John Petro
Moving Forward with a New Urban Housing Strategy: The death of the Ownership Society
As the economic crisis continues to unfurl, we are only beginning to understand some of the possible ramifications. We’ve seen the number of foreclosures skyrocket and home prices fall in much of the country. Homeownership rates have slipped, though not drastically. Interest rates for mortgages are higher now than they were in the past several years and it is becoming more difficult for perspective home buyers to get a loan.
In the short-term, policy makers are trying to find the best way to address the crisis in our financial system and to take emergency procedures to assist homeowners that are having trouble staying in their homes. Once we address the crisis, however, we should take a serious look at our nation’s housing policies and determine how we will move forward after the dust settles.
Specifically, we should look at the idea of the ownership society as it relates to urban housing. In most big cities a majority of households rent their homes (see chart). Future housing policies should reflect this reality. Many urban households choose to rent because it is less expensive than owning, but it is far from cheap to rent. The number of renter households that have a severe cost burden (yearly rent exceeds 50 percent of annual income) rose 20 percent between 2001 and 2006. Severe rental burden is not just a low-income household problem either. In the same period, the number of upper-middle income households that experienced a severe rental housing burden rose by 66 percent while severely rent-burdened lower-middle income households rose by 70 percent.
If the ultimate goal is indeed ownership, we still need to address the strain that rental prices are making on middle-income households. The cost of renting is making it more difficult for households to get ahead and to save, seriously hurting the chance that such a household will be able to get together the money needed for a down-payment on a mortgage.
But we will also need to challenge the central tenet of the ownership society and see if it truly holds water, the assertion that for every household in America it is better to own than to rent.
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Posted at 10:23 AM, Oct 13, 2008 in
Housing | Urban Affairs
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