Homeownership vs. Real Housing Abundance

Why Headline Writers Should All Be Fired

Jerusalem Demsas¹, a usually brilliant figure in the housing crisis discussion, has a boundary-pushing take today. Sadly, the headline is misleading, but it does point to a philosophical disagreement I have with her conclusions.

Most of her reasoning is sound. She’s right about all the things that are wrong with our imperfect ownership society — inequality, its “Ponzi” nature, the luck factor — and also in her conclusion:

Policy makers should completely abandon trying to preserve or improve property values and instead make their focus a housing market abundant with cheap and diverse housing types able to satisfy the needs of people at every income level and stage of life.

But where she sees the end goal of this as being about fixing rental markets so they can dominate over ownership, I think it should be more about obviating the need for renting to become the dominant mode of housing.

Cheap, diverse, and abundant housing — housing that’s not being treated like an investment — doesn’t inherently make renting the obvious alternative to owning. If anything, it makes ownership the more attractive option! If housing cost anywhere from half to a third as much as it currently does (relative to our incomes), a lot more people would own. We’d treat it the same way we did our cars: as a rather expensive durable good, one which will naturally depreciate from wear and tear, but whose expense and redeeming trade-in value still made it a better deal than leasing.

Demsas herself mentions that “no one expects their TV or their car to be a store of value, let alone to appreciate”, but she doesn’t take the TV analogy to its logical conclusion. In fact, in a world where our national policy is committed to keeping housing cheap through simple abundance, the lower price level solves most of the problems she mentions:

1. People would be less tempted to treat their houses as investments, since the market would rarely go up — prevailing policy would simply take price increases as a signal to build more.

2. Instead, since local markets would be prone to frequently bottoming out due to normal fluctuations, people would avoid putting all their eggs in the housing basket. At worst, we might need some minor interventions to stabilize against negative shocks, like insuring owners against market losses up to some cap, but we also wouldn’t need the trillions of dollars of subsidies we currently give away to homeowners. And the insurance itself would be affordable because *waves arms at low price level*.

3. Like cars, it’d be less costly to trade up or exit the local market, as many people already do with their cars when they move away.

4. Significantly cheaper housing would free up income for both savings and consumer spending. The savings would make the housing market itself more flexible, but also improve economic mobility across all classes. And to boot, the extra savings makes it easier to pay for home improvements and emergency repairs.

5. Cheaper housing lowers the racial wealth gap. And not just by shrinking the scale of the numbers we calculate the gap from — going from “$100k white - $10k nonwhite = $90k gap” to “$50k white - $5k nonwhite = $45k gap” — although it will shrink that. Rather, by the aforementioned savings effect (#4), and also lowering the bar for entry, it evens the entire playing field.

If ownership is a hill full of hurdles and we’re all racing up it, cheaper housing makes it less steep for all intersectional identities, lowers the hurdles, and it’s easier to change lanes to avoid the bad ones. All while reducing the incentive for anyone to ever rig the rules of the game again.

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But more important than all of this, I wanted to talk about the “endgame” here.

In Demsas’ world, we mostly give up on ownership and mostly become highly-protected renters. Okay, that’s a legitimate vision, I’m not going to flame her over that. I myself have been tempted to embrace it at times.

But you know what? Renting sucks. Like our minimum wage and labor laws, leases are often honored only in the breach for our poorest citizens. And the legalism is just another hurdle for minorities to jump or stumble on. It’s funny, because when we discuss equity, what often gets lost in the search for social justice is that there is rarely ever a perfectly equitable solution. It’s not enough to just point out where inequalities exist; we have to prove that the inequalities in one vision are better or worse than another.

Anyways, if almost all of us were renting, then that means someone else is owning. Who’s that going to be? Big banks? Landlords? A GSE? Moreover, it means someone is telling us what to do with the places we live in. That we can’t own pets, or mount a can-crusher on the wall, or hang our favorite paintings, or install a huge flatscreen TV mount. At the end of the day, some entity or sector of society would gain too much power over us. Do we really want to rely on “protections” that we have to fight tooth and nail to enforce, against that powerful entity? That doesn’t even look like an improvement on the status quo, it looks worse.

In my vision… housing is like your car. You still have to spend more for quality, and you know it depreciates, but owning is still smarter than leasing 99% of the time. If housing is made cheap and abundant, I still wouldn’t think it’s actually all that great to be paying off some landlord’s mortgage for him; I’d just rather scrounge up my skrilla, sign the dotted line, and enjoy getting to have a damned cat.

In my vision, we get homeownership up to 90-95%. It’s so cheap to own, it’s insane not to, except in some specific circumstances — maybe you’re renting while hunting for the right place to buy, or on some temporary work assignment, or an extended vacation. And it’s an equitable society because we all share equal stakes in our communities as homeowners.

It’s a legitimate difference of opinion to have. I just think that this is more worth fighting for than living the rest of my life as a renter.

1. She alone is worth the Atlantic’s subscription price.