Homes as Assets and Wealth

Housing bought today may not appreciate in valueNew Orleans The New York Times ran the article on the front page announcing that the “era” is over when a family in the United States could reliably expect their personal residences to appreciate and create citizen wealth. Housing Fades as a Means to Build Wealth, Analysts Say was headline on the email version.  This headline has been in the making for several years since the subprime crash and the advent of the Great Recession, but it is really more complicated than the headline or the story reveals.

For many lower income and working families, the evidence I amassed in Citizen Wealth would still be correct in establishing that a house is an asset which can act to separate a family decidedly, if not irrevocably, from the ranks of poverty, and provides an intergenerational asset that can continue to create income security, which is how I defined citizen wealth in the first place.  It is

also undeniably true that despite the fact that a house may be an asset, it is definitely not a piggybank or a get-rich-quick scheme which some wheeler dealers were promoting on the infomericals and real estate hype of the time.

With millions of homes “underwater” families may need to walk away today in order to have a chance at building assets in the future.  Values may in fact not recover in the generation of their lives.  The housing crises has been disproportionately devastating to African-American and Latino families and the non-existence of any kind of effective home mortgage modification program has been equally disastrous.  Public policy has been at the banker’s heels in this crisis to the peril of the entire nation.

Tax policy and federal expenditure have not caught up to the housing crises.  Our single largest “safety net” expenditure on citizen wealth is the wholesale mortgage interest rate deduction to facilitate home ownership.  The early and mid-20th Century view that home ownership was a guaranteed winning ticket to poverty reduction is simply not finding evidence in the 21st Century to support the level of the expenditure, which has now been laid bare as more about subsidizing development, construction, and investments rather than poverty reduction.

The challenge now will be whether or not we can put some sacred cows out to pasture and run with some new programs and plans that remember that housing in its various forms can be assets, but we need a lot more in terms of affordable options for housing and realistic income maintenance and asset building strategies to actually build and sustain citizen wealth.  It’s hard to be optimistic, but that’s the work order today.

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