I just read Robert Reich’s comment on the housing market. As smart as he may be, he’s still working with some misguided economic notion that home ownership equals prosperity. It does not. In fact, I’d argue there is no such thing as home ownership in the US anymore:
- For the bulk of the “ownership” period, the “owner” is in big debt. If he stops making payment, that home is gone. Plus, that money is tied up and unavailable for emergencies or investments in income-generating assets. What is guaranteed is having a 30-year financial tether that makes for obedient little debtors that need to keep toiling away.
- Even if the home is paid off, most municipalities charge property taxes. Fail to pay those and guess what happens to “your” property…?
- Another wrinkle is co-ops and condos. There, you own no land, owe maintenance charges in perpetuity, and are locked into constant communal negotiations with neighbors.
- Some of the most successful European countries have much lower home ownership rates than we do and they have an overall higher standard of living. Here’s the list of countries by home ownership rate. As you can see, there is zero correlation between which countries have the highest home ownership and highest per capita income or quality of life. Note Germany, Japan, Netherlands and Denmark are well below the US.
- Even here in the US, studies show no correlation between economic prosperity and home ownership.
So who is more free the renter or the “owner”?
Government should not be in the housing business. There is no substantiation for home ownership as a universal good… Sally and Freddie should not exist.
Also see James Altucher’s writing. He has several great articles on why he thinks you should never own a home: