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Saturday, July 13, 2013

Shiller: Owning a Home Isn’t Always a Virtue

Robert Shiller argues that "national policy needs to take away much of the enormous subsidy to homeownership":

Owning a Home Isn’t Always a Virtue, by Robert Shiller, Commentary, NY Times: Encouraging homeownership has been considered a national goal at least since “Own Your Own Home Day” was introduced in 1920 by various business and civic groups as part of a National Thrift Week. The newly popular word “homeownership” represented a goal and a virtue for every good citizen — to get out of the tenements and into one’s own home. Homeownership was thought to encourage planning, discipline, permanency and community spirit.
In the aftermath of the subprime mortgage crisis, our national commitment to homeownership is sure to be questioned as we consider what to do about Fannie Mae and Freddie Mac, the enterprises that are meant to increase the supply of money available for mortgages and are now under government conservatorship; the Federal Housing Administration, which directly subsidizes homeownership; and the Federal Reserve’s quantitative easing program, which was intended to lower interest rates. For both political and economic reasons, any or all of these encouragements for homeownership — not to mention the mortgage interest deduction — could be sharply curtailed.
Which is why this is a good time to ask a basic question: In today’s world, is it wise for the government to subsidize homeownership? ...

His arguments, at least as I read them, seem to favor home ownership over renting (especially if you toss out the argument about mobility, as you should). But maybe that's just my own biases (I think home ownership is better than renting for a variety of reasons, perhaps connected to growing up in a small town rather than a big city, but that seems to be a fairly lonely position these days). But even if homeownership is better, subsidies aren't justified unless there is a market failure of some sort (e.g. a positive externality to neighbors from owning rather than renting, and so on), differences in the ability to purchase a home due to historical inequities in the distribution of income, wealth, and opportunity, that kind of thing (which I believe are present).

    Posted by on Saturday, July 13, 2013 at 11:40 AM in Economics, Housing | Permalink  Comments (51)


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