Last year, after our friend bought a condo in New Haven, we realized that technically we too could afford the downpayment for a home. Swept into the we should really be building equity mindset, we found a real estate agent and looked at a couple of places. But in the process of poking around closet space and fantasizing about tearing out carpets and knocking down walls, I came to the realization that I didn't want to sacrifice the ability to move where my career projected me for the satisfaction of being able to install marble counter tops in the kitchen.
Richard Florida�s recent Atlantic article, How the Crash Will Reshape America, discusses a study by economist Andrew Oswald that showed that places with higher homeownership rates also suffer from higher unemployment. Oswald�s results went as far as showing that homeownership is in fact a better predictor of unemployment than rates of unionization or generosity of welfare benefits.
In his article, discussed on Steetsblog and Greater Greater Washington, Florida argues that "America�s tendency to overconsume and under-save has been intimately intertwined with our postwar spatial fix�that is, with housing and suburbanization," and that the solution "begins with the removal of homeownership from its long-privileged place at the center of the U.S. economy."
Incentives for homeownership extend far beyond the cultural premium placed on the creation of the perfect suburban domestic space. Not only does public funding for road and utility construction subsidize the cost of building suburban communities, but our tax code and federal government programs have, both historically and in the present day, have primarily subsidized single-family home ownership, thanks to influence from the real estate industry.
Since its inception in 1908, the National Association of Realtors (NAR) has sustained an active role in shaping federal housing policy. During the Great Depression, NAR successfully lobbied the President Hoover and the Federal Housing Authority (FHA) to stimulate housing production through loan guarantees for mortgages for single-family homes. Thanks to NAR�s efforts the FHA originally excluded multi-family from the program.
NAR also successfully lobbied for a mortgage interest income tax deduction. This "mansion subsidy" is an extremely regressive tax, as the amount of the deduction increases with the size of the mortgage. In her 2003 publication Building Suburbia, Yale urbanism scholar Dolores Hayden estimates that this tax break costs the federal government $100 billion a year in lost revenue, and almost half the tax break goes to the top 5 percent of taxpayers � households with income over $100,000 a year. Since 1997, homeowners have been able to write off the first $500,000 from sale of home before capital gains tax, and since last year, first-time homebuyers have been eligible for an $8,000 tax credit.
In February of this year, President Obama included in his budget proposal a provision that would reduce the amount of mortgage payments families earning over $250,000 can deduct from their federal taxes. NAR, of course, is "100% opposed" to the provision and has vowed to "use its formidable array of resources against its enactment." NAR�s power should not be underestimated: it is is America�s largest trade organization with 1.3 million members, and NAR�s PAC spent over $17 million on federal lobbying in 2008, ranking it the 11th largest PAC in the U.S.
Let's hope that as President Obama's attempts to win Congressional support for his tax reforms, transit advocates will seize the opportunity to counter the lobbying power of NAR. And let's continue to discuss the merits of universal homeownership and whether federal incentives for homeownership, incentives that have been extensively shaped by the real estate industry over the last hundred years, are in actuality beneficial for our country.
Photo: Martha Stewart, undercover lobbyist for the NAR?