As the Obama Administration unveils its $75 billion plan today to prevent foreclosures, an urban theorist argues that a nation of renters would be better for America's future.
In the Atlantic, Richard Florida takes on the sanctity of home ownership by calling decades of housing growth in the Sun Belt and elsewhere a Ponzi scheme:
"To an uncommon degree, the economic boom in these cities was propelled by housing appreciation: as prices rose, more people moved in, seeking inexpensive lifestyles and the opportunity to get in on the real-estate market where it was rising, but still affordable. Local homeowners pumped more and more capital out of their houses as well, taking out home-equity loans and injecting money into the local economy in the form of home improvements and demand for retail goods and low-level services.
"Cities grew, tax coffers filled, spending continued, more people arrived. Yet the boom itself neither followed nor resulted in the development of sustainable, scalable, highly productive industries or services. It was fueled and funded by housing, and housing was its primary product. Whole cities and metro regions became giant Ponzi schemes."
Now that the housing bubble has burst, Florida advocates "removal of homeownership from its long-privileged place at the center of the U.S. economy. Substantial incentives for homeownership (from tax breaks to artificially low mortgage-interest rates) distort demand, encouraging people to buy bigger houses than they otherwise would. That means less spending on medical technology, or software, or alternative energy—the sectors and products that could drive U.S. growth and exports in the coming years...
"If anything, our government policies should encourage renting, not buying. Homeownership occupies a central place in the American Dream primarily because decades of policy have put it there. A recent study...shows that...homeowners are no happier than renters, nor do they report lower levels of stress or higher levels of self-esteem."
As provocative as this argument may be, it will meet heavy resistance. In yesterday's Times, David Brooks mocks urban planners who dream Americans "will give up their love affair with suburban sprawl and will rediscover denser, more environmentally friendly, less auto-dependent ways of living."
He cites a Pew study: "City dwellers are least happy with where they live" and most Americans still long for "places where you can imagine yourself with a stuffed garage--filled with skis, kayaks, soccer equipment, hiking boots and boating equipment. These are places you can imagine yourself leading an active outdoor lifestyle."
Right or wrong, Americans will be worshipping at the shrine of home ownership until this economic crisis eases, and the government will keep pumping billions of bailout money into keeping them there.