Is Home Ownership a Good Thing?
Jimmy Stewart in "Its a Wonderful Life" handing the keys to Mr. Martini
It was always considered so, and is actively promoted in the US with mortgage interest deductibility. However it has also perhaps had some detrimental environmental effects, including sprawl, long commutes and far more cars on the road than a system where people rent and have a bit more flexibility in the size of unit for their needs or the distance to their jobs. A lot of smart people are reconsidering it these days:
James Surowiecki in the New Yorker: "Homeownership also impedes the economy’s readjustment by tying people down. From a social point of view, it’s beneficial that homeownership encourages commitment to a given town or city. But, from an economic point of view, it’s good for people to be able to leave places where there’s less work and move to places where there’s more. Homeowners are much less likely to move than renters, especially during a downturn, when they aren’t willing (or can’t afford) to sell at market prices. As a result, they often stay in towns even after the jobs leave. And reluctance to move not only keeps unemployment high in struggling areas but makes it hard for businesses elsewhere to attract the workers they need to grow."
Richard Florida: "Housing tenure is not a given. It is associated with particular modes of production. Homeownership was a critical cog in the fordist economy - stimulating purchases of everything from cars and washing machines, spurring the large-scale development of infrastructure. But it is a significant institutional impediment to the flexibility, adjustment and mobility the creative economy requires. NYC and London will derive even greater benefits over time from high rates of renters. "
Matt YgIesias in the Atlantic: "If you're considering leaving Michigan because it's economically depressed, you're not alone. As a consequence, your house probably isn't very valuable. If your stock investments tank, there's nothing you can do about it. But if your home investment tanks, you can still live there! Unless, that is, you try to move. If you'd been living in a rental and investing in the stock market, you could liquidate some of your investments to help finance the move to a more vibrant area where housing costs and employment prospects are better. But if you spent your savings on your house, then you're basically stuck."
What do you think?