“Some people shouldn’t own houses”
This is one of the greatest lies to come out of the foreclosure crisis. It claims not only that under some circumstances homeownership doesn’t make sense,1 but that a certain class of person is somehow unfit for homeownership. Bipartisan efforts to push broader homeownership—and the stabalization of neighborhoods that comes with it—now face bipartisan ridicule.2
The problem is that rental rates—at least in the current climate, are significantly higher than mortgage payments. If you can afford to pay rent every month, you can afford to pay a mortgage on a similarly sized property.3 A rental typically covers the landlord’s costs to pay a mortgage, costs to pay taxes and insurance (likely at a higher rate than homeowners pay), costs for repairs, cost for a property management company, and a bit of extra money for the landlord. A rental payment might be twice the size of a market-rate mortgage payment on the same property. Renters pay more than owners for comparable housing without building home equity or enjoying the sort of stability that creates stable neighborhoods. Renters also aren’t able to enjoy the generous mortgage interest tax subsidy we give to homeowners.
What’s really going on?
When people say that “not everybody should own a house,” either they don’t understand the housing market or they’re suggesting that something other than limited means should keep people from owning houses. Some kinds of people, the imply, are part of a renting class that should pay us noble landowners for the right to peacefully exist. Because feudalism was such a great idea and you can’t have a proper fiefdom without some peasants. Limiting homeownership is simply another way to reduce social mobility.
The problem with the expansion of homeownership wasn’t that some people don’t have what it takes to be homeowners. They did. The problem was that traditional methods of discrimination were replaced by new forms of exploitation. Borrowers in certain neighborhoods were steered toward subprime loans. Appraisals were deliberately inflated. Loans with predatory terms were set up and designed to fail. None of that had to happen. And now, as that house of cards is collapsing, we’re losing decades of progress in integrating and stabilizing neighborhoods.
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Of course renting makes sense in some circumstances. You might be better off renting if you don’t expect to live somewhere long, don’t want to maintain a property, or live in a broken market where the only affordable properties are rentals. The goal of increasing home ownership isn’t about forcing homeownership on people—it is simply about lowering barriers that frequently prevent people who can afford homes to buy them. ↩
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To give credit where it’s due, the Bush administration pushed homeownership as a solution to a variety of problems. While the decision to give an implicit subsidy to some folks who cared a lot more about profit than homeownership had some horrible consequences, the goal remains both a worthy and attainable goal. ↩
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Some rental payments are, of course, subsidized. In those cases, if we can afford to subsidize rent each month, we can afford to pay a mortgage each month. ↩
