It's still a home if you're renting
The housing crisis is putting a new perspective on the nation's history of home ownership.
So when did the American dream become so closely linked with home ownership? Apparently, not long after the phrase was coined in 1931.
According to a Wall Street Journal piece by professor Thomas Sugrue, who's writing a history of real estate in modern America, renting was the American way before the 1940s, when less than half of of the population owned a home. That's the cut-off point. Since then, more and more have steadily been trading in rental receipts for mortgage payments, with two-thirds of Americans now owning their homes.
But with 1.5 million people at risk of losing their homes in the first half of this year, who knows how long we'll continue seeing an increase in home ownership, or if we should be preparing ourselves for a decline.
This could have been the bubble that convinced a lot of homeowners, previous homeowners and renters that owning a home simply isn't for everybody and that it's time to start pursuing another aspect of the American dream.
Sounds like the Obama administration is on the same track. An article in The Baltimore Sun says the Department of Housing and Urban Development is putting $4.25 billion in economic stimulus aid toward creating tens of thousands of federally subsidized rental units.
An additional $4 billion also has been set aside to fix up the 1.2 million affordable housing units that already exist nationwide, and there's $1.8 billion in Obama's budget that Congress already approved for the construction of rental housing.
From the article:
"I've always said the American dream should be a home -- not homeownership," said Rep. Barney Frank, chairman of the House Financial Services Committee and one of the earliest critics of the Bush administration’s push to put mortgages in the hands of low- and moderate-income people.
Conservatives, however, believe that President Obama and HUD shouldn’t head too far in the other direction; in some cases, rent can be more expensive than a mortgage payment.
Valid points on both sides, and then there's also the basic fact that all those people who have lost or are at risk of losing their homes have to live somewhere, so President Barack Obama's plan couldn't come at a better time -- well, I suppose six months ago would have been nice, but let's just hope it's on a fast track.
Dean Baker, co-director of the Center for Economic and Policy Research, offers another idea in the L.A. Times. He proposes Congress pass legislation that would allow homeowners who are no longer able to pay their mortgages the opportunity to stay in their homes as renters paying market-rate rent.
He argues that allowing people to stay in their homes creates an incentive for banks to look at creative ways to modify their loans, and in the meantime can protect neighborhoods from high rates of vacancies, and help give families facing foreclosure a sense of normalcy -- keeping a roof over everyone's heads, allowing kids to go to the same schools, etc.
Sure, it sounds wonderful, but last month a couple of bloggers commented on some of the possible flaws with what they called the "own-to-rent" idea, asking who would manage these properties, and pointing out that it could further dampen the economy because then investors would be stuck with these properties.
And Baker doesn't necessarily disagree, saying:
There is no doubt that the banks would hate "right to rent" legislation. They will likely use all their political power to defeat any bill -- and banks are incredibly powerful on Capitol Hill. But we should remember that it was the banks' greed and incompetence that got us into this mess in the first place.
Pointing fingers isn't really my way, but the guy does have a point. Freddie Mac already proved that such a "right-to-rent" policy could work, allowing borrowers who have lost their homes to foreclosure to stay on as leasers, but on a month-to-month basis.
Calculated Risk says the transition from a homeowner society is already under way, with 4.3 million rental units added since the end of 2004, and investors picking up 29% of existing home properties in the last couple of months, most likely to put on the market as rentals.
The blog calls it the Rentership Society.
About Teresa Mears
Teresa Mears is a veteran journalist who has been interested in houses since her father took her to tax auctions to carry the cash at age 10. A former editor of The Miami Herald's Home & Design section, she lives in South Florida where, in addition to writing about real estate, she publishes Miami on the Cheap to help her neighbors adjust to the loss of 60% of their property value.