Does “The Man” Care if You Own or Rent?

A recent post from James Altucher about why he will never own a home again has been getting plenty of interest in the blogosphere lately. The folks at On the Block have mentioned it, and I’ve seen it referenced a few times on twitter in the past day or two. It is a contrarian take on the value of home ownership in America. As a Realtor an easy argument can be made that I’m unable to address the question about the value of home ownership in a neutral way. But if Fox news can be “fair and balanced” – oh wait, I digress. Is it like asking Steve Jobs to argue against the value of owning an iPad? Or will you give me the benefit of the doubt and believe that my long term success comes from doing right by my clients, and that might mean advocating that they not buy a home? It’s a tangent to the debate around the value of owning a home, so I’m not going there in this post. Instead, I’m going to zero in on one particular argument put forth by Mr. Altucher about how the historical narrative of home-ownership came to be…

One of the reasons put forth by Mr. Altucher for not owning a home is that:

You’re trapped. Lets spell out very clearly why the myth of homeownership became religion in the United States. Its because corporations didn’t want their employees to have many job choices. So they encouraged them to own homes. So they can’t move away and get new jobs. Job salaries is a function of supply and demand. If you can’t move, then your supply of jobs  is low. You can’t argue the reverse, since new adults are always competing with you.

I’ve never understand the American story about home ownership to be one about companies having a vested interest in their employees being “trapped” so that they can game the laws of supply and demand in the labor pool. But hey, I’ve been known to misunderstand plenty of things before so in between bitching about the rain, I’ve been doing a little reading this morning.

I can’t find much to support the assertion that big business (“the man” – if you think corporations run the world) have been big drivers behind the propaganda campaign that home ownership is the only path to the American Dream. From what I can read and find (and please, correct me or point me to additional information) the government (another “the man”) and the physical/geographic structure of our living patterns have been the big drivers of the story about Home Ownership in the United States.

An article published in the “Region Focus” publication of the Federal Bank of Richmond in the Fall of 2008 by Stephen Slivinski titled “House Bias: The Economic Consequences of Subsidizing Homeownership” (pdf) points the finger at the growth of suburbs in America, starting as far back as the late 1890’s. He also suggests that government involvement in the mortgage industry is another major factor, mentioning specifically the Federal Housing Administration (FHA), Federal Home Loan Bank system, and Fannie Mae (Federal National Mortgage Association). From what I can find this article was written by the same Stephen Slivinksi that has worked with the Goldwater and Cato Institutes, to give you some background on what his political bent may or may not be.

Another take on it is from Douglas E. French in “Walk Away: The Rise and Fall of the Home-Ownership Myth” published by the Ludwig von Mises Institute in Auburn, Alabama (a rather libertarian take on things, for what its worth, from what I gather). Mr. French also pegs the government with responsibility, tracing it back to Herbert Hoover in the 1920’s who he characterizes as being “disturbed” that the 1920 census reflected a decline in home ownership. He points to four organizations that President Hoover used to “promote home ownership” as the:

…commercial “Own Your Own Home Campaign” and Home Modernization Bureau, the nonprofit Better Homes in America Movement, and the professional Architect’s Small House Service Bureau. [page 20]

Mr. French also points out that this too coincides with the growth of the suburbs, reinforcing the argument put forth by Mr. Slivinski in 2008. He goes on to describe much of the familiar narrative of government intervention during the great depression, the creation of the FHA and Fannie Mae, and so on and so forth. He also points out that business certainly benefited from all of this because of the jobs “created to plan, develop, build and maintain these communities. And a whole new world of consumption was created to make life easier to keep the house and feed the family.” [page 28]

And as long as we are fingering Uncle Sam as “the man” there are plenty of other government agencies that have been created to keep a finger or three in the housing and mortgage markets, two obvious ones being the VA loan programs that were massively popular after WWII and the Department of Housing and Urban Development (HUD) created in the 1960s.

So while this all may sound rather pedantic and pointless because I’m arguing about a tree while missing the forest, I think a common agreement about how we find ourselves in our current situation is important. Corporations, while certainly beneficiaries, haven’t been the instigators of American housing policy. Uncle Sam is the guy to get the credit or the blame, depending on your political bent and beliefs about the role of government.

And if we truly are a government “of the people,by the people, for the people” then at the end of the day, we have no one to hold responsible for our current situation other than ourselves.

Interested in a slightly more humorous contrarian take on home ownership, be sure to check out Mark Morford‘s column from 2008 titled “Why buy a house? Behold, one of the biggest myths of the American Dream.”