Monday, June 23, 2008

Krugman: Home Not-So-Sweet Home

by Bill McBride on 6/23/2008 01:23:00 AM

From the NY Times: Home Not-So-Sweet Home

Listening to politicians, you’d think that every family should own its home — in fact, that you’re not a real American unless you’re a homeowner. ... Even Democrats seem to share the sense that Americans who don’t own houses are second-class citizens.
...
And the belief that you’re nothing if you don’t own a home is reflected in U.S. policy. Because the I.R.S. lets you deduct mortgage interest from your taxable income but doesn’t let you deduct rent, the federal tax system provides an enormous subsidy to owner-occupied housing.
...
In effect, U.S. policy is based on the premise that everyone should be a homeowner. But here’s the thing: There are some real disadvantages to homeownership.
Krugman lists three disadvantages to owning that we've discussed:

  • Financial risk: "At this point there are probably around 10 million households with negative home equity — that is, with mortgages that exceed the value of their houses."
  • Less labor mobility.
  • The cost of commuting.

    Krugman concludes:
    All I’m suggesting is that we drop the obsession with ownership, and try to level the playing field that, at the moment, is hugely tilted against renting.

    And while we’re at it, let’s try to open our minds to the possibility that those who choose to rent rather than buy can still share in the American dream — and still have a stake in the nation’s future.
    Hear, hear!