Dangling Affordability

In late June, the day before I wrote this column, I watched a panel discussion about the state of the nation’s housing market. As expected, the panelists on this live webcast, hosted by Harvard University’s Joint Center for Housing Studies, discussed home sales, starts and construction. What held my attention, however, was their focus on the potential problems this country faces if the ability to purchase a home remains as difficult as the panelists said it is.

Panelist George McCarthy, director of Metropolitan Opportunity, Ford Foundation, said it’s “cruel” to dangle housing affordability — low interest rates and low home prices — in front of low-income Americans who have limited or no ability to buy a home. Banks aren’t lending to the millions of young Americans with massive debt, low credit scores and no money for a down payment. Their ability to secure a mortgage, McCarthy said, is practically nonexistent.

These young people, and many older Americans with imperfect finances, are unable to buy homes and create wealth by paying down a mortgage, McCarthy continued. This forces them to rent their homes, which, as rental prices rise, detracts from their personal wealth. It also limits their ability to contribute to the economy, he added.

It was discussed how, after the Great Depression, public policies and programs were enacted to help lower-income Americans buy homes and create wealth. The contrast between that era almost a century ago and the end of the Great Recession this country recently endured was highlighted, and the question was raised as to what could be done to make home ownership more accessible once again.

Then, McCarthy mentioned America’s cultural shift away from home ownership during the past several years. Should the government or banks intervene to shift the U.S. culture back toward the way this country has identified itself since the Depression as a nation of homeowners? Is it important?

Not intervening, McCarthy said, could result in class warfare between the wealthiest and poorest citizens, as the Great Recession has increased the gap between the upper and lower classes and nearly eroded the middle class. This has created frustration, tension and even anger, which, if not addressed, could boil over sooner than later, he added.

What can be done to improve access to home ownership? Should anything be done, or will the problem solve itself? These are not questions for me to answer, because I am no expert on public or economic policy. But, intervening appears to have its merits, as it did after the Depression.

Affordability is only one of the housing market’s problems, the panelists remarked. More than 2 million Americans remain in foreclosure or are seriously delinquent in their mortgage payments. This is half the number of a few years ago, but still a big number. I know people who came frighteningly close to foreclosure but benefitted from a mortgage adjustment. I’ve seen the positive effects this intervention can have on one’s quality of life, so it’s difficult for me to argue against taking action.

I believe in one’s responsibility to make smart decisions, and to accept the consequences of making poor ones. Still, I’d rather have someone living in the empty house a few doors down from mine, cutting the grass and keeping its value up, than having it drag down my home’s value. Home ownership is good for the economy, Americans and remodelers.