Home, a social asset
Home ownership has its obvious benefits, but should it fall on taxpayers to uphold them?
You should know that I make my living building homes for people who otherwise might never own one. As a developer of affordable housing, I have an interest in advocating the social benefits of home ownership as a national priority worthy of taxpayer dollars. Before publishing a selfserving commentary, however, I wanted to know if the facts supported my opinion.
From the freedom to drive nails into any wall, to the sense of place and stability, to the tax deductions, we all know the personal and financial benefits of making mortgage rather than rent payments. But can we justify subsidizing the benefits of home ownership at taxpayer expense?
The anecdotal evidence
Three years ago, Anselmo Cazun Mijangos bought a 1600-sq.- ft. house from me. His mortgage payments, with taxes and insurance, total about $1100 a month. Mijangos bought the house with the assistance of $15,000 in municipal funds, $4000 from his employer, and a low-interest loan for disadvantaged first-time buyers. He will realize a tidy sum should he decide to sell his house.
Around the same time, Fadhilah Al-Rubaiai moved her family into an identical house in the same neighborhood, paying $1100 a month in rent. As a single mom and a recent immigrant, she did not qualify for a mortgage. Al-Rubaiai moved out recently. She lost her deposit to repair expenses and moved to a new rental with no gain from her years of paying rent.
“Our housing prices mock the poor, and increasingly, the middle class is shut out.”
The financial benefits speak for themselves, but there’s more at stake. Mijangos’s children will graduate from elementary school with friends and teachers they have known since third grade. Al-Rubaiai’s children are adjusting to a new school.
The neighborhood is affected as well. When Al-Rubaiai moved out, her lawn needed care, and nothing had been done to improve the house. Mijangos’s turf could win a gardening contest. He also has added a room to his house. In this example, one family has become a member of the community, while the other remains on the nomadic perimeter. One received home-buying assistance; the other did not.
I believe that a home is inseparable from the community, that it extends beyond the yard to encompass the neighborhood, the city, even the nation. Home ownership not only creates enfranchisement but better health and educational outcomes, too. The president agrees with me. “I believe our country can and must become an ownership society. When you own something, you care about it. When you own something, you have a vital stake in the future of your country,” George W. Bush said in a 2004 campaign interview.
Let’s face it, though. Nowhere else in the world would homes exceeding $100,000 be “affordable.” Our housing prices mock the poor, and increasingly, the middle class is shut out. When I set out to write this essay, I assumed that I would find support for these empirical arguments. I was wrong.
Facts send mixed message
“We’re still not exactly sure [how the] different ways of helping the poor [get housing] help their communities,” says Carlos Martin, Ph.D., technical director for Development Innovations Group in Bethesda, Md. “There’s actually a lot of evidence showing that giving someone a home does them less of a service than giving them the access to financial services that can help them eventually buy a home.”
Although researchers at Harvard University’s Joint Center for Housing Studies and at the National Association of Home Builders have found significant correlations between housing problems and high degrees of poverty and crime, it’s not clear whether public investment in housing can reverse the decline of neighborhoods at risk. Some argue that any kind of housing assistance spoils the drive to self-sufficiency.
In America’s Trillion-Dollar Housing Mistake, author Howard Husock, director of the Manhattan Institute’s Social Entrepreneurship Initiative, claims that housing subsidies work to undermine neighborhoods and to perpetuate a dependent underclass. On the other hand, Husock supports programs like Habitat for Humanity that convert sweat equity into a leg up on the housing ladder.
Given a crisis of affordability, confusion exists over where home ownership breeds social benefits and where a healthy society creates more homeowners. Mijangos’s home purchase came with some taxpayer help, but the home improvements and mortgage payments come from his efforts. Without the ability to start from scratch—as countless middle-class World War II vets did when credit became widespread and government programs made houses affordable—today’s minority and low-income households cannot become members of the ownership society.
Really, no one can. The U.S. federal government provides financial assistance to all homeowners through the mortgageinterest tax deduction. In 2005, tax expenditures for housing rose to $120 billion per year, with nearly 80% of all federal housing assistance going to middle-class buyers through interest buy downs (Federal Housing Administration loans) and tax deductions.
Very few of us can afford housing without a “subsidy.” To wit, the mortgage-interest deduction saves homeowners $79.9 billion a year, more than double the $33.6 billion proposed 2007 budget for the Department of Housing and Urban Development (HUD), which funnels funds into local grants for affordable rent and home-ownership programs.
Twenty years of success
Taxpayer-funded subsidies are a sloppy solution to the housing crisis. Throw enough free money at a house, and a mansion becomes affordable. But we’re not a nation rich enough to do this at a level that would make a tangible difference. Public funds for subsidized home ownership are chronically short, and handouts aren’t valued as much as achievements won through hard work.
I advocate a free-market method of delivering affordable housing, a method I have practiced for nearly 20 years: I look for undesirable land at a low cost; I spend as much time as it takes to make my plans costeffective; and I struggle with municipalities to obtain the highest density possible. Only then do I turn to government dollars to help buyers qualify at a mortgage rate they can afford. Because of this multilayer approach, my developments have many partners, from architects and engineers devoted to affordable housing, to government agencies, private charities, and institutions like Fannie Mae. The first stages of my process require no government assistance, so even when I fund the project alone, I still manage to sell houses at accessible prices.
A neighborhood boost
Sometimes a neighborhood needs a leg up as much as the homebuyers. Neighborhoods improve when I build 20 homes in the worst part of town and fill them with owners. Residents talk about how much safer the streets are. Land values go up because the area becomes more desirable. Sure, I use some government resources, but it’s not just my buyers who benefit; you’re safer, too. The cancer of disenfranchisement in one part of a city affects the whole.
Still, I remain hesitant to reveal the best news about affordable housing, only because I enjoy almost no competition. The news about neighborhood reinvestment is that you can make a good living at it. The sites are small enough that most big builders have no interest in developing them, and the projects are complex enough that only the best builders with good accounting and construction skills would dare try.
As builders realize the profits possible from working in underserved housing markets, the affordability crisis will disappear quickly. Maybe then we will become a nation united by ownership.
Fine Homebuilding Recommended Products
Fine Homebuilding receives a commission for items purchased through links on this site, including Amazon Associates and other affiliate advertising programs.
Anchor Bolt Marker
Original Speed Square
Plate Level
