The original Galloway homestead in metro Atlanta was built in 1962 on the blue-collar frontiers of suburbia, in the midst of a housing-led recession.
The modest split-level was the work of Scott Hudgens, a relative newcomer to the business. The builder had bet that a resulting glut in housing stock didn’t apply to lower-income homes.
Mechanics and baggage handlers at the expanding Hartsfield International Airport needed a place to park their families, so Hudgens won that particular gamble. He would go on to bigger and better things, including the Mall of Georgia in Gwinnett County.
The old homestead did not. The Galloways moved out in the late 1970s. A few years ago, the house was declared the headquarters of a flamboyantly named church — a convenient and not uncommon tax dodge.
Which didn’t work, apparently. Not too long ago, the house showed up on the long list of foreclosed properties in south Fulton County.
That the American Dream of home ownership is struggling is no secret to anyone who looks up and down the curb — and requires more than one hand to count the foreclosures and forced exits.
To be sure, gated communities and high-end condos have been swept into the maelstrom. But it is the people on the lower rungs of the economy who have become the subject of a renewed debate over whether America should be a nation of homeowners or renters.
We have been here before. In fact, the current housing crisis has déjà vu written all over it, said A. Scott Henderson, an academic at Furman University whose specialty is the history of U.S. housing policy.
Most people forget, Henderson pointed out in an interview, that the American Dream — the prospect of home ownership for the average working family — was a 1930s creation of the federal government.
At the time of Franklin Roosevelt’s inauguration, the country was on the verge of both collapse and revolution. A housing boom made sense for two reasons. One was economic stimulation — something we’re all familiar with today.
“In times of economic collapse, deflated wages are trying to buy inflated housing prices,” Henderson said. Then as now, bubbly housing prices were on the decline — but weren’t shrinking as fast as jobs were disappearing.
The other reason for a federalized American Dream was political. It was necessary to stave off a revolt from the left. “Property ownership was the strongest thing we had for preserving free-market capitalism,” Henderson said — which was indeed at risk. Put people in homes, and you keep pitchforks off the streets.
And so the Federal Housing Administration invented the 30-year, low-interest mortgage. Until then, Henderson said, home purchases were by cash or balloon note — a five-year, interest-only loan followed by repayment of the principal.
It has been U.S. policy ever since. The last major endorsement came during the Reagan administration in 1986, Henderson said, when income tax deductions for interest on automobile loans and credit cards were eliminated. But the interest deduction for home mortgages was preserved.
“That was a clear attempt by lawmakers to single out home ownership as a social good to be preferred among all others — above say, until recently, health care,” Henderson said.
The problem is that the American Dream has become disconnected from the American economy. What is good for one is no longer good for the other.
We ourselves are responsible for the disconnect. Somewhere in the late ’80s, we shifted from a nation of homeowners to a nation of home speculators, Henderson said. Homeowners treated their equity as piggy banks. Banks, driven by lower interest rates to make up the loss with more customers, dropped their guard.
“That’s not morally good or bad. I don’t think it’s even partisan,” Henderson said.
Even so, the debate has begun to play out in the U.S. Senate race.
Republican incumbent Johnny Isakson, a former Cobb County real estate executive, drafted the legislation last year that extended the $8,000 first-time homebuyer credit and added a $6,500 repeat-buyer credit for purchasers who signed a contract by the end of April.
He will not do so again. “The tax credits provided an impetus needed at the time,” Isakson said, but something directed at jobs is what’s needed now.
Democratic challenger Michael Thurmond isn’t even sure the tax credits worked. “Before I could support any return to that, we’d have to know what led to a 27 percent drop in new home sales this last quarter,” he said.
Libertarian Chuck Donovan considers home-purchase tax credits just another form of federal spending — and thus off-limits. Donovan’s no fan of interest deductions for home mortgages, either. But there’s a limit, he acknowledged.
“That’s set into the fabric of the American mindset. I think that’s going to be one of the last ones tackled,” he said.