of markets rather than on labor’s bargaining power and more direct state support. This broad march is visible in the history of Freddie Mac and Fannie Mae. Fannie Mae was founded in 1938 as a New Deal initiative to provide federal money (mainly through the familiar mechanism of buying mortgages from banks) to promote home ownership. In 1968 it became the government-sponsored entity (GSE) that we know and hate. While Fannie Mae originally monopolized the secondary mortgage market, by the 1960s the easing of this monopoly opened up that market. On the backs of that, and other changes to law and policy, the mortgage-backed securitization process gradually emerged. Each one of these changes was defended in the name of increasing home ownership.
To be clear, the point here is not that the GSEs caused the crisis – rather, it was the massive housing bubble, of which the GSEs were one important but not decisive part. The point, rather, is that home ownership was ‘sold’ ideologically as well as economically on a particular basis. First, it eventually became disconnected even from maintaining basic earning power. But second, and more subtly and long-term, it has become an ideal linked to a much narrower freedom than it originally had. If there is an opportunity in the crisis, it might be to rethink the whole ideal that is to be achieved in the first place, rather than continue to squeeze and narrow it into an empty shell of a promise.
One place to start might be to think about what kind of freedom can plausibly be connected to housing, given that housing is necessarily disconnected from other economic freedoms like control over work. Here, one imagines mobility, or the freedom of movement, that comes with being a renter might very well be just as desirable as the ‘stability’ of being fixed to a 30-year mortgage. Much more housing, rented at cheaper rates, might not only increase the freedom to move, but also be a way of including the worst off 1/3, who cannot and, might never be able to afford to, own. Of course, mobility would probably require a lot more than just changing the supply and nature of rentals and homeowning. Since homes are also used as a backup asset, perhaps for retirement or as a security against unexpected costs, a much more substantial, publicly provided access to basic goods like Social Security and public health care would also be required. But the point, in some sense, is to deflate the expectations around housing. Housing should be cheap and available, but it does not and should not carry either the great burden of promising total productive control (though we might want to recover that promise in other ways unrelated to housing) nor the more minor burden of functioning as the hedge against insufficient provision of basic welfare. A society in which many fewer own, but have more secure access to housing, is likely to be one with a greater amount of free movement, and, from a purely economic point of view, greater ‘factor mobility’ means more efficient labor markets.