Revisiting the American Dream

WASHINGTON – In most towns and cities across the country, owning a little patch of real estate probably embodies the central tenet of the American Dream. It’s been that way for generations, going back to the nation’s agrarian roots.

After World War II, the federal government gave homeownership a huge boost by offering returning veterans assistance with getting a mortgage. When added to the home mortgage-interest deduction, the veterans’ benefit led to the suburbanization of cities around the country.

Many political leaders continue to believe that federal incentives for homeownership are in the national interest. Civic boosters say homeownership leads to greater stability and civic participation; you get your own home, you maintain your property, you register to vote, you care more about your community.

Or so the thinking does.

But the housing meltdown has led some economists to question the federal government’s ongoing mission of encouraging homeownership. Though boosting rates of owner-occupied housing has retained its appeal through a succession of Democratic and Republican presidents, some farsighted thinkers are beginning to wonder whether that idea makes sense in a modern economy of highly mobile workers.

Let’s look beyond the housing bust for a moment. While it has forced the economy into a steep recession, the housing market will eventually recover.

Meanwhile, however, the economy is undergoing a permanent change of seismic proportions. The typical college senior will have several jobs – perhaps several careers – in his or her lifetime. That will require not only a commitment to continuing education and retraining, but also a willingness to relocate whenever the economy requires it.

Homeownership restricts the ability to pick up and go when a new job beckons. Some economists have even argued that the unemployment rate in certain areas – such as Michigan, where the rate now hovers around 15 percent – would be lower if homeownership were not restricting workers’ ability to relocate to a state with more opportunities for employment.

I have a personal interest in the issue of housing and mobility since my move to Washington all but assured that I’d be burdened with a new mortgage up here even as I try to sell a house back there – in a barely thawing market. My circumstances are not as dire as those of some would-be sellers: I’ve owned the house since 1992; I’ve kept my home equity loans manageable; I’ve paid down the principal significantly.

Yet, the experience has left me wondering about the advantages of homeownership. I’m currently a renter in a lovely Washington neighborhood; in fact, because of its transient population of political aides, diplomats and military personnel, Washington offers a network of desirable rental houses. After I sell my Atlanta house, I’m not sure I’ll rejoin the community of homeowners.

Or maybe I will. My parents, who bought their first home in the 1950s as a young married couple, believed in homeownership as the foundation of financial stability. (Of course, they weren’t members of a mobile generation. My father was born and died in the same small town; my mother still lives there.)

But there is no reason for the government to encourage me with incentives such as the mortgage-interest deduction. Most industrialized nations don’t offer such incentives, and they don’t lack stability or civic participation. Indeed, voter turnout is higher in most Western democracies than in the U.S.

Getting the federal government out of the business of encouraging homeownership would be such a huge cultural shift that it’s unlikely to happen anytime soon. Nor has any leading political figure suggested that it should. And no wonder. The entire housing-relating industry would arm for battle.

But let’s hope some young economist toiling at a think tank is writing a white paper outlining the downsides of homeownership. With a rapidly changing economy, the culture must also change. And that just might include changing our definition of the American Dream.