How Much Homeownership Is Too Much?

The National Multi Housing Council and its joint legislative partner, the National Apartment Association, have a long history of aggressively protecting the apartment industry's interests. Over the years, instead of criticizing homeownership incentives, we have argued for a balanced housing policy. But in 2004, a rash of election-year inspired homeownership rhetoric and proposals forced us to take off the gloves and question the Administration's homeownership-above-all-else approach to housing policy.

Our challenge was motivated by clear evidence that our nation has pushed homeownership too far. Consider the following: Foreclosures on conventional loans in 2004 were near record-level, and FHA foreclosures were at their highest level ever, more than double the historic average for the past 21 years.

Reports from across the nation confirm this: Home foreclosures in North Carolina have nearly tripled over the last five years. In the Poconos, Monroe County now auctions nearly 100 houses a month at foreclosure auctions, up from a handful in the 1980s. In Indianapolis , t he sheriff's office reported 5,500 foreclosures in 2002 compared to about 1,000 per year in the mid-1990s. In February 2004, Philadelphia officials temporarily suspended auctions of foreclosed homes after a record 1,120 homes were put up for bid in one week. The only group whose housing conditions worsened between 1999 and 2001 were low- and moderate-income owners, not renters. Fully 53% of working families with critical housing needs are owners, not renters. [Data compiled from various sources.]

With every foreclosure, there is a family who is worse off as a result of our nation's aggressive homeownership policies. But rising foreclosures don't hurt working families only. They also hit local communities hard. When families default and abandon their houses, property values decline and neighborhoods can spiral downward. Cities, counties and towns lose tax revenue and incur higher costs associated with vandalism and other social problems. One researcher estimated that cities spend an average $73,300 per FHA foreclosure.

On Jan. 11, a 12-organization coalition, including the Consumer Federation of America; the Children's Defense Fund; the National Urban League; and the National Low Income Housing Coalition, held a Congressional briefing to rebut what it called the most prevalent myths "undermining a balanced housing policy in Washington." Among the top three was: Homeownership is the best housing option for everyone, all the time, everywhere.

Veteran housing counselors who participated in the briefing said that providing low-income homeownership was a very time- and money-intensive endeavor that required significant subsidies to help a small number of families. They said that their experiences taught them that homeownership could not replace successful rental-assistance programs such as housing vouchers, and that many low-income families are being hurt by the pressure and rhetoric from HUD and elsewhere to become homeowners.

Also in January, former HUD official and now Harvard researcher William Apgar published a new working paper concluding that America overstates the benefits of homeownership and fails to appreciate the benefits of rental housing. Apgar finds that "today, homeownership is widely viewed as the 'silver-bullet' solution to a range of individual and social problems. Yet there are downsides to an excessive focus on promoting homeownership. Notably, owning a home may prove unhelpful or even financially disastrous."

He provides evidence that "many low-wealth and low-income families are being 'pushed' into homeownership," because they are told that homeownership is a prerequisite for economic and social success. Apgar explains that by denigrating rental housing, our current policies limit Americans' housing options and causes us to miss out on opportunities to use low-cost rental housing as a "pathway to social and economic opportunity."

Despite clear evidence that some of our homeownership incentives are backfiring, the Administration and Congress are expected to propose new, and more aggressive, ownership incentives in 2005. Failed attempts to create a federally-insured zero down-payment loan program and to allow certain households to deduct private mortgage-insurance premiums from their taxes are likely to be resurrected. Meanwhile, HUD continues to try and balance its budget with Draconian cuts to the Section 8 housing voucher program.

In many ways, our housing policy is more disconnected from our national housing needs than ever before. Fortunately the chorus of groups willing to recognize that is increasing. Nevertheless, 2005 will be a challenge for housing advocates.

Doug Bibby is president of the Washington DC-based National Multi Housing Council.