Tuesday, June 24, 2008

Does America Have an Anti-Renter Bias?

Princeton University economist Paul Krugman says yes, America does have an anti-renter bias.
Here’s a question rarely asked, at least in Washington: Why should ever-increasing homeownership be a policy goal? How many people should own homes, anyway?

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!

Even Democrats seem to share the sense that Americans who don’t own houses are second-class citizens. Early last year, just as the mortgage meltdown was beginning, Austan Goolsbee, a University of Chicago economist who is one of Barack Obama’s top advisers, warned against a crackdown on subprime lending. “For be it ever so humble,” he wrote, “there really is no place like home, even if it does come with a balloon payment mortgage.”

And the belief that you’re nothing if you don’t own a home is reflected in U.S. policy. Because the I.R.S. lets you deduct mortgage interest from your taxable income but doesn’t let you deduct rent, the federal tax system provides an enormous subsidy to owner-occupied housing. On top of that, government-sponsored enterprises — Fannie Mae, Freddie Mac and the Federal Home Loan Banks — provide cheap financing for home buyers; investors who want to provide rental housing are on their own.

In effect, U.S. policy is based on the premise that everyone should be a homeowner. But here’s the thing: There are some real disadvantages to homeownership....

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.
The full article is well worth reading and points out some of the downsides to homeownership. On another note, Krugman says high oil prices are not the fault of financial speculators.


  1. Homeownership is an over-arching, top-level societal goal because it creates a stable, non-transient population base.

    A non-transient population is easier to control. An indebted population, locked into the symbol of their debt (the home), is an iron-clad assurance of a stable population.

    And yes, I own a home and make monthly payments. (60% debt to equity ratio, including the current market, with a 5.5% 30 year fixed loan.)

  2. Go to any condo complex where you have both owner-occupied units and rented-out units and observe. See which are better maintained, find out who is more involved in the many voluntary activities that allow the community to function. It's not that renters are inherently less responsible than owners, it's just that it's human nature to be more responsible when you "have some skin in the game".

  3. I feel this bias all the time. As a San Francisco resident, and a committed lover of this city, I often feel defeated by the constant message that renters are a sub-class. I see friends in other places with a huge ball and chain on them for attempting to own a home. I've told my skeptical brother that I wouldn't want to live anywhere I could "afford," not meaning I like poverty or renting, but I've chosen San Francisco where there are still a majority of renters. A neighorhood cafe wanted an entertainment license and the signatures list had a box for "Owner" or "Renter" for nearby residence to check when the city considers the cafe's request. In SF, owners are as likely to live in Hong Kong as the building itself. Speculators don't exhibit a "stake" in the community as far as I can see.

  4. "Go to any condo complex where you have both owner-occupied units and rented-out units and observe."

    yep come to mine, Im a renter and my place is spotless and beautiful.

    Then look at three doors down, where the neighbor has had the police called on him 3 times for hording and collecting garbage in his house, rotten food and all (he is an owner)

    Then look 3 floors up at the crazy cat lady who owns 20 cats when the condo rules only allow 1 animal, her whole floor smells like a zoo (again another owner)

    Lets not forget the guy on the top floor who was an owner, that was a drug dealer and is now in prison.

  5. There is a difference between ownership with borrowed money and increased networth. If you take someone with a $40k bank account and have him buy a $200k home with 20% down, is he now more responsible than before going into debt?

    IMHO, building actual wealth is more correlated with positive traits than just borrowing money. I suspect getting people into debt adds problems rather than solving them.

  6. Well one of the arguments for the mortgage interest deduction for homeowners is that landlords get to deduct mortgage interest as a business expense. So it's an attempt to eliminate tax incentives for a landlord/tennant system in housing.
    -Jim A