Why Does The Government Promote Home Ownership?

Why Does The Government Promote Home Ownership?

As you may have figured out I'm not a big fan of the government's feeble attempts to prop up the housing market. After just posting about how the government's losses on the housing market continue to mount I once again asked myself why they insist on promoting home ownership. There are only 2 possible explanations. The cynical explanation is that it results from the influence of powerful home building and real estate lobbyists. The other explanation is that home ownership promotes social and economic stability. The theory is that people who own homes are less likely to riot in the streets and can build equity over time.

I'm pretty sure it's a combination of both factors but I'm going to focus on the social and economic factors. First some data, courtesy of Wikipedia which shows home ownership rates by country. Notice how the top of the list is populated with some countries that are not exactly known for their economic strength: Bulgaria, Hungary, Slovenia, Spain, and Italy. Then notice some of the winners at the bottom of the list: Germany, Netherlands, and Denmark. The United States is in the middle of the pack. Clearly high home ownership rates don't correlate with economic success very well.

If you are interested The Economist has an interesting online debate on whether or not governments should promote home ownership. Actually, they have this whether or not you are interested.

So what gives? I really don't know. Personally I don't see an economic difference between renting and owning. I've done both, most recently ending a very satisfying 12 year stretch of renting. To me it comes down to simple economics: what is the lowest cost alternative? They are just different ways of financing a place to live. Either you pay a landlord or you pay the bank or you pay the opportunity cost of your own capital. Whose name is on the deed is really irrelevant.

As far as I'm concerned the only difference between renting and owning, other than cost, is that owning gives you a bit more stability while renting gives you more flexibility. In other words, you're not going to decorate/ improve a home that you are renting but when you rent you can pack up and leave at least once per year. Oh...and when you own you can't be forced to move unless you refuse to pay your mortgage or taxes.

Personally, I think that, given the current fiscal situation in this country, it's only a matter of time before the politicians figure out that it's time to cut the chord on this baby. The talks have already begun.

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