Homeownership is an integral aspect of the American dream. But it also seems to contribute to a lot of downstream policy dysfunctions. Everyone says they want housing to be affordable, but they also want their own investment to pay off.
My Co-Host Jerusalem Demsas moves beyond these kinds of mixed feelings to boldly proclaim that “homeownership is overrated.” She notes that when people give you financial advice, the standard guidance is that you ought to “diversify your assets” — but plowing a huge share of your savings into a single home is the opposite of that. Her argument is that we should shift our whole cultural narrative to encourage lifelong renting.
I grew up in New York City where it’s normal for middle-class families to rent and for large family-sized units to be available for long-term leases. I see the upside of this.
But of course most people don’t live in New York. In most cases, buying a home is far and away the easiest route to getting a nice place to live. It also offers stability of tenure and insurance against rent increases and displacement. And in terms of financial advice, while homeownership may not be an ideal savings vehicle in a practical sense, it works as a good commitment device for most people. I’m skeptical that the realistic alternative to homeownership is a well-diversified stock portfolio rather than short-term consumption. Holding the policy environment completely constant, I think the conventional advice and life script is pretty good.
That said, this raises the question of whether we should hold the policy environment constant. There’s a lot that’s wrong with the housing status quo in America, and most efforts to encourage homeownership have significant downsides. The ultimate question for Jerusalem and me is less about whether any individual person should aspire to homeownership than whether the policy landscape should be less tilted in favor of homeowners.
We get into all this and more on this week’s episode. Watch or listen wherever you get your podcasts.
Our next Book Club episode will discuss Robert Putnam’s “Bowling Alone,” so grab a copy now if you want to read along.
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