American Nightmare. Randal O'Toole

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СКАЧАТЬ Figure 12.6 State Housing Indexes before 2000 2

       Figure 14.1 Inflation-Adjusted British Home Price Index, 1952–2008

       Figure 14.2 European Home Price Indexes, 1998–2009

      Tables

       Table 9.1 Planning Regimes and 2009 Housing Prices

       Table 11.1 Change in Number of Households by Income Class from 1989 to 2009

       Table 12.1 Bubble and Nonbubble States

       Table 14.1 Homeownership Rates by Nation

       Table 14.2 Ratios of Housing Price to Per Capita GDP

       Introduction

      Along with millions of other Americans, I watched in shock and awe as the world’s financial markets melted down in September 2008. The knowledge that this was the beginning of a major recession was especially heartbreaking because several of my colleagues and I had been warning people of this imminent collapse, and ways to prevent it, for several years.¹ Most recently, my 2007 Cato Institute book, The Best-Laid Plans, argued that “planning-induced housing bubbles . . . are threatening the world economy,” and the inevitable collapse of those bubbles would “cause the world to go into a severe recession.”²

      Numerous researchers have shown that government regulation has made American housing unnecessarily expensive and made many regional housing markets prone to bubbles. In recent years, the focus of state and local land-use regulation has been a war on sprawl that, in practice, became a war on single-family homes. Because 84 percent of people living in single-family homes own those homes, compared with just 14 percent of people living in multifamily housing, a war on single-family homes was a war on homeownership.

      In 1997, for example, planners in my former hometown of Portland, Oregon, set a target of reducing the share of Portland-area households who lived in single-family detached homes from 68 percent in 1995 to 41 percent by 2040. If they are successful, hundreds of thousands of people who would have preferred single-family homes will be stuck in apartments instead.³ To achieve this goal, they limited the land available for new single-family homes while they used tax dollars to subsidize construction of multifamily dwellings. Similar plans have been or are being written for cities and metropolitan areas across the nation.

      In places with relatively unregulated housing markets, housing is inexpensive, and when demand increases—whether because of population growth, low interest rates, or loosened lending standards— homebuilders build more homes. When new single-family homes are restricted, housing becomes expensive, and increases in demand lead to higher prices rather than more housing, while decreases in demand result in lower prices—in other words, a housing bubble.

      The lesson I learned from the housing bubble was that the American dream of owning a single-family home is so powerful that many Americans will go to extraordinary lengths to achieve that dream, including dedicating more than half their incomes to 30-year mortgages on those homes. But many other people learned a very different lesson: the mantra they repeated over and over was “As much as they might want to, some people shouldn’t try to own their homes.”

      “Homeownership has let us down,” said Time magazine. “The dark side of homeownership is now all too apparent: foreclosures and walkaways, neighborhoods plagued by abandoned properties and plummeting home values, a nation in which families have $6 trillion less in housing wealth than they did just three years ago.”⁴ When the Census Bureau reported American homeownership rates had fallen from 69 percent in 2004 to 65 percent in 2010, housing economist Ryan McMaken responded that “the present rate needs to drop even more.”⁵ “The poor are better off renting,” agreed an op-ed in the Wall Street Journal.⁶

      “Homeownership is overrated,” says urban planner Richard Florida. “Too many people in economically distressed communities are trapped in homes they can’t sell, unable to move on to new centers of opportunity.” Florida thinks more people should rent and that we should “updat[e] our definition of the American dream.”⁷

      Is the American dream of homeownership dead? “In my opinion the American Dream as we know it is dead,” wrote financial adviser Suze Orman. “In many areas of the country, the dream of homeownership has backfired. Real estate values have deflated to such an extent that a record number of people owe more than their homes are worth.”⁸

      American Nightmare explores the questions raised by the debate over homeownership. What is the “right” homeownership rate? Is “universal homeownership” possible or even desirable? What roles do the mortgage-interest deduction, Federal Housing Administration mortgage insurance, and other government housing programs play in influencing peoples’ decisions to buy rather than rent their homes? What are the real lessons of the housing-market crash? To answer these questions, this book looks at the history of home-ownership and its role in people’s lives and the economy as a whole.

      As recently as 250 years ago, it is likely that fewer than 1 percent of the world’s families lived in their own homes. Even just 25 years ago, homeownership was a privilege enjoyed by only a small minority of people. Today, at least 60 percent of the world’s families own their own homes, and the percentage in many countries is much higher.

      The United States was long a leader in this remarkable transformation. Throughout much of the 20th century, high U.S. homeownership rates contributed to the nation’s booming economy, encouraging other countries to remove local barriers to homeownership. But homeownership in this country may be little more than an accident of history. At the time the New World was being colonized, nearly everyone in Europe effectively rented their lands from their monarch, and many Dutch, French, and Spanish land grants in North America followed this pattern. But in 1629, King Charles I of England offered Massachusetts colonists “fee simple” land—that is, the opportunity to own land after paying a single fee rather than annual rents. Soon after the American Revolution, this form of land tenure became dominant in the United States, and Europeans, Asians, and others who wanted to own rather than rent land came to America for the opportunity to do so.

      As late as the 1960s, America’s homeownership rate of more than 60 percent was one of the highest in the world. But at 65 percent today, America is barely in the middle of the pack. In the 60-some countries for which homeownership rates can be accurately determined, more than 75 percent of people live in their own homes. The fact that almost all those countries have lower per capita incomes than those in the United States flies in the face of the idea that American rates should be even lower because some people are too poor to afford a house.

      Three different themes weave through American Nightmare’s exploration of this history. First, homeownership provides many benefits, particularly for the children in homeowning families. Yet the main benefits of homeownership accrue to the homeowners and their families, so there is little reason for government to subsidize or otherwise promote homeownership. Instead, government should get out of the way and let people decide to buy or rent depending on their personal needs and the real costs of each of the alternatives. If this happens, the United States will likely end up with a higher rate of homeownership СКАЧАТЬ